<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 21, 1996
-------------------------------
ABC Bancorp
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-16181 58-1456434
- -------------------------------------------------------------------------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
310 First Street, S.E., Moultrie, Georgia 31768
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (912) 890-1111
---------------------
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ---------------------------------------------------------------------------
The following described financial statements are being filed as an
amendment to the Report on Form 8-K dated June 21, 1996 of ABC Bancorp ("ABC")
in connection with its merger transaction with Southland Bancorporation
("Southland"), pursuant to which Southland was merged with and into ABC
(the "Merger"). As described more fully in the previously filed Report, the
Merger is the first of three mergers that ABC intends to consumate in 1996. In
addition to the Merger, ABC has announced proposed merger transactions with
Central Bankshares, Inc. ("Central") and First National Financial Corporation
("First National").
(a) Financial Statements of Business Acquired. Included in this Report are
-----------------------------------------
unaudited consolidated financial statements of ABC as of March 31, 1996,
together with the notes thereto, as well as the audited financial statements of
ABC as of December 31, 1995 and the year then ended which have been audited by
the independent accounting firm of Mauldin & Jenkins.
Included in this Report are unaudited consolidated financial statements of
Central as of March 31, 1996, together with the notes thereto, as well as the
audited financial statements of Central as of December 31, 1995 and the year
then ended which have been audited by the independent accounting firm of
Mauldin & Jenkins.
Included in this Report are unaudited consolidated financial statements of
Southland as of March 31, 1996, together with the notes thereto, as well as the
audited financial statements of Southland as of December 31, 1995 and the year
then ended which have been audited by the independent accounting firm of KPMG
Peat Marwick LLP, whose opinion is also included herein.
Incorporated in this Report by reference are unaudited consolidated
financial statements of First National as of March 31, 1996, together with the
notes thereto, as well as the audited financial statements of First National as
of December 31, 1995 and the year then ended which have been audited by the
independent accounting firm of Francis & Co., CPA's.
(b) Pro Forma Financial Information. The Unaudited Pro Forma Condensed
-------------------------------
Consolidated Financial Data included herein give effect to the merger
transactions described in this Report. Southland's information is
combined with ABC using the purchase accounting method. Central's information is
combined with ABC using the pooling of interests method of accounting. First
National's information is combined with ABC using the pooling of interests
method of accounting.
The ABC historical amounts were derived from consolidated financial
statements of ABC included herein. The historical amounts of Southland were
derived from the consolidated financial statements of Southland included herein.
Central historical amounts were derived from the consolidated financial
statements of Central included herein. The historical amounts of First National
were derived from the consolidated financial statements of First National
incorporated herein by reference.
The Unaudited Pro Forma Condensed Consolidated Financial Data do not purport
to present the financial position of ABC had the various transactions
indicated above actually been consummated on the dates indicated. In addition,
the Unaudited Pro Forma Condensed Consolidated Financial Data are not
necessarily indicative of the future results of operations of ABC and should
be read in conjunction with the historical financial statements of ABC,
Southland, Central and First National, including the notes thereto, included
herein or incorporated herein by reference.
2
<PAGE>
(c) Exhibits. The following is a list of the Exhibits attached hereto.
--------
Exhibit No. 2.1 Merger Agreement*
Exhibit No. 10.1 Employment Agreement*
Exhibit No. 23.1 Consent of Mauldin & Jenkins
Exhibit No. 23.2 Consent of Mauldin & Jenkins
Exhibit No. 23.3 Consent of KPMG Peat Marwick LLP
Exhibit No. 23.4 Consent of Francis & Co., CPA's
Exhibit No. 99 Press Release*
* Previously filed.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of ABC (Commission File No. 0-16181) are hereby
incorporated by reference:
1. Agreement and Plan of Merger by and between ABC and Central Bankshares,
Inc., dated as of December 29, 1995, filed as Exhibit 10.11 to ABC's
Annual Report on Form 10-K (File No. 0-16181), filed with the Commission
on March 28, 1996, and Amendment No. 1 thereto dated as of April 26,
1996 filed as part of Appendix A to ABC's Registration on Form S-4
(Registration No. 333-05861), filed with the Commission on June 12, 1996.
2. Agreement and Plan of Merger by and between ABC and First National
Financial Corporation dated as of April 15, 1996, filed as Exhibit 10.12
to Amendment No. 1 to ABC's Registration on Form S-4 (Registration No.
333-2387), filed with the Commission on May 21, 1996.
The following documents filed by First National Financial Corporation
("First National") (Commission File No. 0-20130) are hereby incorporated by
reference:
1. Financial Statements of First National consisting of an Independent
Auditors' Report; Consolidated Balance Sheets as of December 31, 1995 and
1994; Consolidated Statements of Income for the years ended December 31,
1995 and 1994; Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1995 and 1994; Consolidated Statements
of Cash Flows for the years ended December 31, 1995 and 1994; and Notes
to Consolidated Financial Statements (filed as pages 26 through 48 of
First National's Annual Report on Form 10-KSB filed with the Commission
on March 26, 1996).
2. Financial Statements of First National, consisting of Consolidated
Balance Sheets as of March 31, 1996 and 1995, Consolidated Income
Statements and Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995; and Notes to Financial Statements (filed
as pages 2 through 7 of First National's Quarterly Report on Form 10-QSB
filed with the Commission on May 15, 1996).
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Report to the extent
that a statement contained in this Report, or in any other subsequently filed
document which is also incorporated herein by reference, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be deemed
to constitute a part of this Report except as so modified or superseded. The
information relating to ABC contained in this Report should be read together
with the information in the documents incorporated herein by reference.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amended Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ABC BANCORP
By: /s/ W. Edwin Lane, Jr.
------------------------------------
Name: W. Edwin Lane, Jr.
Title: Vice President and Chief
Financial Officer
Dated: July 15, 1996
4
<PAGE>
INDEX TO FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial Data:
<TABLE>
<S> <C>
ABC Historical combined with Central Historical
-- Pro Forma Condensed Balance Sheet................................... PF-1
-- Pro Forma Condensed Statements of Income............................ PF-2
-- Notes to Pro Forma Condensed Financial Statements................... PF-4
ABC Historical combined with First National Historical
-- Pro Forma Condensed Balance Sheet................................... PF-5
-- Pro Forma Condensed Statements of Income............................ PF-6
-- Notes to Pro Forma Condensed Financial Statements................... PF-8
ABC/First National combined with Central Historical
-- Pro Forma Condensed Balance Sheet................................... PF-9
-- Pro Forma Condensed Statements of Income............................ PF-10
-- Notes to Pro Forma Condensed Financial Statements................... PF-12
ABC Historical combined with Southland Historical
-- Pro Forma Condensed Balance Sheet................................... PF-13
-- Pro Forma Condensed Statements of Income............................ PF-14
-- Notes to Pro Forma Condensed Financial Statements................... PF-15
ABC/Southland combined with Central Historical
-- Pro Forma Condensed Balance Sheet................................... PF-17
-- Pro Forma Condensed Statements of Income............................ PF-18
-- Notes to Pro Forma Condensed Financial Statements................... PF-20
ABC/First National combined with Southland Historical
-- Pro Forma Condensed Balance Sheet................................... PF-21
-- Pro Forma Condensed Statements of Income............................ PF-22
-- Notes to Pro Forma Condensed Financial Statements................... PF-23
ABC/First National/Southland combined with Central Historical
-- Pro Forma Condensed Balance Sheet................................... PF-25
-- Pro Forma Condensed Statements of Income............................ PF-26
-- Notes to Pro Forma Condensed Financial Statements................... PF-28
ABC Bancorp Historical Financial Data:
Consolidated Financial Statements--March 31, 1996 and 1995 (unaudited)
-- Consolidated Balance Sheets......................................... F-1
-- Consolidated Statements of Income................................... F-2
-- Consolidated Statements of Cash Flows............................... F-3
-- Notes to Consolidated Financial Statements.......................... F-4
Consolidated Financial Statements
-- Independent Auditors' Report........................................ F-5
-- Consolidated Balance Sheets--December 31, 1995 and 1994............. F-6
-- Consolidated Statements of Income--Years ended December 31, 1995,
1994 and 1993......................................................... F-7
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
-- Consolidated Statements of Stockholders' Equity--Years ended December
31, 1995, 1994 and 1993.............................................. F-9
-- Consolidated Statements of Cash Flows--Years ended December 31, 1995,
1994 and 1993.......................................................... F-11
-- Notes to Consolidated Financial Statements........................... F-13
Central Bankshares, Inc. Historical Financial Data:
Consolidated Financial Statements--March 31, 1996 and 1995 (unaudited)
-- Consolidated Balance Sheets.......................................... F-36
-- Consolidated Statements of Income.................................... F-37
-- Consolidated Statements of Cash Flows................................ F-38
-- Notes to Consolidated Financial Statements........................... F-39
Consolidated Financial Statements
-- Independent Auditors' Report......................................... F-40
-- Consolidated Balance Sheets--Years ended December 31, 1995 and 1994.. F-41
-- Consolidated Statements of Income--Years ended December 31, 1995 and
1994................................................................... F-42
-- Consolidated Statements of Stockholders' Equity--Years ended December
31, 1995 and 1994...................................................... F-43
-- Consolidated Statements of Cash Flows--Years ended December 31, 1995
and 1994............................................................... F-44
-- Notes to Consolidated Financial Statements........................... F-46
Southland Bancorporation Historical Financial Data:
Consolidated Financial Statements
-- Consolidated Balance Sheets--March 31, 1996 and December 31, 1995
(unaudited)............................................................ F-66
-- Consolidated Statements of Earnings--Three Months ended
March 31, 1996 and 1995.............................................. F-67
-- Consolidated Statements of Cash Flows--Three Months ended March 31,
1996 and 1995.......................................................... F-68
-- Notes to Consolidated Financial Statements........................... F-70
Consolidated Financial Statements
-- Independent Auditors' Report......................................... F-71
-- Consolidated Balance Sheets--December 31, 1995 and 1994.............. F-72
-- Consolidated Statements of Earnings--Years ended December 31, 1995,
1994 and 1993.......................................................... F-74
-- Consolidated Statements of Stockholders' Equity--Years ended December
31, 1995, 1994 and 1993.............................................. F-76
-- Consolidated Statements of Cash Flows--Years ended December 31, 1995,
1994 and 1993.......................................................... F-77
-- Notes to Consolidated Financial Statements........................... F-79
</TABLE>
6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC of 100% of Central
after giving effect to the adjustments described in the notes to the pro forma
condensed financial statements. The acquisition will be accounted for as a
pooling of interest.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
ABC CENTRAL (NOTES A PRO FORMA
ASSETS HISTORICAL HISTORICAL AND B) COMBINED
- ------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 16,855 $ 2,142 $ - $ 18,997
Federal funds sold 21,535 - - 21,535
Investment securities 56,916 10,862 - 67,778
Loans, net 218,877 34,988 - 253,865
Premises and equipment 7,222 1,074 - 8,296
Investment in Central - - 4,300 (1)
(4,300)(2) -
Excess cost over fair value of assets
acquired 1,996 - - 1,996
Other assets 12,188 1,038 - 13,226
--------- --------- -------- -----------
$ 335,589 $ 50,104 $ - $ 385,693
========= ========= ======== ===========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 293,385 $ 44,724 $ - $ 338,109
Other liabilities 7,629 1,080 - 8,709
--------- --------- -------- -----------
Total Liabilities 301,014 45,804 - 346,818
--------- --------- -------- -----------
EQUITY
- --------
Common stock 3,597 - 491 (1) 4,088
Capital surplus 16,826 - 3,828 (1) 20,654
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (108) - (19)(1) (127)
Treasury stock (1,555) - - (1,555)
Equity of Central - 4,300 (4,300)(2) -
--------- --------- ------- -----------
Total equity 34,575 4,300 - 38,875
--------- --------- -------- -----------
$ 335,589 $ 50,104 $ - $ 385,693
========= ========= ======== ===========
</TABLE>
PF-1
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC of 100% of Central after giving
effect to the adjustments described in the notes to the pro forma condensed
financial statements. The acquisition will be accounted for as a pooling of
interest.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1993
--------------------------------- --------------------------------- -------------------------------
PRO FORMA PRO FORMA PRO FORMA
ABC CENTRAL COMBINED ABC CENTRAL COMBINED ABC CENTRAL COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $26,703 $4,141 $30,844 $21,328 $3,253 $24,581 $19,697 $3,118 $22,815
INTEREST EXPENSE 10,673 1,960 12,633 7,828 1,248 9,076 7,732 1,207 8,939
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income 16,030 2,181 18,211 13,500 2,005 15,505 11,965 1,911 13,876
PROVISION FOR LOAN LOSSES 848 140 988 638 180 818 1,191 193 1,384
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income after
provision for loan losses 15,182 2,041 17,223 12,862 1,825 14,687 10,774 1,718 12,492
OTHER INCOME 3,276 597 3,873 3,025 667 3,692 2,867 611 3,478
OTHER EXPENSE 12,228 1,874 14,102 11,547 1,795 13,342 10,535 1,843 12,378
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes and
cumulative effect 6,230 764 6,994 4,340 697 5,037 3,106 486 3,592
INCOME TAXES 1,889 265 2,154 1,240 240 1,480 814 165 979
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
cumulative effect 4,341 499 4,840 3,100 457 3,557 2,292 321 2,613
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - - - - - 346 - 346
Income from continuing
operations $ 4,341 $ 499 $ 4,840 $ 3,100 $ 457 $ 3,557 $ 2,638 $ 321 $ 2,959
======= ====== ======= ======= ====== ======= ======= ====== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.26 $ 1.03 $ 0.98
======= ======= =======
</TABLE>
PF-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1996 THREE MONTHS ENDED MARCH 31, 1995
-------------------------------- -----------------------------------
PRO FORMA PRO FORMA
ABC CENTRAL COMBINED ABC CENTRAL COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 7,051 $ 1,113 $ 8,164 $ 6,157 $ 914 $ 7,071
INTEREST EXPENSE 2,941 540 3,481 2,348 403 2,751
-------- -------- -------- -------- -------- --------
Net interest income 4,110 573 4,683 3,809 511 4,320
PROVISION FOR LOAN LOSSES 180 - 180 180 45 225
-------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 3,930 573 4,503 3,629 466 4,095
OTHER INCOME 927 180 1,107 886 160 1,046
OTHER EXPENSE 3,017 476 3,493 3,000 476 3,476
-------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes and
cumulative effect 1,840 277 2,117 1,515 150 1,665
INCOME TAXES 605 105 710 487 57 544
-------- -------- -------- -------- -------- --------
Income from operations
before cumulative effect 1,235 172 1,407 1,028 93 1,121
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - - - - - -
-------- -------- -------- -------- -------- --------
Income from continuing
operations $ 1,235 $ 172 $ 1,407 $ 1,028 $ 93 $ 1,121
======== ======== ======== ======== ======== ========
INCOME PER SHARE FROM CONTINUING
OPERATIONS $ .36 $ .29
======== ========
</TABLE>
PF-3
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH CENTRAL BANKSHARES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated on January 1, 1993, the beginning of the earliest fiscal year
presented.
B. The following pro forma adjustments have been applied to give effect to the
proposed transaction:
BALANCE SHEET:
(1) Issue of 490,619 shares of ABC common stock, $1 par value, in exchange
for 100% of the equity of Central.
(2) Elimination of investment in Central.
STATEMENTS OF INCOME:
(3) Pro forma income per common share is based on the average number of
common shares that would have been outstanding during the respective
periods. There are no dilutive common stock attributes.
PF-4
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH FIRST NATIONAL FINANCIAL
CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC of 100% of First
National after giving effect to the adjustments described in the notes to the
pro forma condensed financial statements. The acquisition will be accounted for
as a pooling of interest.
<TABLE>
<CAPTION>
PRO FORMA
FIRST ADJUSTMENTS
ABC NATIONAL (NOTES A PRO FORMA
HISTORICAL HISTORICAL AND B) COMBINED
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 16,855 $ 2,118 $ - $ 18,973
Federal funds sold 21,535 3,100 - 24,635
Investment securities 56,916 11,332 - 68,248
Loans, net 218,877 35,015 - 253,892
Premises and equipment 7,222 1,463 - 8,685
Investment in First National - - 5,593 (1)
(5,593)(2) -
Excess cost over fair value of assets
acquired 1,996 - - 1,996
Other assets 12,188 836 - 13,024
--------- -------- ------- ---------
$ 335,589 $ 53,864 $ - $ 389,453
========= ======== ======= =========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 293,385 $ 47,863 - $ 341,248
Other liabilities 7,629 408 - 8,037
--------- -------- ------- ---------
Total liabilities 301,014 48,271 - 349,285
--------- -------- ------- ---------
EQUITY
------
Common stock 3,597 - 690 (1) 4,287
Capital surplus 16,826 - 4,942 (1) 21,768
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (108) - (39)(1) (147)
Treasury stock (1,555) - - (1,555)
Equity of First National - 5,593 (5,593)(2) -
--------- -------- ------- ---------
Total equity 34,575 5,593 - 40,168
--------- -------- ------- ---------
$ 335,589 $ 53,864 $ - $ 389,453
========= ======== ======= =========
</TABLE>
PF-5
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH FIRST NATIONAL FINANCIAL CORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC of 100% of First National after
giving effect to the adjustments described in the notes to the pro forma
condensed financial statements. The acquisition will be accounted for as a
pooling of interest.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
--------------------------------- --------------------------------- -------------------------------
FIRST PRO FORMA FIRST PRO FORMA FIRST PRO FORMA
ABC NATIONAL COMBINED ABC NATIONAL COMBINED ABC NATIONAL COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $26,703 $4,045 $30,748 $21,328 $3,162 $24,490 $19,697 $2,510 $22,207
INTEREST EXPENSE 10,673 1,893 12,566 7,828 1,438 9,266 7,732 1,177 8,909
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income 16,030 2,152 18,182 13,500 1,724 15,224 11,965 1,333 13,298
PROVISION FOR LOAN LOSSES 848 185 1,033 638 120 758 1,191 128 1,319
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income after
provision for loan losses 15,182 1,967 17,149 12,862 1,604 14,466 10,774 1,205 11,979
OTHER INCOME 3,276 524 3,800 3,025 355 3,380 2,867 289 3,156
OTHER EXPENSE 12,228 1,573 13,801 11,547 1,420 12,967 10,535 1,256 11,791
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes and
cumulative effect 6,230 918 7,148 4,340 539 4,879 3,106 238 3,344
INCOME TAXES 1,889 306 2,195 1,240 223 1,463 814 - 814
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
cumulative effect 4,341 612 4,953 3,100 316 3,416 2,292 238 2,530
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - - - - - 346 - 346
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations $ 4,341 $ 612 $ 4,953 $ 3,100 $ 316 $ 3,416 $ 2,638 $ 238 $ 2,876
======= ====== ======= ======= ====== ======= ======= ====== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.22 $ 0.94 $ 0.89
======= ======= =======
</TABLE>
PF-6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH FIRST NATIONAL FINANCIAL CORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1996 THREE MONTHS ENDED MARCH 31, 1995
-------------------------------- -----------------------------------
FIRST PRO FORMA FIRST PRO FORMA
ABC NATIONAL COMBINED ABC NATIONAL COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 7,051 $ 1,071 $ 8,122 $ 6,157 $ 938 $ 7,095
INTEREST EXPENSE 2,941 538 3,479 2,348 393 2,741
-------- -------- -------- -------- -------- --------
Net interest income 4,110 533 4,643 3,809 545 4,354
PROVISION FOR LOAN LOSSES 180 50 230 180 25 205
-------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 3,930 483 4,413 3,629 520 4,149
OTHER INCOME 927 123 1,050 886 85 971
OTHER EXPENSE 3,017 397 3,414 3,000 391 3,391
-------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes and cumulative effect 1,840 209 2,049 1,515 214 1,729
INCOME TAXES 605 76 681 487 81 568
-------- -------- -------- -------- -------- --------
Income from operations
before cumulative effect 1,235 133 1,368 1,028 133 1,161
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - - - - - -
-------- -------- -------- -------- -------- --------
Income from continuing
operations $ 1,235 $ 133 $ 1,368 $ 1,028 $ 133 $ 1,161
======== ======== ======== ======== ======== ========
INCOME PER SHARE FROM CONTINUING
OPERATIONS $ .34 $ 0.29
======== ========
</TABLE>
PF-7
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH FIRST NATIONAL FINANCIAL CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated on January 1, 1993, the beginning of the earliest fiscal year
presented.
B. The following pro forma adjustments have been applied to give effect to
the proposed transaction:
BALANCE SHEET:
(1) Issue of 690,259 shares of ABC common stock, $1 par value, in
exchange for 100% of the equity of First National.
(2) Elimination of investment in First National.
STATEMENTS OF INCOME:
(3) Pro forma income per common share is based on the average number of
common shares that would have been outstanding during the respective
periods. There are no dilutive common stock attributes.
PF-8
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC (after the proposed
acquisition of First National) of 100% of Central after giving effect to the
adjustments described in the notes to the pro forma condensed financial
statements.
<TABLE>
<CAPTION>
ABC PRO FORMA
FIRST ADJUSTMENTS
NATIONAL CENTRAL (NOTES A PRO FORMA
COMBINED HISTORICAL AND B) COMBINED
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 18,973 $ 2,142 $ - $ 21,115
Federal funds sold 24,635 - - 24,635
Investment securities 68,248 10,862 - 79,110
Loans, net 253,892 34,988 - 288,880
Premises and equipment 8,685 1,074 - 9,759
Investment in Central - - 4,300 (1)
(4,300)(2) -
Excess cost over fair value of assets
acquired 1,996 - - 1,996
Other assets 13,024 1,038 - 14,062
--------- -------- ------- ---------
$ 389,453 $ 50,104 $ - $ 439,557
========= ======== ======= =========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 341,248 $ 44,724 - $ 385,972
Other liabilities 8,037 1,080 - 9,117
--------- -------- ------- ---------
Total liabilities 349,285 45,804 - 395,089
--------- -------- ------- ---------
EQUITY
------
Common stock 4,287 - 491 (1) 4,778
Capital surplus 21,768 - 3,828 (1) 25,596
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (147) - (19)(1) (166)
Treasury stock (1,555) - - (1,555)
Equity of Central - 4,300 (4,300)(2) -
--------- -------- ------- ---------
Total equity 40,168 4,300 - 44,468
--------- -------- ------- ---------
$ 389,453 $ 50,104 $ - $ 439,557
========= ======== ======= =========
</TABLE>
PF-9
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC (after the proposed acquisition
of First National) of 100% of Central after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
--------------------------------- --------------------------------- -------------------------------
ABC ABC ABC
FIRST PRO FORMA FIRST PRO FORMA FIRST PRO FORMA
NATIONAL CENTRAL COMBINED NATIONAL CENTRAL COMBINED NATIONAL CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $30,748 $4,141 $34,889 $24,490 $3,253 $27,743 $22,207 $3,118 $25,325
INTEREST EXPENSE 12,566 1,960 14,526 9,266 1,248 10,514 8,909 1,207 10,116
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income 18,182 2,181 20,363 15,224 2,005 17,229 13,298 1,911 15,209
PROVISION FOR LOAN LOSSES 1,033 140 1,173 758 180 938 1,319 193 1,512
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income after
provision for loan losses 17,149 2,041 19,190 14,466 1,825 16,291 11,979 1,718 13,697
OTHER INCOME 3,800 597 4,397 3,380 667 4,047 3,156 611 3,767
OTHER EXPENSE 13,801 1,874 15,675 12,967 1,795 14,762 11,791 1,843 13,634
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes and
cumulative effect 7,148 764 7,912 4,879 697 5,576 3,344 486 3,830
INCOME TAXES 2,195 265 2,460 1,463 240 1,703 814 165 979
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
cumulative effect 4,953 499 5,452 3,416 457 3,873 2,530 321 2,851
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - - - - - 346 - 346
Income from continuing
operations $ 4,953 $ 499 $ 5,452 $ 3,416 $ 457 $ 3,873 $ 2,876 $ 321 $ 3,197
======= ====== ======= ======= ====== ======= ======= ====== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.20 $ 0.94 $ 0.86
======= ======= =======
</TABLE>
PF-10
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1996 THREE MONTHS ENDED MARCH 31, 1995
-------------------------------- -----------------------------------
ABC/FIRST PRO FORMA ABC/FIRST PRO FORMA
NATIONAL CENTRAL COMBINED NATIONAL CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 8,122 $ 1,113 $ 9,235 $ 7,095 $ 914 $ 8,009
INTEREST EXPENSE 3,479 540 4,019 2,741 403 3,144
-------- -------- -------- -------- -------- --------
Net interest income 4,643 573 5,216 4,354 511 4,865
PROVISION FOR LOAN LOSSES 230 - 230 205 45 250
-------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 4,413 573 4,986 4,149 466 4,615
OTHER INCOME 1,050 180 1,230 971 160 1,131
OTHER EXPENSE 3,414 476 3,890 3,391 476 3,867
-------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes and
cumulative effect 2,049 277 2,326 1,729 150 1,879
INCOME TAXES 681 105 786 568 57 625
-------- -------- -------- -------- -------- --------
Income from operations
before cumulative
effect 1,368 172 1,540 1,161 93 1,254
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - - - - - -
-------- -------- -------- -------- -------- --------
Income from continuing
operations $ 1,368 $ 172 $ 1,540 $ 1,161 $ 93 $ 1,254
======== ======== ======== ======== ======== ========
INCOME PER SHARE FRO CONTINUING
OPERATIONS $ .34 $ 0.28
======== ========
</TABLE>
PF-11
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated on January 1, 1993, the beginning of the earliest fiscal year
presented.
B. The following pro forma adjustments have been applied to give effect to
the proposed transaction:
BALANCE SHEET:
(1) Issue of 490,619 shares of ABC common stock, $1 par value, in
exchange for 100% of the equity of Central.
(2) Elimination of investment in Central.
STATEMENTS OF INCOME:
(3) Pro forma income per common share is based on the average number of
common shares that would have been outstanding during the respective
periods. There are no dilutive common stock attributes.
PF-12
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH SOUTHLAND BANCORPORATION
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC of 100% of
Southland after giving effect to the adjustments described in the notes to the
pro forma condensed financial statements. The acquisition will be accounted for
as a purchase transaction.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
ABC SOUTHLAND (NOTES A PRO FORMA
ASSETS HISTORICAL HISTORICAL AND B) COMBINED
- ----- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 16,855 $ 2,667 $ - $ 19,522
Federal funds sold 21,535 - (5,793)(1) 15,742
Investment securities 56,916 25,180 - 82,096
Loans, net 218,877 74,880 - 293,757
Premises and equipment 7,222 2,544 500 (2) 10,266
Investment in Southland - - 11,822 (1)
(11,822)(2) -
Excess cost over fair value of assets
acquired 1,996 - 2,250 (2)
2,504 (2) 6,750
Other assets 12,188 2,197 - 14,385
--------- --------- -------- -----------
$ 335,589 $170,468 $ (539) $ 442,518
========= ========= ======== ===========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 293,385 $ 87,865 $ - $ 381,250
Other liabilities 7,629 1,027 - 8,656
Long-term debt 12,008 - 12,008
--------- --------- -------- -----------
Total Liabilities 301,014 100,900 - 401,914
--------- --------- -------- -----------
EQUITY
- --------
Common stock 3,597 - 396 (1) 3,993
Capital surplus 16,826 - 5,633 (1) 22,459
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (108) - - (108)
Treasury stock (1,555) - - (1,555)
Equity of Southland - 6,568 (6,568)(2) -
--------- --------- -------- -----------
Total equity 34,575 6,568 (539) 40,604
--------- --------- -------- -----------
$ 335,589 $ 107,468 $ (539) $ 442,518
========= ========= ======== ===========
</TABLE>
PF-13
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH SOUTHLAND BANCORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC of 100% of Southland after
giving effect to the adjustments described in the notes to the pro forma
condensed financial statements. The acquisition will be accounted for as a
purchase transaction.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
PRO FORMA
ABC SOUTHLAND ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTE B) COMBINED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME $26,703 $9,033 $ 319 (4) $35,417
INTEREST EXPENSE 10,673 4,775 - 15,448
------- ------ ----- -------
Net interest income 16,030 4,258 319 19,969
PROVISION FOR LOAN LOSSES 848 72 - 920
------- ------ ----- -------
Net interest income
after provision for
loan losses 15,182 4,186 319 19,049
OTHER INCOME 3,276 1,582 - 4,858
OTHER EXPENSE 12,228 4,101 409 (3) 16,738
------- ------ ----- -------
Income from continuing
operations before
income taxes 6,230 1,667 (728) 7,169
INCOME TAXES 1,889 643 (108)(5) 2,424
------- ------ ----- -------
Income from continuing
operations $ 4,341 $1,024 $(620) $ 4,745
======= ====== ===== =======
INCOME PER SHARE FROM $ 1.26
CONTINUING OPERATIONS =======
THREE MONTHS ENDED MARCH 31, 1996
--------------------------------------------------
PRO FORMA
ABC SOUTHLAND ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTE B) COMBINED
---------- ---------- ----------- ----------
INTEREST INCOME $ 7,051 $2,456 $ (80)(4) $ 9,427
INTEREST EXPENSE 2,941 1,206 - 4,147
------- ------ ----- -------
Net interest income 4,110 1,250 (80) 5,280
PROVISION FOR LOAN LOSSES 180 - - 180
------- ------ ----- -------
Net interest income
after provision for
loan losses 3,930 1,250 (80) 5,100
OTHER INCOME 927 399 - 1,326
OTHER EXPENSE 3,017 1,076 102 (3) 4,195
------- ------ ----- -------
Income from continuing
operations before
income taxes 1,840 573 (182) 2,231
INCOME TAXES 605 213 (27)(5) 791
------- ------ ----- -------
Income from continuing
operations $ 1,235 $ 360 $(155) $ 1,440
======= ====== ===== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ .38
=======
</TABLE>
PF-14
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH SOUTHLAND BANCORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated at the beginning of each period presented.
B. The following pro forma adjustments have been applied to give effect to the
proposed transaction:
BALANCE SHEET:
(1) Payment of $5,793,000 in cash (representing 49% of total
consideration) and issue of 396,398 of ABC common in exchange for 100%
of the equity of Southland for a total consideration of $11,822,000.
(2) Elimination of investment in Southland and allocation of purchase
price as follows:
(a) Write-up of land and buildings to approximate market value.
(b) $2,250,000, representing approximately 50% of the excess of
purchase price over the fair value of net assets acquired, has
been tentatively allocated as a premium paid for the customer
deposit base. The allocation is subject to a statistical study to
determine the ultimate customer deposit base premium. For
purposes of the pro forma financial statements, the premium is
being amortized over a period of 10 years.
(c) The remainder of the excess of purchase price over the fair value
of net assets acquired amounting to $2,504,000 has been considered
to be goodwill and is being amortized over a period of 15 years.
PF-15
<PAGE>
STATEMENTS OF INCOME:
(3) Pro forma adjustments to income resulting from the allocation of the
purchase price of Southland as follows:
(a) Depreciation of the write-up of buildings using the straight-line
method over the estimated average remaining life of 30 years.
(b) Amortization of the customer deposit base premium using the
straight-line method over a period of 10 years.
(c) Amortization of goodwill using the straight-line method over a
period of 15 years.
(4) Loss of interest on Federal funds sold used to fund the acquisition
using an average rate of 5.5%.
(5) Tax effect of pro forma adjustments for reduction in interest income
using a tax rate of 34%.
C. The following is the effect of the purchase adjustments described in Note
B(3) of Notes to the Pro Forma Condensed Financial Statements of ABC
Bancorp and Subsidiaries Combined with Southland Bancorporation.
<TABLE>
<CAPTION>
DEPRECIATION AMORTIZATION
OF WRITE-UP OF DEPOSIT AMORTIZATION
YEAR ENDING OF BANK BASE OF
DECEMBER 31, BUILDINGS PREMIUM GOODWILL TOTAL
------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1996 $ 17,000 $ 225,000 $ 167,000 $ 409,000
1997 17,000 225,000 167,000 409,000
1998 17,000 225,000 167,000 409,000
1999 17,000 225,000 167,000 409,000
2000 17,000 225,000 167,000 409,000
</TABLE>
No tax effects relating to the purchase adjustments have been recorded
because the Company is acquiring the stock of Southland and will not be
allowed any taxable deductions for the above adjustments.
PF-16
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC (after the proposed
acquisition of Southland) of 100% of Central after giving effect to the
adjustments described in the notes to the pro forma condensed financial
statements.
<TABLE>
<CAPTION>
PRO FORMA
ABC ADJUSTMENTS
SOUTHLAND CENTRAL (NOTES A PRO FORMA
COMBINED HISTORICAL AND B) COMBINED
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 19,522 $ 2,142 $ - $ 21,664
Federal funds sold 15,742 - - 15,742
Investment securities 82,096 10,862 - 92,958
Loans, net 293,757 34,988 328,745
Premises and equipment 10,266 1,074 - 11,430
Investment in Central - - 4,300 (1)
(4,300)(2) -
Excess cost over fair value of assets
acquired 6,750 - - 6,750
Other assets 14,385 1,038 - 15,433
--------- -------- ------- ---------
$ 442,518 $ 50,104 $ - $ 492,622
========= ======== ======= =========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 381,250 $ 44,724 $ - $ 425,974
Other liabilities 8,656 1,080 - 9,736
Long-term debt 12,008 - - 12,008
--------- -------- ------- ---------
Total liabilities 401,914 45,804 - 447,718
--------- -------- ------- ---------
EQUITY
------
Common stock 3,993 - 491 (1) 4,484
Capital surplus 22,459 - 3,828 (1) 26,287
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (108) - (19)(1) (127)
Treasury stock (1,555) - - (1,555)
Equity of Central - 4,300 (4,300)(2) -
--------- -------- ------- ---------
Total equity 40,604 4,300 - 44,904
--------- -------- ------- ---------
$ 442,518 $ 50,104 $ - $ 492,622
========= ======== ======= =========
</TABLE>
PF-17
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC (after the proposed acquisition
of Southland) of 100% of Central after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
--------------------------------- --------------------------------- -------------------------------
ABC PRO FORMA PRO FORMA PRO FORMA
SOUTHLAND CENTRAL COMBINED ABC CENTRAL COMBINED ABC CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $35,417 $4,141 $39,558 $21,328 $3,253 $24,581 $19,697 $3,118 $22,815
INTEREST EXPENSE 15,448 1,960 17,408 7,828 1,248 9,076 7,732 1,207 8,939
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income 19,969 2,181 22,150 13,500 2,005 15,505 11,965 1,911 13,876
PROVISION FOR LOAN LOSSES 920 140 1,060 638 180 818 1,191 193 1,384
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income after
provision for loan losses 19,049 2,041 21,090 12,862 1,825 14,687 10,774 1,718 12,492
OTHER INCOME 4,858 597 5,455 3,025 667 3,692 2,867 611 3,478
OTHER EXPENSE 16,738 1,874 18,612 11,547 1,795 13,342 10,535 1,843 12,378
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes and
cumulative effect 7,169 764 7,933 4,340 697 5,037 3,106 486 3,592
INCOME TAXES 2,424 265 2,689 1,240 240 1,480 814 165 979
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
cumulative effect 4,745 499 5,244 3,100 457 3,557 2,292 321 2,613
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - - - - - 346 - 346
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations $ 4,745 $ 499 $ 5,244 $ 3,100 $ 457 $ 3,557 $ 2,638 $ 321 $ 2,959
======= ====== ======= ======= ====== ======= ======= ====== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.24 $ 1.03 $ 0.98
======= ======= =======
</TABLE>
PF-18
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1996 THREE MONTHS ENDED MARCH 31, 1995
-------------------------------- -----------------------------------
ABC PRO FORMA ABC PRO FORMA
SOUTHLAND CENTRAL COMBINED SOUTHLAND CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 9,427 $ 1,113 $ 10,540 $ 8,347 $ 914 $ 9,261
INTEREST EXPENSE 4,147 540 4,687 3,428 403 3,831
-------- -------- -------- -------- -------- --------
Net interest income 5,280 573 5,853 4,919 511 5,430
PROVISION FOR LOAN LOSSES 180 - 180 232 45 277
-------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 5,100 573 5,673 4,687 466 5,153
OTHER INCOME 1,326 180 1,506 1,254 160 1,414
OTHER EXPENSE 4,195 476 4,671 4,184 476 4,660
-------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes and
cumulative effect 2,231 277 2,508 1,757 150 1,907
INCOME TAXES 791 105 896 631 57 688
-------- -------- -------- -------- -------- --------
Income from operations
before cumulative effect 1,440 172 1,612 1,126 93 1,219
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - - - - - -
-------- -------- -------- -------- -------- --------
Income from continuing
operations $ 1,440 $ 172 $ 1,612 $ 1,126 $ 93 $ 1,219
======== ======== ======== ======== ======== ========
INCOME PER SHARE FROM CONTINUING
OPERATIONS $ .38 $ 0.29
======== ========
</TABLE>
PF-19
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated on January 1, 1993, the beginning of the earliest fiscal year
presented.
B. The following pro forma adjustments have been applied to give
effect to the proposed transactions:
BALANCE SHEET:
(1) Issue of 490,619 shares of ABC common stock in exchange for
100% of the equity of Central.
(2) Elimination of investment in Central.
C. The following is the effect of the purchase adjustments described
in Note B(3) of Notes to the Pro Forma Condensed Financial Statements
of ABC Bancorp and Subsidiaries Combined with Southland Bancorporation.
<TABLE>
<CAPTION>
DEPRECIATION AMORTIZATION
OF WRITE-UP OF DEPOSIT AMORTIZATION
YEAR ENDING OF BANK BASE OF
DECEMBER 31, BUILDINGS PREMIUM GOODWILL TOTAL
------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1996 $ 17,000 $ 225,000 $ 167,000 $ 409,000
1997 17,000 225,000 167,000 409,000
1998 17,000 225,000 167,000 409,000
1999 17,000 225,000 167,000 409,000
2000 17,000 225,000 167,000 409,000
</TABLE>
No tax effects relating to the purchase adjustments have been recorded
because the Company is acquiring the stock of Southland and will not
be allowed any taxable deductions for the above adjustments.
PF-20
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH SOUTHLAND BANCORPORATION
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC (after the proposed
acquisition of First National) of 100% of Southland after giving effect to the
adjustments described in the notes to the pro forma condensed financial
statements.
<TABLE>
<CAPTION>
ABC PRO FORMA
FIRST ADJUSTMENTS
NATIONAL SOUTHLAND (NOTES A PRO FORMA
COMBINED HISTORICAL AND B) COMBINED
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 18,973 $ 2,667 $ - $ 21,640
Federal funds sold 24,635 - (5,793)(1) 18,842
Investment securities 68,248 25,180 - 93,428
Loans, net 253,892 74,880 - 328,772
Premises and equipment 8,685 2,544 500 (2) 11,729
Investment in Southland - - 11,822 (1)
(11,822)(2) -
Excess cost over fair value of assets
acquired 1,996 - 2,250 (2)
2,504 (2) 6,750
Other assets 13,024 2,197 - 15,221
--------- -------- ------- ---------
$ 389,453 $107,468 $ (539) $ 496,382
========= ======== ======= =========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 341,248 $ 87,865 $ - $ 429,113
Other liabilities 8,037 1,027 - 9,064
Long-term debt - 12,008 - 12,008
--------- -------- ------- ---------
Total liabilities 349,285 100,900 - 450,185
--------- -------- ------- ---------
EQUITY
------
Common stock 4,287 - 396 (1) 4,683
Capital surplus 21,768 - 5,633 (1) 27,401
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (147) - (147)
Treasury stock (1,555) - - (1,555)
Equity of Southland - 6,568 (6,586)(2) -
--------- -------- ------- ---------
Total equity 40,168 6,568 (539) 46,197
--------- -------- ------- ---------
$ 389,453 $107,468 $ (539) $ 496,382
========= ======== ======= =========
</TABLE>
PF-21
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH SOUTHLAND BANCORPORATION
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC (after the proposed acquisition
of First National) of 100% of Southland after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------
ABC
FIRST PRO FORMA
NATIONAL SOUTHLAND ADJUSTMENTS PRO FORMA
COMBINED HISTORICAL (NOTE B) COMBINED
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 30,748 $ 9,033 $ (319)(4) $ 39,462
INTEREST EXPENSE 12,566 4,775 - 17,341
-------- -------- ------- --------
Net interest income 18,182 4,258 (319) 22,121
PROVISION FOR LOAN LOSSES 1,033 72 - 1,105
-------- -------- ------- --------
Net interest income 17,149 4,186 (319) 21,016
after provision for
loan losses
OTHER INCOME 3,800 1,582 - 5,382
OTHER EXPENSE 13,801 4,101 409 (3) 18,311
-------- -------- ------- --------
Income from continuing
operations before
income taxes 7,148 1,667 (728) 8,087
INCOME TAXES 2,195 643 (108)(5) 2,730
-------- -------- ------- --------
Income from continuing
operations $ 4,953 $ 1,024 $ (620) $ 5,357
======== ======== ======= ========
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.21
========
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------
ABC/FIRST PRO FORMA
NATIONAL SOUTHLAND ADJUSTMENTS PRO FORMA
COMBINED HISTORICAL (NOTE B) COMBINED
--------- ---------- ----------- ----------
INTEREST INCOME $ 8,122 $ 2,456 $ (80)(4) $ 10,498
INTEREST EXPENSE 3,479 1,206 - 4,685
-------- -------- ------- --------
Net interest income 4,643 1,250 (80) 5,813
PROVISION FOR LOAN LOSSes 230 - - 230
-------- -------- ------- --------
Net interest income 4,413 1,250 (80) 5,583
after provision for
loan losses
OTHER INCOME 1,050 399 - 1,449
OTHER EXPENSE 3,414 1,076 102 (3) 4,592
-------- -------- ------- --------
Income from continuing
operations before
income taxes 2,049 573 (182) 2,440
INCOME TAXES 681 213 (27)(5) 867
-------- -------- ------- --------
Income from continuing
operations $ 1,368 $ 360 $ (155) $ 1,573
======== ======== ======= ========
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ .35
========
</TABLE>
PF-22
<PAGE>
ABC BANCORP AND SUBSIDIARIES
AND FIRST NATIONAL FINANCIAL CORPORATION
COMBINED WITH SOUTHLAND BANCORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming the
transaction was consummated on March 31, 1996. The pro forma condensed
statements of income have been prepared assuming the transaction was
consummated at the beginning of each period presented.
B. The following pro forma adjustments have been applied to give effect to the
proposed transactions:
BALANCE SHEET:
(1) Payment of $5,793,000 in cash (representing 49% of total
consideration) and issue of 396,398 of ABC common in exchange for 100%
of the equity of Southland for a total consideration of $11,822,000.
(2) Elimination of investment in Southland and allocation of purchase
price as follows:
(a) Write-up of land and buildings to approximate market value.
(b) $2,250,000, representing approximately 50% of the excess of
purchase price over the fair value of net assets acquired, has
been tentatively allocated as a premium paid for the customer
deposit base. The allocation is subject to a statistical study to
determine the ultimate customer deposit base premium. For
purposes of the pro forma financial statements, the premium is
being amortized over a period of 10 years.
(c) The remainder of the excess of purchase price over the fair value
of net assets acquired amounting to $2,504,000 has been considered
to be goodwill and is being amortized over a period of 15 years.
PF-23
<PAGE>
STATEMENTS OF INCOME:
(3) Pro forma adjustments to income resulting from the allocation of the
purchase price of Southland as follows:
(a) Depreciation of the write-up of buildings using the straight-line
method over the estimated average remaining life of 30 years.
(b) Amortization of the customer deposit base premium using the
straight-line method over a period of 10 years.
(c) Amortization of goodwill using the straight-line method over a
period of 15 years.
(4) Loss of interest on Federal funds sold used to fund the acquisition
using an average rate of 5.5%.
(5) Tax effect of pro forma adjustments for reduction in interest income
using a tax rate of 34%.
C. The following is the effect of the purchase adjustments described in Note
B(3) of Notes to the Pro Forma Condensed Financial Statements of ABC
Bancorp and Subsidiaries Combined with Southland Bancorporation.
<TABLE>
<CAPTION>
DEPRECIATION AMORTIZATION
OF WRITE-UP OF DEPOSIT AMORTIZATION
YEAR ENDING OF BANK BASE OF
DECEMBER 31, BUILDINGS PREMIUM GOODWILL TOTAL
------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1996 $ 17,000 $ 225,000 $ 167,000 $ 409,000
1997 17,000 225,000 167,000 409,000
1998 17,000 225,000 167,000 409,000
1999 17,000 225,000 167,000 409,000
2000 17,000 225,000 167,000 409,000
</TABLE>
No tax effects relating to the purchase adjustments have been recorded
because the Company is acquiring the stock of Southland and will not be
allowed any taxable deductions for the above adjustments.
PF-24
<PAGE>
ABC BANCORP AND SUBSIDIARIES,
FIRST NATIONAL FINANCIAL CORPORATION
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet as of March
31, 1996 has been prepared to reflect the acquisition by ABC (after the proposed
acquisitions of First National and Southland) of 100% of Central after giving
effect to the adjustments described in the notes to the pro forma condensed
financial statements.
<TABLE>
<CAPTION>
ABC
FIRST PRO FORMA
NATIONAL ADJUSTMENTS
SOUTHLAND CENTRAL (NOTES A PRO FORMA
COMBINED HISTORICAL AND B) COMBINED
--------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and due from banks $ 21,640 $ 2,142 $ - $ 23,782
Federal funds sold 18,842 - - 18,842
Investment securities 93,428 10,862 - 104,290
Loans, net 328,772 34.988 - 363,760
Premises and equipment 11,729 1,074 - 12,803
Investment in Central - - 4,300 (1)
(4,300)(2) -
Excess cost over fair value of assets
acquired 6,750 - - 6,750
Other assets 15,221 1,038 - 16,259
--------- -------- ------- ---------
$ 496,382 $ 50,104 $ - $ 546,486
========= ======== ======= =========
LIABILITIES AND EQUITY
- ----------------------
Deposits $ 429,113 $ 44,724 - $ 473,837
Other liabilities 9,064 1,080 - 10,144
Long-termerm debt 12,008 - - 12,008
--------- -------- ------- ---------
Total liabilities 450,185 45,804 - 495,989
--------- -------- ------- ---------
EQUITY
------
Common stock 4,683 - 491 (1) 5,174
Capital surplus 27,401 - 3,828 (1) 31,229
Retained earnings 15,815 - - 15,815
Unrealized losses on securities
available for sale, net of taxes (147) - (19)(1) (166)
Treasury stock (1,555) - - (1,555)
Equity of Central - 4,300 (4,300)(2) -
--------- -------- ------- ---------
Total equity 46,197 4,300 - 50,497
--------- -------- ------- ---------
$ 496,382 $ 50,104 $ - $ 546,486
========= ======== ======= =========
</TABLE>
PF-25
<PAGE>
ABC BANCORP AND SUBSIDIARIES,
FIRST NATIONAL FINANCIAL CORPORATION
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed statements of income have
been prepared to reflect the acquisition by ABC (after the proposed acquisitions
of First National and Southland) of 100% of Central after giving effect to the
adjustments described in the notes to the pro forma condensed financial
statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
--------------------------------- --------------------------------- -------------------------------
ABC
FIRST ABC ABC
NATIONAL PRO FORMA FIRST PRO FORMA FIRST PRO FORMA
SOUTHLAND CENTRAL COMBINED NATIONAL CENTRAL COMBINED NATIONAL CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $39,462 $4,141 $43,603 $24,490 $3,253 $27,743 $22,207 $3,118 $25,325
INTEREST EXPENSE 17,341 1,960 19,301 9,266 1,248 10,514 8,909 1,207 10,116
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income 22,121 2,181 24,302 15,224 2,005 17,229 13,298 1,911 15,209
PROVISION FOR LOAN LOSSES 1,105 140 1,245 758 180 938 1,319 193 1,512
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income after
provision for loan losses 21,016 2,041 23,057 14,466 1,825 16,291 11,979 1,718 13,697
OTHER INCOME 5,382 597 5,979 3,380 667 4,047 3,156 611 3,767
OTHER EXPENSE 18,311 1,874 20,185 12,967 1,795 14,762 11,791 1,843 13,634
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes and
cumulative effect 8,087 764 8,851 4,879 697 5,576 3,344 486 3,830
INCOME TAXES 2,730 265 2,995 1,463 240 1,703 814 165 979
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
cumulative effect 5,357 499 5,856 3,416 457 3,873 2,530 321 2,851
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE - - - - - - 346 - 346
Income from continuing
operations $ 5,357 $ 499 $ 5,856 $ 3,416 $ 457 $ 3,873 $ 2,876 $ 321 $ 3,197
======= ====== ======= ======= ====== ======= ======= ====== =======
INCOME PER SHARE FROM
CONTINUING OPERATIONS $ 1.19 $ 0.94 $ 0.86
======= ======= =======
</TABLE>
PF-26
<PAGE>
ABC BANCORP AND SUBSIDIARIES,
FIRST NATIONAL FINANCIAL CORPORATION
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1996 THREE MONTHS ENDED MARCH 31, 1995
-------------------------------- -----------------------------------
ABC/FIRST ABC/FIRST
NATIONAL/ PRO FORMA NATIONAL/ PRO FORMA
SOUTHLAND CENTRAL COMBINED SOUTHLAND CENTRAL COMBINED
COMBINED HISTORICAL (NOTE A) COMBINED HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 10,498 $ 1,113 $ 11,611 $ 9,285 $ 914 $ 10,199
INTEREST EXPENSE 4,685 540 5,225 3,821 403 4,224
-------- -------- -------- -------- -------- --------
Net interest income 5,813 573 6,386 5,464 511 5,975
PROVISION FOR LOAN LOSSES 230 - 230 257 45 302
-------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 5,583 573 6,156 5,207 466 5,673
OTHER INCOME 1,449 180 1,629 1,339 160 1,499
OTHER EXPENSE 4,592 476 5,068 4,575 476 5,051
-------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes and
cumulative effect 2,440 277 2,717 1,971 150 2,121
INCOME TAXES 867 105 972 712 57 769
-------- -------- -------- -------- -------- --------
Income from operations
before cumulative
effect 1,573 172 1,745 1,259 93 1,352
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - - - - - -
-------- -------- -------- -------- -------- --------
Income from continuing
operations $ 1,573 $ 172 $ 1,745 $ 1,259 $ 93 $ 1,352
======== ======== ======== ======== ======== ========
INCOME PER SHARE FRO CONTINUING
OPERATIONS $ .35 $ 0.27
======== ========
</TABLE>
PF-27
<PAGE>
ABC BANCORP AND SUBSIDIARIES,
FIRST NATIONAL FINANCIAL CORPORATION
AND SOUTHLAND BANCORPORATION
COMBINED WITH CENTRAL BANKSHARES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. The pro forma condensed balance sheet has been prepared assuming
the transaction was consummated on March 31, 1996. The pro forma
condensed statements of income have been prepared assuming the
transaction was consummated on January 1, 1993, the beginning of the
earliest fiscal year presented.
B. The following pro forma adjustments have been applied to give
effect to the proposed transactions:
BALANCE SHEET:
(1) Issue of 490,619 shares of ABC common stock in exchange for
100% of the equity in Central.
(2) Elimination of investment in Central.
C. The following is the effect of the purchase adjustments described
in Note B(3) of Notes to the Pro Forma Condensed Financial Statements
of ABC Bancorp and Subsidiaries Combined with Southland Bancorporation.
<TABLE>
<CAPTION>
DEPRECIATION AMORTIZATION
OF WRITE-UP OF DEPOSIT AMORTIZATION
YEAR ENDING OF BANK BASE OF
DECEMBER 31, BUILDINGS PREMIUM GOODWILL TOTAL
------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1996 $ 17,000 $ 225,000 $ 167,000 $ 409,000
1997 17,000 225,000 167,000 409,000
1998 17,000 225,000 167,000 409,000
1999 17,000 225,000 167,000 409,000
2000 17,000 225,000 167,000 409,000
</TABLE>
No tax effects relating to the purchase adjustment have been recorded
because the Company is acquiring the stock of Southland and will not be
allowed any taxable deductions for the above adjustments.
PF-28
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MAR 31, 1996 DEC 31, 1995
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
Cash and due from banks $ 16,855 $ 23,612
Securities available for sale, at fair value 46,618 39,991
Securities held to maturity, at cost 10,298 10,269
(fair value $10,479 and $10,462, respectively)
Federal funds sold 21,535 41,025
Loans 223,305 214,251
Less allowance for loan losses 4,428 4,272
-------- --------
Loans, net 218,877 209,979
-------- --------
Premises and equipment, net 7,222 6,942
Other assets 14,184 9,687
-------- --------
$335,589 $341,505
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------
Deposits
Noninterest-bearing demand $ 45,125 $ 58,430
Interest-bearing demand 74,410 71,833
Savings 24,075 22,318
Time, $100,000 and over 38,653 37,773
Other time 111,122 110,634
-------- --------
Total deposits 293,385 300,988
Securities sold under repurchase agreements and
other borrowing 529 3,487
Other time 7,100 3,095
-------- --------
Total liabilities 301,014 307,570
-------- --------
Stockholders' equity
Common stock, par value $1;
10,000,000 shares authorized,
3,597,074 shares issued 3,597 3,597
Capital surplus 16,826 16,826
Retained earnings 15,815 14,918
Unrealized gains (losses) on securities
available for sale, net of taxes (108) 149
-------- --------
36,130 35,490
Less cost of 217,882 shares acquired for
the treasury (1,555) (1,555)
-------- --------
Total stockholders' equity 34,575 33,935
-------- --------
$335,589 $341,505
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-1
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Interest income
Interest and fees on loans $ 5,872 $ 5,176
Interest on taxable securities 668 516
Interest on nontaxable securities 134 133
Interest on deposits in other banks 0 18
Interest on Federal funds sold 377 314
---------- ----------
7,051 6,157
---------- ----------
Interest expense
Interest on deposits 2,910 2,291
Interest on securities sold under repurchase
agreements and other borrowings 31 57
---------- ----------
2,941 2,348
---------- ----------
Net interest income 4,110 3,809
Provision for loan losses 180 180
---------- ----------
Net interest income after provision for
loan losses 3,930 3,629
---------- ----------
Other income
Service charges on deposit accounts 668 602
Other service charges, commissions and fees 233 229
Other 26 55
---------- ----------
Total other income 927 886
---------- ----------
Other expense
Salaries and employee benefits 1,670 1,519
Equipment expense 270 278
Occupancy expense 207 231
Amortization of intangible assets 79 79
Data processing fees 346 337
Directors fees 49 47
FDIC premiums 3 145
Other operating expenses 393 364
---------- ----------
Total other expenses 3,017 3,000
---------- ----------
Income before income taxes 1,840 1,515
Applicable income taxes 605 487
---------- ----------
Net income $ 1,235 $ 1,028
========== ==========
Income per common share $0.37 $0.31
========== ==========
Average shares outstanding 3,379,192 3,352,525
========== ==========
</TABLE>
F-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,235 $ 1,028
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 227 199
Provision for loan losses 180 180
Amortization of intangible assets 79 67
Other prepaids, deferrals and accruals, net (547) (941)
--------- ---------
Total adjustments (61) (495)
--------- ---------
Net cash provided by (used in)
operating activities 1,174 533
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held for
investment 6,145 3,928
Purchase of securities available for sale (12,561) (3,607)
Purchase of securities held for investment (500) --
(Increase) decrease in Federal funds sold 19,490 (1,663)
(Increase) decrease in loans (9,153) (3,510)
Purchase of premises and equipment (483) (217)
--------- ---------
Net cash provided by (used in) investing
activities 2,938 (5,069)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (8,613) (20)
Net increase (decrease) in repurchase agreements (2,694) (1,198)
Increase (decrease) of long-term debt -- 2,000
Dividends paid (338) (230)
--------- ---------
Net cash provided by (used in) financing
activities (11,645) 543
--------- ---------
Net increase (decrease) in cash and due from Banks ($ 7,533) ($ 3,993)
Cash and due from banks at beginning of year 24,388 20,495
--------- ---------
Cash and due from banks at end of quarter $ 16,855 $ 16,502
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of ABC Bancorp and subsidiaries ("the
Company") conform to generally accepted accounting principles and to general
practices within the banking industry. The interim consolidated financial
statements included herein are unaudited, but reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
consolidated financial position and results of operations for the interim
periods presented. All adjustments reflected in the interim financial
statements are of normal, recurring nature. Such financial statements should
be read in conjunction with the financial statements and notes thereto and the
report of independent auditors included in the Company's Form 10-K Annual Report
for the year ended December 31, 1995. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. STOCKHOLDERS' EQUITY
As of July 17, 1995, a 4-for-3 stock split in the form of a Common Stock
dividend on the outstanding shares of the Company's Common Stock became
effective. Fractional shares were paid in cash. All per share information
reflects retroactively this stock split.
F-4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- -----------------------------------------------------------------------------
To the Board of Directors
ABC Bancorp
Moultrie, Georgia
We have audited the accompanying consolidated balance sheets of ABC
BANCORP AND SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ABC Bancorp
and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes.
/s/ Mauldin & Jenkins
------------------------
Albany, Georgia
January 24, 1996
F-5
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ -------- --------
<S> <C> <C>
Cash and due from banks $ 23,612 $ 20,089
Federal funds sold 41,025 21,902
Securities available for sale,
at fair value (Note 2) 39,991 1,910
Securities held to maturity,
at cost (fair value $10,462
and $43,024) (Note 2) 10,269 44,595
Loans (Note 3) 214,251 192,124
Less allowance for loan losses 4,272 3,757
--------- ---------
Loans, net 209,979 188,367
--------- ---------
Premises and equipment, net (Note 4) 6,942 7,171
Other assets 9,687 8,765
--------- ---------
$341,505 $292,799
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing demand $ 58,430 $ 48,450
Interest-bearing demand 71,833 63,262
Savings 22,318 23,644
Time, $100,000 and over 37,773 27,291
Other time 110,634 94,222
-------- ---------
Total deposits 300,988 256,869
Securities sold under repurchase
agreements 1,887 2,338
Other short-term borrowings 1,600 -
Other liabilities 3,095 3,142
--------- --------
Total liabilities 307,570 262,349
--------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)
STOCKHOLDERS' EQUITY (Note 10)
Common stock, par value $1;
10,000,000 shares authorized,
3,597,074 and 2,697,987 shares
issued, respectively 3,597 2,698
Capital surplus 16,826 17,728
Retained earnings 14,918 11,753
Unrealized gains (losses) on
securities available for sale, net
of taxes 149 (49)
-------- ---------
35,490 32,130
Less cost of shares acquired for the
treasury, 217,882 and 183,412
shares, respectively (1,555) (1,680)
--------- ---------
Total stockholders' equity 33,935 30,450
--------- ---------
$ 341,505 $292,799
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 22,647 $ 18,017 $ 16,278
Interest on taxable securities 2,271 1,863 1,892
Interest on nontaxable securities 551 610 597
Interest on deposits in other banks 65 105
Interest on Federal funds sold 1,234 773 825
-------- -------- --------
26,703 21,328 19,697
-------- -------- --------
INTEREST EXPENSE
Interest on deposits 10,371 7,603 7,476
Interest on securities sold
under repurchase agreements 77 68 18
Interest on other borrowings 225 157 238
-------- -------- --------
10,673 7,828 7,732
-------- -------- --------
Net interest income 16,030 13,500 11,965
PROVISION FOR LOAN LOSSES (Note 3) 848 638 1,191
-------- -------- --------
Net interest income
after provision for
loan losses 15,182 12,862 10,774
-------- -------- --------
OTHER INCOME
Service charges on deposit
accounts 2,595 2,456 2,299
Other service charges,
commissions and fees 301 224 230
Other 380 345 338
-------- -------- --------
3,276 3,025 2,867
-------- -------- --------
OTHER EXPENSES
Salaries and employee benefits
(Note 5) 6,210 5,711 5,238
Equipment expense 1,074 1,091 723
Occupancy expense 756 663 844
Amortization of intangible assets 268 268 279
Data processing fees 372 448 290
Directors fees 314 291 270
FDIC premiums 301 559 551
Other operating expenses (Note 6) 2,933 2,516 2,340
-------- -------- --------
12,228 11,547 10,535
-------- -------- --------
</TABLE>
F-7
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Income before income taxes
and cumulative effect of
accounting change $ 6,230 $ 4,340 $ 3,106
APPLICABLE INCOME TAXES (Note 7) 1,889 1,240 814
--------- ------- -------
Income before cumulative
effect of accounting change 4,341 3,100 2,292
CUMULATIVE EFFECT OF CHANGE IN METHOD
OF ACCOUNTING FOR INCOME TAXES - - 346
--------- --------- --------
Net income $ 4,341 $ 3,100 $ 2,638
========= ========= ========
INCOME PER COMMON SHARE:
Income before cumulative effect
of accounting change $ 1.29 $ 1.05 $ 0.91
Cumulative effect of accounting
change - - 0.13
--------- --------- --------
Net income (Note 1) $ 1.29 $ 1.05 $ 1.04
========= ========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- CAPITAL RETAINED
SHARES PAR VALUE SURPLUS EARNINGS
--------- --------- ------- --------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 1,950,487 $1,950 $10,152 $ 7,571
Net income 2,638
Cash dividends paid, $.29 per share (672)
Purchase of 143,024 shares of treasury
stock - - - -
--------- ------ ------- -------
BALANCE, DECEMBER 31, 1993 1,950,487 1,950 10,152 9,537
Net income - - - 3,100
Cash dividends declared, $.29 per share - - - (884)
Proceeds from sale of stock, net of stock
offering expense 747,500 748 7,576 -
Net change in unrealized losses on
securities available for sale, net of taxes - - - -
--------- ------ ------- -------
BALANCE, DECEMBER 31, 1994 2,697,987 2,698 17,728 11,753
Net income - - - 4,341
Cash dividends declared, $.35 per share - - - (1,176)
Four-for-three common stock split 899,087 899 (899) -
Purchase of fractional shares - - (3) -
Stock issued under stock option purchase plan - - - -
Net change in unrealized gains on
securities available for sale, net of taxes - - - -
--------- ------ ------- -------
BALANCE, DECEMBER 31, 1995 3,597,074 $3,597 $16,826 $14,918
========= ====== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
AVAILABLE TREASURY STOCK
FOR SALE, --------------------
NET OF TAXES SHARES COST TOTAL
- -------------- -------- --------- -------
<S> <C> <C> <C>
$ - 40,388 $ (268) $19,405
- - - 2,638
- - - (672)
- 143,024 (1,412) (1,412)
------- ------- ------- -------
- 183,412 (1,680) 19,959
- - - 3,100
- - - (884)
- - - 8,324
(49) - - (49)
------- ------- ------- -------
(49) 183,412 (1,680) 30,450
- - - 4,341
- - - (1,176)
- 61,137 - -
- - - (3)
- (26,667) 125 125
198 - - 198
------- ------- ------- -------
$ 149 217,882 $(1,555) $33,935
======= ======= ======= =======
</TABLE>
F-10
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 936 809 638
Amortization of intangible assets 268 268 279
Provision for loan losses 848 638 1,191
Provision for deferred taxes (160) (22) (170)
Write-downs of other real estate owned - 53 -
(Increase) decrease in interest receivable (775) (804) 100
Increase (decrease) in interest payable 190 104 (90)
Increase (decrease) in taxes payable (29) 184 76
Other prepaids, deferrals and accruals, net (653) 798 (178)
-------- -------- --------
Total adjustments 625 2,028 1,846
-------- -------- --------
Net cash provided by operating activities 4,966 5,128 4,484
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest-bearing deposits in banks - 1,257 100
Purchases of securities available for sale (21,690) (1,664) -
Purchases of securities held to maturity (1,654) (7,524) (24,502)
Proceeds from maturities of securities available for sale 4,086 - -
Proceeds from maturities of securities held to maturity 15,778 8,531 13,587
(Increase) decrease in Federal funds sold (19,123) 9,673 9,565
Increase in loans, net (22,460) (30,829) (12,435)
Purchase of premises and equipment (717) (2,303) (382)
Proceeds from the sale of premises and equipment 24 22 26
-------- -------- --------
Net cash used in investing activities (45,756) (22,837) (14,041)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 44,119 18,644 3,755
Increase (decrease) in repurchase agreements (451) (842) 3,117
Proceeds from other borrowings 1,600 - 1,412
Repayment of long-term debt - (4,677) (15)
Dividends paid (1,077) (645) (672)
Proceeds from stock offering, net - 8,324 -
Proceeds from exercise of stock options 125 - -
Purchase of fractional shares (3) - -
Purchase of shares of stock for the treasury - - (1,412)
-------- -------- --------
Net cash provided by financing activities 44,313 20,804 6,185
-------- -------- --------
</TABLE>
F-11
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net increase (decrease) in cash and due from banks $ 3,523 $ 3,095 $(3,372)
Cash and due from banks at beginning of year 20,089 16,994 20,366
------- ------- -------
Cash and due from banks at end of year $23,612 $20,089 $16,994
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $10,483 $ 7,724 $ 7,822
Income taxes $ 2,078 $ 1,078 $ 562
NONCASH TRANSACTIONS
Net change in unrealized gains (losses)
on securities available for sale $ 289 $ (54) $ -
Property transferred from premises and equipment
to other real estate owned $ - $ 103 $ -
Dividends declared $ 338 $ 239 $ -
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
ABC Bancorp, headquartered in Moultrie, Georgia, is the holding
company (the "Company") for five community banks ("the Banks") located
in the south Georgia cities of Moultrie, Quitman, Tifton, Cairo and
Thomasville. The Banks operate 11 banking offices and two drive-
through facilities within ABC Bancorp's market area. Through its
Banks, ABC Bancorp operates a full service banking business and offers
a broad range of retail and commercial banking services to its
customers. The Company and the Banks are subject to the regulations of
certain Federal and state agencies and are periodically examined by
those regulatory agencies.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
The principles which significantly affect the determination of
financial position, results of operations and cash flows are
summarized below.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including
cash items in process of clearing). Cash flows from loans
originated by the Banks, deposits, interest-bearing deposits and
Federal funds purchased and sold are reported net.
The Company maintains amounts due from banks which, at times,
may exceed Federally insured limits. The Company has not
experienced any losses in such accounts.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SECURITIES AVAILABLE FOR SALE
Securities classified as available for sale are those debt securities
that the Company intends to hold for an indefinite period of time, but
not necessarily to maturity. Any decision to sell a security
classified as available for sale would be based on various factors,
including significant movements in interest rates, changes in the
maturity mix of the Company's assets and liabilities, liquidity needs,
regulatory capital considerations and other similar factors.
Securities available for sale are carried at fair value. Unrealized
gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized
gains or losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
SECURITIES HELD TO MATURITY
Securities classified as held to maturity are those debt securities
the Company has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or changes
in general economic conditions. These securities are carried at cost
adjusted for amortization of premium and accretion of discount,
computed by the interest method over their contractual lives. The sale
of a security within three months of its maturity date or after
collection of at least 85 percent of the principal outstanding at the
time the security was acquired is considered a maturity for purposes
of classification and disclosure.
A decline in the fair value below cost of any available for sale or
held to maturity security that is deemed other than temporary is
charged to earnings resulting in the establishment of a new cost basis
for the security.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS AND INTEREST INCOME
Loans are stated at principal amounts outstanding less unearned income
and the allowance for loan losses. Interest income on loans is
credited to income based on the principal amount outstanding at the
respective rate of interest except for add-on interest on certain
instalment loans for which interest is recognized on the sum-of-the-
months method.
Accrual of interest income is discontinued on loans when, in the
opinion of management, collection of such interest income becomes
doubtful. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is reversed against current
interest income. Accrual of interest on such loans is resumed when, in
management's judgment, the collection of interest and principal
becomes probable.
Fees on loans and costs incurred in origination of loans are
recognized at the time the loan is placed on the books. Because loan
fees are not significant and the majority of loans have maturities of
one year or less, the results on operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that collectibility
of the principal is unlikely. The allowance is an amount that
management believes will be adequate to absorb estimated losses on
existing loans that may become uncollectible, based on evaluation of
the collectibility of loans and prior loss experience. This evaluation
also takes into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans and current economic conditions that may affect
the borrower's ability to pay. Certain estimates are susceptible to
change in the near term. Such estimates include the creditworthiness
of significant borrowers and the collateral value of delinquent loans.
While management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on
their judgment about information available to them at the time of
their examinations.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS AND INTEREST INCOME (CONTINUED)
Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or,
as a practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. A
loan is impaired when it is probable the creditor will be unable to
collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement. Accrual of interest
on an impaired loan is discontinued when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Cash collections on impaired loans are credited to the loans
receivable balance, and no interest income is recognized on those
loans until the principal balance has been collected.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the
straight-line method over the following estimated useful lives:
Years
-----
Buildings and improvements 15-40
Furniture and equipment 5-7
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents properties acquired through
foreclosure or other proceedings. OREO is held for sale and is
recorded at the lower of the recorded amount of the loan or fair value
of the properties less estimated costs of disposal. Any write-down to
fair value at the time of transfer to OREO is charged to the allowance
for loan losses. Property is evaluated regularly to ensure the
recorded amount is supported by its current fair value and valuation
allowances to reduce the carrying amount to fair value less estimated
costs to dispose are recorded as necessary. Subsequent decreases in
fair value and increases in fair value, up to the value established at
foreclosure, are recognized as charges or credits to noninterest
expense. OREO is reported net of allowance for losses in the Company's
financial statements.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INTANGIBLE ASSETS
Intangible assets, arising from excess of purchase price over
net assets acquired of purchased banks, are being amortized on
the straight-line method over various periods not exceeding 25
years.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax
return. Each subsidiary provides for income taxes based on its
contribution to income taxes (benefits) of the consolidated group.
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
SFAS No. 109 requires a balance sheet approach to accounting for
income taxes and requires that deferred tax assets and liabilities be
adjusted in the period of enactment for the effect of an enacted
change in tax laws or rates. The adoption of SFAS No. 109 resulted in
an income tax benefit of $345,937, which has been included in the
consolidated statement of income for the year ended December 31, 1993
as a cumulative effect.
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effect of changes in tax laws on the date of
enactment.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of
the instrument. Statement No. 107 excludes certain financial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
The following methods and assumptions were used by the Company
in estimating the fair value of its financial instruments:
Carrying amounts approximate fair values for the following
instruments:
Cash and due from banks
Federal funds sold
Securities available for sale
Variable rate loans that reprice frequently
Credit card loans and equity line loans
Variable rate money market accounts
Variable rate certificates of deposit
Short-term borrowing
Accrued interest receivable
Accrued interest payable
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Quoted market prices, where available, or if not available,
based on quoted market prices of comparable instruments for
securities held to maturity.
Discounted cash flows using interest rates currently being
offered on instruments with similar terms and with similar
credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposit
Commitments to extend credit and standby letters of credit are not
recorded until such commitments are funded. The value of these
commitments are the fees charged to enter into such agreements. These
commitments do not represent a significant value to the Company until
such commitments are funded. The Company has determined that such
instruments do not have a distinguishable fair value and no fair value
has been assigned to these instruments.
EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted
average number of shares outstanding. All per share data for
prior years have been adjusted to reflect the four-for-three
stock split effected in the form of a stock dividend to
shareholders of record as of July 17, 1995.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. INVESTMENTS IN SECURITIES
Effective January 1, 1994, the Bank adopted Financial Accounting
Standards Board Statement No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." Upon adoption, the Company transferred
$300,005 of marketable equity securities from securities held to
maturity to securities available for sale. The securities available for
sale were marked to fair value resulting in a net unrealized loss of
$11,986 which was included in stockholders' equity at $11,986.
Under special provisions adopted by the Financial Accounting Standards
Board in October 1995, the Company transferred $20,188,243 from
securities held to maturity to securities available for sale on December
31, 1995, resulting in a net unrealized gain of $94,743 which was
included in stockholders' equity at $62,531 net of related taxes of
$32,212.
The amortized cost and approximate fair values of investments in
securities at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
-------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1995:
U. S. GOVERNMENT AND AGENCY SECURITIES $37,174 $285 $ (93) $37,366
MORTGAGE-BACKED SECURITIES 2,282 69 (8) 2,343
OTHER SECURITIES 300 - (18) 282
------- ---- ------- -------
$39,756 $354 $ (119) $39,991
======= ==== ======= =======
December 31, 1994:
U. S. Government and agency securities $ 1,664 $ - $ (14) $ 1,650
Other securities 300 - (40) 260
------- ---- ------- -------
$ 1,964 $ - $ (54) $ 1,910
======= ==== ======= =======
SECURITIES HELD TO MATURITY
DECEMBER 31, 1995:
STATE AND MUNICIPAL SECURITIES $10,269 $258 $ (65) $10,462
======= ==== ======= =======
December 31, 1994:
U. S. Government and agency securities $32,159 $ 19 $(1,196) $30,982
State and municipal securities 9,819 114 (471) 9,462
Mortgage-backed securities 2,617 22 (59) 2,580
------- ---- ------- -------
$44,595 $155 $(1,726) $43,024
======= ==== ======= =======
</TABLE>
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. INVESTMENTS IN SECURITIES (CONTINUED)
There were no sales of securities during 1995, 1994 or 1993.
The amortized cost and fair value of securities as of December 31, 1995
by contractual maturity are shown below. Maturities may differ from
contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without any
penalties. Therefore, these securities are not included in the maturity
categories in the following maturity summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE SECURITIES HELD TO MATURITY
----------------------------- -----------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ------------- ---------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $11,541 $11,566 $ 727 $ 724
Due from one year to five years 25,633 25,800 2,734 2,748
Due from five to ten years - - 5,722 5,891
Due after ten years - - 1,086 1,099
Mortgage-backed securities 2,282 2,343 - -
Marketable equity securities 300 282 - -
------- ------- ------- -------
$39,756 $39,991 $10,269 $10,462
======= ======= ======= =======
</TABLE>
Securities with a carrying value of $33,837,773 and $28,616,565
at December 31, 1995 and 1994, respectively, were pledged to
secure public deposits and for other purposes.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C>
Commercial and financial $ 23,733 $ 23,531
Agricultural 15,124 17,079
Real estate - construction 1,836 1,828
Real estate - mortgage, farmland 40,053 34,887
Real estate - mortgage, commercial 41,438 35,242
Real estate - mortgage, residential 52,377 44,064
Consumer instalment loans 38,976 34,220
-------- --------
Other 717 1,280
214,254 192,131
Unearned discount (3) (7)
Allowance for loan losses (4,272) (3,757)
-------- --------
$209,979 $188,367
======== ========
</TABLE>
At December 31, 1995, executive officers and directors, and companies in
which they have a 10 percent or more beneficial ownership, were indebted
to the Company in the aggregate amount of $7,792,000. The interest rates
on these loans were substantially the same as rates prevailing at the
time of the transaction and repayment terms are customary for the type
of loan involved. Following is a summary of transactions:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 7,234 $ 8,506
Advances 5,030 4,670
Repayments (4,715) (4,890)
Transactions due to changes
in directors 243 (1,052)
-------- --------
BALANCE, END OF YEAR $ 7,792 $ 7,234
======== ========
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
------- -------
(Dollars in Thousands)
------------------------
<S> <C> <C>
Balance, beginning of year $ 3,757 $ 3,571
Provision charged to operations 848 638
Loans charged off (730) (971)
Recoveries 397 519
-------- -------
Balance, end of year $ 4,272 $ 3,757
Information with respect to impaired loans as of and for the
year ended December 31, 1995 is as follows:
(Dollars in
Thousands)
---------
Loans receivable for which there is a related allowance for
credit losses $ 1,006
Loans receivable for which there is no related allowance for
credit losses 1,253
-------
Total impaired loans $ 2,259
=======
Allowance provided for impaired loans included in the
allowance for loan losses $ 163
=======
Average balance $ 3,089
=======
Interest income recognized $ 161
=======
</TABLE>
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Loans on which the accrual of interest had been discontinued or
reduced amounted to $3,817,699 at December 31, 1994. The
reduction in interest income associated with nonaccrual and
renegotiated loans for 1994 and 1993 is as follows. For 1995,
nonaccrual loans have been included in the impaired loan
information above.
<TABLE>
<CAPTION>
December 31,
--------------------
1994 1993
-------- --------
(Dollars in Thousands)
----------------------
<S> <C> <C>
Income in accordance with original loan terms $ 324 $ 201
Income recognized 37 9
------- ------
$ 287 $ 192
======= ======
NOTE 4. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
December 31,
----------------------
1995 1994
-------- ---------
(Dollars in Thousands)
----------------------
Land $ 1,563 $ 1,564
Buildings 5,446 5,271
Equipment 5,936 6,223
Construction in progress 182 -
------- -------
13,127 13,058
Accumulated depreciation (6,185) (5,887)
======= =======
$ 6,942 $ 7,171
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1994
and 1993 was $886,320, $738,562 and $462,368, respectively.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 5. EMPLOYEE BENEFIT PLANS
The Company and all subsidiaries have adopted simplified
employee pension plans for substantially all employees. These
plans are SEP-IRA defined contribution plans. Contributions to
these plans charged to expense during 1995, 1994 and 1993
amounted to $540,766, $499,254 and $484,870, respectively.
NOTE 6. DEFERRED COMPENSATION PLANS
The Company and two subsidiary Banks have entered into separate
deferred compensation arrangements with certain executive
officers and directors. The plans call for certain amounts
payable at retirement, death or disability. The estimated
present value of the deferred compensation is being accrued over
the remaining expected term of active employment. The Company
and Banks have purchased life insurance policies which they
intend to use to finance this liability. Aggregate compensation
expense under the plans were $54,724, $81,295 and $83,459 for
1995, 1994 and 1993, respectively, and is included in other
operating expenses.
NOTE 7. INCOME TAXES
The total income taxes in the consolidated statements of income
are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994 1993
------- -------- ------
(Dollars in Thousands)
------------------------------
<S> <C> <C> <C>
Current $ 2,049 $ 1,262 $ 638
Deferred (160) (22) 176
------- ------- -----
$ 1,889 $ 1,240 $ 814
======= ======= =====
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. INCOME TAXES (Continued)
The Company's provision for income taxes differs from the
amounts computed by applying the Federal income tax statutory
rates to income before income taxes. A reconciliation of the
differences is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1995 1994 1993
----------------- ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------- -------- -------- -------
(Dollars in Thousands)
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory rate $2,118 34 % $1,475 34 % $1,056 34 %
Increase (decrease) resulting from:
Tax-exempt interest (216) (3) (246) (6) (274) (9)
Amortization of excess
cost over assets acquired 32 - 37 1 49 2
Changes in valuation allowance
for deferred taxes (72) (1) (50) (1) - -
Other 27 - 24 1 (17) (1)
------ ----- ------ ----- ------- -----
Provision for income taxes $1,889 30 % $1,240 29 % $ 814 26 %
====== ====== ====== ===== ====== =====
</TABLE>
Net deferred income tax assets of $486,260 and $411,710 at
December 31, 1995 and 1994, respectively, are included in other
assets. The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
---------- ----------
(Dollars in Thousands)
-----------------------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $ 836 $ 640
Deferred compensation 148 138
Other real estate 18
Other 34 68
Net operating loss tax carryforward 285 310
Less valuation allowance (228) (300)
------ ------
1,075 874
------ ------
Deferred tax liabilities:
Deprecation and amortization (253) (179)
Amortization of intangible assets (250) (283)
Unrealized gain on securities available for sale (86) -
------ ------
(589) (462)
------ ------
Net deferred tax assets $ 486 $ 412
====== ======
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into
off-balance-sheet financial instruments which are not reflected
in the financial statements. These financial instruments include
commitments to extend credit and standby letters of credit.
Such financial instruments are included in the financial
statements when funds are disbursed or the instruments become
payable. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in
the balance sheet.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit
is represented by the contractual amount of those instruments.
The Company uses the same credit and collateral policies for
these off-balance-sheet financial instruments as it does for
on-balance-sheet financial instruments. A summary of the
Company's commitments is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
---------- ----------
(Dollars in Thousands)
-----------------------------
<S> <C> <C>
Commitments to extend credit $ 36,024 $ 22,344
Credit card commitments 2,883 2,345
Standby letters of credit 905 590
--------- --------
$ 39,812 $ 25,279
========= ========
</TABLE>
Commitments to extend credit generally have fixed expiration
dates or other termination clauses and may require payment of a
fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The credit risk
involved in issuing these financial instruments is essentially
the same as that involved in extending loans to customers. The
Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is
based on management's credit evaluation of the customer.
Collateral held varies but may include real estate and
improvements, marketable securities, accounts receivable, crops,
livestock, inventory, equipment and personal property.
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Credit card commitments are unsecured.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support
public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
Collateral held varies as specified above and is required in
instances which the Company deems necessary.
In the normal course of business, the Company is involved in
various legal proceedings. In the opinion of management and
counsel for the Company, any liability resulting from such
proceedings would not have a material adverse effect on the
Company's financial statements.
NOTE 9. CONCENTRATIONS OF CREDIT
The Banks make agricultural, agribusiness, commercial,
residential and consumer loans to customers primarily in the
twelve county area surrounding Moultrie in south central Georgia.
A substantial portion of the Company's customers' abilities to
honor their contracts is dependent on the business economy in
the geographical area served by the Banks.
Although the Company's loan portfolio is diversified, there is a
relationship in this region between the agricultural economy and
the economic performance of loans made to nonagricultural
customers. The Company's lending policies for agricultural and
nonagricultural customers require loans to be
well-collateralized and supported by cash flows. Collateral for
agricultural loans include equipment, crops, livestock and land.
Credit losses from loans related to the agricultural economy is
taken into consideration by management in determining the
allowance for loan losses.
A substantial portion of the Company's loans are secured by real
estate in the Company's primary market area. In addition, a
substantial portion of the real estate owned is located in those
same markets. Accordingly, the ultimate collectibility of a
substantial portion of the Company's loan portfolio and the
recovery of a substantial portion of the carrying amount of real
estate owned are susceptible to changes in market conditions in
the Company's primary market area.
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 9. CONCENTRATIONS OF CREDIT (Continued)
The Company has a concentration of funds on deposit at its
primary correspondent bank at December 31, 1995, as follows:
Noninterest-bearing accounts $ 15,448,169
Federal funds sold 25,550,000
------------
$ 40,998,169
============
NOTE 10. STOCKHOLDERS' EQUITY
The primary source of funds available to the Parent Company is
the payment of dividends by the subsidiary Banks. Banking
regulations limit the amount of dividends that may be paid
without prior approval of the Banks' regulatory agency.
Approximately $2,381,100 are available to be paid as dividends
by the Bank subsidiaries at December 31, 1995.
Banking regulations also require the Company to maintain
minimum capital levels in relation to Company assets. At
December 31, 1995, the Company's capital ratios were considered
adequate based on regulatory minimum capital requirements. The
minimum capital requirements and the actual capital ratios for
the Company at December 31, 1995 are as follows:
Regulatory
Actual Requirement
-------- -----------
Leverage capital ratio 10.37 % 4.00 %
Risk based capital ratios:
Core capital 15.23 4.00
Total capital 16.49 8.00
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1995 1994
-------------------------- -------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
---------- ---------- ----------- ---------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and short-term investments $ 64,637 $ 64,637 $ 41,991 $ 41,991
======== ======== ======== ========
Investments in securities $ 50,260 $ 50,453 $ 46,505 $ 44,934
======== ======== ======== ========
Loans $214,251 $205,845 $192,124 $185,314
Allowance for loan losses (4,272) - (3,757) -
-------- -------- -------- --------
Loans, net $209,979 $205,845 $188,367 $185,314
======== ======== ======== ========
FINANCIAL LIABILITIES:
Noninterest-bearing demand $ 58,430 $ 58,430 $ 48,450 $ 48,450
Interest-bearing demand 71,833 71,833 63,262 63,262
Savings 22,318 22,318 23,644 23,644
Time deposits 148,407 150,186 121,513 121,595
-------- -------- -------- --------
Total deposits $300,988 $302,767 $256,869 $256,951
======== ======== ======== ========
Short-term borrowings $ 3,487 $ 3,487 $ 2,338 $ 2,338
======== ======== ======== ========
</TABLE>
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash $ 1,027 $ 1,307
Interest-bearing deposits in banks 2,060 1,500
Investment in subsidiaries 27,607 24,461
Other assets 3,856 3,838
------- -------
Total assets $34,550 $31,106
======= =======
LIABILITIES
Other liabilities $ 615 $ 656
------- -------
Total liabilities 615 656
------- -------
STOCKHOLDERS' EQUITY 33,935 30,450
------- -------
Total liabilities and stockholders' equity $34,550 $31,106
======= =======
</TABLE>
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (Continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
------- ------- -------
Income
Dividends from subsidiaries $ 1,815 $ 1,170 $ 1,150
Interest 106 84 11
Fee and rental income 2,757 2,427 1,950
Other income 25 94 32
------- ------- -------
Total income 4,703 3,775 3,143
------- ------- -------
Expense
Interest - 111 193
Amortization and depreciation 423 436 423
Other expense 2,944 2,644 1,926
------- ------- -------
Total expense 3,367 3,191 2,542
------- ------- -------
Income before income taxes (benefits)
and equity in undistributed earnings
of subsidiaries 1,336 584 601
Income taxes (benefits) (58) (55) 147
------- ------- -------
Income before equity in undistributed
earnings of subsidiaries 1,394 639 454
Equity in undistributed earnings
of subsidiaries 2,947 2,461 2,184
------- ------- -------
Net income $ 4,341 $ 3,100 $ 2,638
======= ======= =======
</TABLE>
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
------- ------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155 168 144
Amortization of intangible assets 268 268 279
Undistributed earnings of subsidiaries (2,947) (2,461) (2,184)
Increase in interest receivable (9) (6) -
Increase (decrease) in taxes payable (180) 30 19
Provision for deferred taxes 14 5 204
(Increase) decrease in due from
subsidiaries (55) 45 (49)
Other prepaids, deferrals and accruals, net (88) 50 (56)
------- ------- -------
Total adjustments (2,842) (1,901) (1,643)
------- ------- -------
Net cash provided by operating
activities 1,499 1,199 995
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in interest-bearing deposits in banks (560) (1,500) -
Purchases of premises and equipment (281) (243) (22)
Proceeds from sale of premises 17 - -
Contribution of capital to subsidiary bank - (1,500) -
------- ------- -------
Net cash used in investing activities (824) (3,243) (22)
------- ------- -------
</TABLE>
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP
(PARENT COMPANY ONLY) (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term debt $ - $ - $ 1,412
Repayment of long-term debt - (4,677) (15)
Proceeds from sale of stock, net of
stock offering expense 8,324
Proceeds from exercise of stock options 125 - -
Purchase of treasury stock - - (1,412)
Purchase of fractional shares (3) - -
Dividends paid (1,077) (645) (672)
------- ------- -------
Net cash provided by (used in)
financing activities (955) 3,002 (687)
------- ------- -------
Net increase (decrease) in cash (280) 958 286
Cash at beginning of year 1,307 349 63
------- ------- -------
Cash at end of year $ 1,027 $ 1,307 $ 349
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for interest $ - $ 111 $ 193
</TABLE>
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 13. PENDING ACQUISITIONS
The Company has entered into a definitive merger agreement with
Southland Bancorporation, Dothan, Alabama pursuant to which it
would acquire all of the outstanding stock of Southland
Bancorporation in exchange for a combination of cash and the
Company's common stock. The total merger consideration will
approximate $11.4 million. Total assets of Southland
Bancorporation at December 31, 1995 were approximately $101
million. The merger is subject to approval by Southland
Bancorporation shareholders and certain regulatory authorities
and the registration of the Company's common stock to be issued
in connection with the merger. As a result of the merger,
Southland Bank, a wholly-owned subsidiary of Southland
Bancorporation, will become a wholly-owned subsidiary of the
Company. The merger will be accounted for as a purchase
transaction.
The Company has also entered into a definitive merger agreement
with Central Bankshares, Inc., Cordele, Georgia whereby it would
acquire all of the outstanding common stock of Central
Bankshares, Inc. in exchange for the Company's common stock.
The total merger consideration will approximate $8.3 million.
Total assets of Central Bankshares at December 31, 1995 were
approximately $51 million. The merger is subject to approval by
Central Bankshares, Inc. shareholders and certain regulatory
authorities and the registration of the Company's common stock
to be issued in connection with the merger. As a result of the
merger, Central Bank & Trust, a wholly-owned subsidiary of
Central Bankshares, Inc., will become a wholly-owned subsidiary
of the Company. The merger will be accounted for as a pooling
of interests.
F-35
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
ASSETS 1996 1995
---- ----
<S> <C> <C>
Cash and due from banks $ 2,141,940 $ 1,588,742
Federal funds sold - 880,000
Securities available for sale, at fair value 7,977,966 6,070,924
Securities held for investment, at cost 2,883,580 3,251,178
Loans, less allowance for loan losses of $445,115
and $371,884 34,988,252 29,774,901
Office properties and equipment, net 1,073,524 1,190,573
Accrued interest receivable 737,889 572,472
Other assets 300,601 1,485,772
----------- -----------
$50,103,752 $44,814,562
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand $ 3,514,460 $ 2,728,987
Interest-bearing demand 9,668,049 9,205,791
Savings 3,148,812 3,046,732
Time, $100,000 and over 8,005,442 4,149,535
Other time 20,387,251 21,469,634
----------- -----------
Total deposits 44,724,014 40,600,679
----------- -----------
Accrued interest and other liabilities 1,080,051 454,911
----------- -----------
Total liabilities 45,804,065 41,055,590
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Capital stock, common, par value $1; 10,000,000
shares authorized, and 218,130 shares issued
and outstanding 218,130 218,130
Additional paid-in capital 2,423,300 2,423,300
Retained earnings 1,677,502 1,098,322
Unrealized gains (losses) on securities
available for sale, net of taxes (19,245) 19,220
----------- -----------
Total stockholders' equity 4,299,687 3,758,972
----------- -----------
$50,103,752 $44,814,562
=========== ===========
</TABLE>
F-36
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 925,450 $764,822
Investment securities and time deposits 171,281 143,712
Other interest income 16,228 5,853
---------- --------
1,112,959 914,387
---------- --------
INTEREST EXPENSE
Interest on deposits 539,327 397,345
Interest on borrowed money 800 5,950
---------- --------
540,127 403,295
---------- --------
Net interest income 572,832 511,092
PROVISION FOR LOAN LOSSES - 45,000
---------- --------
Net interest income after provision
for loan losses 572,832 466,092
---------- --------
OTHER INCOME
Service charges 127,873 113,694
Other income 51,755 45,925
---------- --------
179,628 159,619
---------- --------
GENERAL AND ADMINISTRATIVE EXPENSES
Employee compensation and benefits 227,431 210,687
Occupancy and equipment 77,480 90,635
Other operating expenses 170,522 174,859
---------- --------
475,433 476,181
---------- --------
Income before income taxes 277,027 149,530
APPLICABLE INCOME TAXES 104,578 57,099
---------- --------
Net income $ 172,449 $ 92,431
========== ========
PER SHARE OF COMMON STOCK
Net income $ .79 $ .42
========== ========
</TABLE>
F-37
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 172,449 $ 92,431
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 33,516 38,857
Provision for loan losses - 45,000
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable 7,866 (21,895)
(Increase) decrease in other assets 999,292 (25,451)
Decrease in accrued interest payable (97,277) (65,926)
(Increase) decrease in accrued expenses and
other liabilities 485,432 (8,962)
----------- ----------
Net cash provided by operating activities 1,601,278 54,054
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in Federal funds sold 2,010,000 700,000
Purchases of securities available for sale (819,417) (1,447,465)
Proceeds from sales of securities available for sale 660,797 1,115,432
Net increase in loans (2,089,075) (1,184,487)
Purchases of property and equipment - (5,930)
----------- ----------
Net cash used in investing activities (237,695) (822,450)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends - (108,850)
Net increase (decrease) in customer deposits (1,486,822) 1,852,819
----------- ----------
Net cash provided by (used in) financing
activities (1,486,822) 1,743,969
----------- ----------
Net increase (decrease) in cash and due from banks (123,239) 975,573
Cash and due from banks at beginning of period 2,265,179 613,169
----------- ----------
Cash and due from banks at end of period $ 2,141,940 $1,588,742
=========== ==========
F-38
<PAGE>
CENTRAL BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The accompanying unaudited consolidated financial statements, which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These financial statements and the notes
thereto should be read in conjunction with the annual financial statements
and the notes thereto for the years ended December 31, 1995 and 1994
included elsewhere in this Proxy Statement/Prospectus.
(2) All material intercompany balances and transactions have
been eliminated.
(3) In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three months ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
F-39
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS
CENTRAL BANKSHARES, INC.
CORDELE, GEORGIA
We have audited the accompanying consolidated balance sheets of CENTRAL
BANKSHARES, INC. AND SUBSIDIARY as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Central
Bankshares, Inc. and subsidiary, as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins
-----------------------------
Macon, Georgia
January 26, 1996
F-40
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
ASSETS 1995 1994
----------- -----------
Cash and due from banks $ 2,265,179 $ 613,169
Federal funds sold 2,010,000 1,580,000
Securities available for sale, at fair value
(Note 2) 7,657,910 4,761,587
Securities held for investment, at cost (fair value
$3,153,364 and $3,806,937) (Note 2) 3,167,994 4,086,463
Loans, less allowance for loan losses of $477,618
and $316,348 (Note 3) 32,899,177 28,635,414
Office properties and equipment, net (Note 4) 1,107,040 1,223,500
Accrued interest receivable 745,755 550,577
Other assets 1,299,893 1,460,321
----------- -----------
$51,152,948 $42,911,031
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand $ 3,855,460 $ 3,826,152
Interest-bearing demand 10,088,278 9,764,121
Savings 2,996,337 3,028,255
Time, $100,000 and over 7,796,339 3,381,390
Other time 21,474,422 18,747,942
----------- -----------
Total deposits 46,210,836 38,747,860
Accrued interest and other liabilities 734,867 473,397
----------- -----------
Total liabilities 46,945,703 39,221,257
----------- -----------
Commitments and contingent liabilities (Note 7)
Stockholders' equity (Notes 6 and 9)
Capital stock, common, par value $1; 10,000,000
shares authorized, and 218,130 shares issued
and outstanding 218,130 218,130
Additional paid-in capital 2,423,300 2,423,300
Retained earnings 1,505,053 1,114,741
Unrealized gains (losses) on securities
available for sale, net of taxes 60,762 (66,397)
----------- -----------
Total stockholders' equity 4,207,245 3,689,774
----------- -----------
$51,152,948 $42,911,031
=========== ===========
See Notes to Consolidated Financial Statements.
F-41
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
----------- -----------
Interest income
Interest and fees on loans $ 3,488,170 $ 2,771,563
Investment securities and time deposits 582,433 441,072
Other interest income 70,851 39,967
----------- -----------
4,141,454 3,252,602
----------- -----------
Interest expense
Interest on deposits 1,953,037 1,236,982
Interest on borrowed money 6,486 10,851
----------- -----------
1,959,523 1,247,833
----------- -----------
Net interest income 2,181,931 2,004,769
Provision for loan losses (Note 3) 139,774 180,000
----------- -----------
Net interest income after provision for
loan losses 2,042,157 1,824,769
----------- -----------
Other income
Service charges 507,685 500,964
Net realized gains (losses) on sales of
securities available for sale (14,432) 1,820
Other income 103,022 164,503
----------- -----------
596,275 667,287
----------- -----------
General and administrative expenses
Employee compensation and benefits 952,094 903,265
Occupancy and equipment 279,587 273,938
FDIC insurance premiums 90,502 81,975
Advertising 58,631 46,047
Directors fees and benefits 50,268 52,069
Other operating expenses 442,812 437,179
----------- -----------
1,873,894 1,794,473
----------- -----------
Income before income taxes 764,538 697,583
Applicable income taxes (Note 5) 265,341 240,324
----------- -----------
Net income $ 499,197 $ 457,259
=========== ===========
Per share of common stock
Net income $ 2.20 $ 2.03
=========== ===========
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Gains
(Losses) on
Securities
Available
Common Stock Additional for Sale,
---------------------- Paid-in Retained Net of
Shares Par Value Capital Earnings Taxes Total
------- --------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 220,000 $220,000 $2,450,000 $ 657,482 $ - $3,327,482
Net income - - - 457,259 - 457,259
Purchase and simultaneous
retirement of the Company's
common stock (1,870) (1,870) (26,700) - - (28,570)
Net change in unrealized
gains (losses) on securities
available for sale, net of
taxes - - - - - (66,397)
------- -------- ---------- ---------- -------- ----------
Balance, December 31, 1994 218,130 218,130 2,423,300 1,114,741 (66,397) 3,689,774
Net income - - - 499,197 - 499,197
Payment of dividends - - - (108,885) - (108,885)
Net change in unrealized
gains (losses) on securities
available for sale, net of
taxes - - - - 127,159 127,159
------- -------- ---------- ---------- -------- ----------
Balance, December 31, 1995 218,130 $218,130 $2,423,300 $1,505,053 $ 60,762 $4,207,245
======= ======== ========== ========== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-43
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 499,197 $ 457,259
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 184,329 191,161
Provision for loan losses 139,774 180,000
Amortization on investments 8,447 42,560
Deferred income tax (benefits) expense (48,205) 51,712
Net realized gains (losses) on securities
available for sale 15,738 (1,820)
Changes in assets and liabilities:
Increase in accrued interest receivable (195,178) (81,624)
(Increase) decrease in other assets 61,870 (1,121,855)
Increase in accrued interest payable 118,173 93,842
(Increase) decrease in accrued expenses and
other liabilities 191,502 (80,453)
----------- -----------
Net cash provided by (used in) operating
activities 975,647 (269,218)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in Federal funds sold (430,000) (727,000)
Purchases of securities available for sale (7,396,446) (3,948,789)
Proceeds from sales of securities available
for sale 3,143,929 3,303,253
Proceeds from maturities of securities
available for sale 1,629,725 1,250,000
Purchases of securities held for investment - (3,540,719)
Proceeds from maturities of securities held
for investment 819,478 805,047
Net increase in loans (4,403,538) (1,620,796)
Purchases of property and equipment (40,876) (98,667)
----------- -----------
Net cash used in investing activities (6,677,728) (4,577,671)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (108,885) -
Repayment of note payable - (61,973)
Net increase in customer deposits 7,462,976 3,205,160
Purchase of common stock for the treasury - (28,570)
----------- -----------
Net cash provided by financing activities 7,354,091 3,114,617
----------- -----------
F-44
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
----------- -----------
Net increase (decrease) in cash and due from banks $1,652,010 $(1,732,272)
Cash and due from banks at beginning of year 613,169 2,345,441
---------- -----------
Cash and due from banks at end of year $2,265,179 $ 613,169
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash payments for:
Interest $1,841,350 $1,154,955
Income taxes $ 207,474 $ 263,119
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITY
Other real estate acquired in settlement of loans $ 98,623 $ 216,660
Net change in unrealized gains (losses) on
securities available for sale $ 127,159 $ (66,397)
See Notes to Consolidated Financial Statements.
F-45
<PAGE>
CENTRAL BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Central Bankshares, Inc. is a one-bank holding company whose
business is presently conducted by its wholly-owned subsidiary,
Central Bank and Trust. The Company provides a full range of
banking services to individual and corporate customers in its
primary market of Crisp County, Georgia and surrounding
counties. The Company is subject to competition from other
financial institutions and the regulations of certain federal
and state agencies. The Company is periodically examined by
certain regulatory authorities.
Basis of Presentation
The consolidated financial statements include the accounts of
the Company and its subsidiary. Significant intercompany
transactions and accounts are eliminated in consolidation. The
accounting and reporting policies of the Company and its
subsidiary conform to generally accepted accounting principles
and with general practices within the banking industry. In
preparing the financial statements, management is required to
make estimates and assumptions that effect the reported amounts
of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could
differ from those estimates.
The principles which significantly affect the determination of
financial position, results of operations and cash flows are
summarized below:
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from loans originated
by the Company, deposits, interest-bearing deposits, Federal
funds purchased and sold are reported net.
The Company maintains amounts due from banks which, at times,
may exceed Federally insured limits, and has experienced no
related losses.
F-46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities Available for Sale
Securities classified as available for sale are those debt
securities that the Company intends to hold for an indefinite
period of time, but not necessarily to maturity. Any decision
to sell a security classified as available for sale would be
based on various factors, including significant movements in
interest rates, changes in the maturity mix of the Company's
assets and liabilities, liquidity needs, regulatory capital
considerations and other similar factors. Securities available
for sale are carried at fair value. Unrealized gains and losses
are reported as increases and decreases in stockholders' equity,
net of the related deferred tax effect. Realized gains or
losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
Securities Held for Investment
Securities classified as held for investment are those debt
securities the Company has both the intent and ability to hold
to maturity regardless of changes in market conditions,
liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization
of premium and accretion of discount, computed by the interest
method over their contractual lives. The sale of a security
within three months of its maturity date or after collection of
at least 85 percent of the principal outstanding at the time the
security was acquired is considered a maturity for purposes of
classification and disclosure.
A decline in the fair value below cost of any available for sale
or held to maturity security that is deemed other than temporary
is charged to earnings resulting in the establishment of a new
cost basis for the security.
Loans
Loans are stated at the amount of unpaid principal, reduced by
unearned discount. Interest on loans is credited to income on a
daily basis based upon the principal amount outstanding, except
for certain installment loans which is credited to income based
on the sum-of-the-months-digits method, the results of which are
not materially different from generally accepted accounting
principles.
F-47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
Accrual of interest income is discontinued on loans when, in the
opinion of management, collection of such interest income
becomes doubtful. Accrual of interest on such loans is resumed
when, in management's judgment, the collection of interest and
principal becomes probable.
Loan Fees
Fees on loans and costs incurred in origination of loans are
recognized at the time the loan is placed on the books. Because
loan fees are not significant and the majority of loans have
maturities of one year or less, the results of this method of
accounting are not materially different than the results which
would be obtained by accounting for loan costs in accordance
with generally accepted accounting principles.
Allowance for Loan Losses
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against
the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is
an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior
loan loss experience. This evaluation also takes into
consideration such factors as changes in the nature and volume
of the loan portfolio, overall portfolio quality, review of
specific problem loans, and current economic conditions that may
affect the borrower's ability to pay. Certain estimates are
susceptible to change in the near term. Such estimates include
the creditworthiness of significant borrowers and the collateral
value of delinquent loans. While management uses the best
information available to make its evaluation, future adjustments
to the allowance may be necessary if there are significant
changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and
may require the Company to record additions to the allowance
based on their judgment about information available to them at
the time of their examinations.
F-48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses (Continued)
Impaired loans are measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if
the loan is collateral dependent. A loan is impaired when it
is probable the creditor will be unable to collect all
contractual principal and interest payments due in accordance
with the terms of the loan agreement. Accrual of interest on an
impaired loan is discontinued when management believes, after
considering collection efforts and other factors, that the
borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are
credited to the loans receivable balance, and no interest income
is recognized on those loans until the principal balance has
been collected.
Office Buildings and Equipment
Office buildings and equipment are stated at cost less
accumulated depreciation, computed on the straight-line method
over the estimated useful lives of the assets.
Income Taxes
The Company and its subsidiary file a consolidated income tax
return. The subsidiary provides for income taxes based on its
contribution to income taxes (benefits) of the consolidated
group.
Provisions for income taxes are based on amounts reported in the
consolidated statements of income after exclusion of nontaxable
income such as interest on state and municipal securities and
include deferred taxes on temporary differences in the
recognition of income and expense for tax and financial
statement purposes.
F-49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
Deferred taxes are computed on the liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for
the effect of changes in tax laws on the date of enactment.
Fair Value of Financial Instruments
Financial Accounting Standards Board Statement No. 107,
"Disclosures About Fair Value of Financial Instruments",
requires disclosure about fair value information about financial
instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where
quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot
be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the
instrument. Statement No. 107 excludes certain financial
instruments from its disclosure requirements. The aggregate
fair value amounts presented do not represent the underlying
value of the Company.
F-50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Value of Financial Instruments (Continued)
The following methods and assumptions were used by the Company
in estimating the fair value of its financial instruments:
Carrying amounts approximate fair values for the following
instruments:
Cash and due from banks Federal funds sold
Securities available for sale Variable rate loans that
Variable rate money markets reprice frequently
Variable rate certificates of Accrued interest receivable
deposit
Accrued interest payable and
other liabilities
Quoted market prices, where available, of if not available,
based upon quoted market prices of comparable instruments for
securities held for investment.
Discounted cash flows using interest rates currently being
offered on instruments with similar terms and with similar
credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposits
Commitments to extend credit and standby letters of credit are
not recorded until such commitments are funded. The value of
these commitments are the fees charged to enter into such
agreements. These commitments do not represent a significant
value to the Company until such commitments are funded. The
Company has determined that such instruments do not have a
distinguishable fair value and no fair value has been assigned
to these instruments.
F-51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share
Earnings per share are calculated on the basis of the weighted
average number of shares outstanding. The effect of the stock
options outstanding (see Note 6) are included in the computation
of the weighted average number of shares outstanding since the
effect of options is considered to be dilutive.
Reclassifications
Certain items on the consolidated financial statements as of and
for the year ended December 31, 1994 have been reclassified with
no effect on net income, to be consistent with the
classifications adopted for the year ended December 31, 1995.
NOTE 2. INVESTMENTS IN SECURITIES
The amortized cost and fair values of investments in
securities as of December 31, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1995:
U. S. Treasury securities $ 499,889 $ 2,611 $ - $ 502,500
U. S. Government agencies 1,451,259 36,576 - 1,487,835
Mortgage-backed securities 5,614,699 57,393 (4,517) 5,667,575
----------- --------- ---------- ----------
$7,565,847 $ 96,580 $ (4,517) $7,657,910
=========== ========= =========== ==========
December 31, 1994:
U. S. Treasury securities $2,977,008 $ - $ (64,698) $2,912,310
U. S. Government agencies 984,215 - (12,810) 971,405
Mortgage-backed securities 907,025 4,482 (33,635) 877,872
----------- --------- ---------- ----------
$4,868,248 $ 4,482 $ (111,143) $4,761,587
=========== ========= =========== ==========
</TABLE>
F-52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 2. INVESTMENTS IN SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ------
<S> <C> <C> <C> <C>
Securities Held for Investment:
December 31, 1995:
Mortgage-backed securities $3,002,394 $ - $ (14,630) $2,987,764
Federal Home Loan Bank stock 165,600 - - 165,600
---------- ---------- ---------- ----------
$3,167,994 $ - $ (14,630) $3,153,364
December 31, 1994:
U. S. Government agencies, one
to five years $ 500,000 $ - $ (30,715) $ 469,285
Mortgage-backed securities 3,420,863 321 (249,132) 3,172,052
Federal Home Loan Bank stock 165,600 - - 165,600
---------- ---------- ---------- ----------
$4,086,463 $ 321 $ (279,847) $3,806,937
</TABLE>
Gross realized gain or loss from the sale of securities
available for sale for the years ended December 31, 1995 and
1994 was $15,738 and $1,820, respectively.
The amortized cost and fair value of securities as of December
31, 1995 by contractual maturity are shown below. Maturities
may differ from contractual maturities in mortgage-backed
securities because the mortgages underlying the securities may
be called or repaid without penalty. Federal Home Loan Bank
stock has no contractual maturity. Therefore, these securities
are not included in the maturity categories in the following
maturity summary:
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held for Investment
----------------------------- ------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 991,835 $ 999,140 $ - $ -
Due from one year to five years 454,174 485,885 - -
Due from five years to ten years 505,140 505,310 - -
Mortgage-backed securities 5,614,698 5,667,575 3,002,394 2,987,764
Federal Home Loan Bank stock - - 165,600 165,600
---------- ---------- ---------- ----------
$7,565,847 $7,657,910 $3,167,994 $3,153,364
========== ========== ========== ==========
</TABLE>
F-53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. INVESTMENTS IN SECURITIES (Continued)
Securities with a carrying value of $6,104,297 and
$4,527,324 at December 31, 1995 and 1994, respectively, were
pledged to secure public deposits and for other purposes.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
A comparative summary of loans receivable as of December
31, 1995 and 1994, is as follows:
1995 1994
----------- -----------
Real estate:
Construction and land development $ 697,869 $ 384,971
Secured by farmland 1,319,053 1,514,974
Secured by residential property 9,604,145 9,300,414
Secured by other real estate 4,123,444 3,788,888
Agricultural 3,402,984 2,696,759
Commercial 7,476,559 4,269,320
Consumer 6,650,828 6,908,351
Other 101,913 88,385
----------- -----------
33,376,795 28,952,062
Reserve for loan losses (477,618) (316,648)
----------- -----------
$32,899,177 $28,635,414
=========== ===========
The Company primarily lends money to customers located in the
immediate geographic area.
As of December 31, 1995 and 1994, the Company serviced loans for
others in the amounts of $13,819,850 and $12,642,411,
respectively.
The Company had no loans it considered to be impaired other than
the loans on which the accrual of interest had been
discontinued. Loans on which the accrual of interest had been
discontinued amounted to $10,450 and $50,574 at December 31,
1995 and 1994, respectively. There was no significant amount
of interest recognized on nonaccrual loans in either year.
F-54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
At December 31, 1995 and 1994, certain executive officers and
directors, and companies in which they have a 10 percent or more
ownership, were indebted to the Company. The interest rates on
these loans were substantially the same as rates prevailing at
the time of the transaction, and repayment terms are customary.
Following is a summary of transactions:
December 31,
----------------------------
1995 1994
------------ -----------
Balance, beginning of year $1,587,622 $1,125,486
Advances 1,853,368 1,369,937
Repayments (1,665,706) (907,801)
Balance, end of year $1,775,284 $1,587,622
Changes in the allowance for loan losses are summarized as
follows:
December 31,
----------------------------
1995 1994
----------- -----------
Balance, beginning of year $ 316,648 $ 369,517
Provision charged to operations 139,774 180,000
Recoveries 24,590 33,111
Loans charged off (3,394) (265,980)
---------- ----------
Balance, end of year $ 477,618 $ 316,648
========== ==========
F-55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. OFFICE PROPERTIES AND EQUIPMENT
At December 31, 1995 and 1994, office properties and equipment
consisted of the following:
1995 1994
----------- -----------
Land $ 204,498 $ 204,498
Buildings and improvements 628,449 627,703
Furniture, equipment and automobiles 1,359,872 1,330,020
----------- ----------
2,192,819 2,162,221
Accumulated depreciation (1,085,779) (938,721)
----------- ----------
$ 1,107,040 $1,223,500
========== ==========
For the years ended December 31, 1995 and 1994, depreciation
expense amounted to $157,336 and $164,174, respectively.
NOTE 5. INCOME TAXES
The components of the income tax provision for the years ended
December 31, 1995 and 1994 were as follows:
1995 1994
----------- -----------
Current tax expense $ 313,546 $ 188,612
Deferred tax (benefit) expense (48,205) 51,712
---------- ----------
$ 265,341 $ 240,324
========== ==========
The Company's provision for income taxes differs from amounts
computed by applying the Federal income tax statutory rates to
income before income taxes. A reconciliation of the differences
is as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1995
---------------------- ---------------------
Amount Percent Amount Percent
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Tax provision at statutory rate $259,943 34.0 % $237,178 34.0 %
State income taxes 10,257 1.3 - -
Other items, net (4,859) (.6) 3,146 .5
-------- ------- -------- -------
Provision for income taxes $265,341 34.7 % $240,324 34.5 %
======== ======== ======== =======
</TABLE>
F-56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. INCOME TAXES (Continued)
Net deferred income tax liabilities of $7,646 and $55,851 at
December 31, 1995 and 1994, respectively, are included in other
liabilities. The components of deferred income taxes are as
follows:
December 31,
----------------------------
1995 1994
----------- -----------
Deferred tax assets:
Loan loss reserves $ 92,857 $ 45,334
Deferred benefits payable 24,646 9,569
Writedown of other real estate owned 4,951 744
--------- ---------
122,454 55,647
--------- ---------
Deferred tax liabilities:
Depreciation and amortization 100,136 98,961
Income from life insurance contracts 29,964 -
Other liabilities - 12,537
--------- ---------
130,100 111,498
--------- ---------
Net deferred tax liabilities $ 7,646 $ 55,851
========= =========
NOTE 6. STOCK OPTIONS AND EARNINGS PER SHARE
The Company granted stock options to the President and Senior
Vice-President for the purchase of 9,990 and 7,200 shares,
respectively, of the Company's common stock. The option price
is $10 per share (market value at date of grant) and the options
are exercisable until October 1996. No options have expired,
been exercised or canceled since granted. The options may be
canceled, reduced or modified if the Board of Directors
considers it necessary in connection with any proposed issuance
of the Company's common stock.
Income per share of common stock includes the effect of the
stock options mentioned above as if the option had been
exercised at January 1, 1995. The number of common shares
outstanding was increased by the number of shares issuable under
the stock option and this theoretical increase in the number of
common shares was reduced by the number of common shares which
are assumed to have been repurchased with the applicable portion
of the proceeds from the exercise of the options. Repurchase
price was assumed to be the average market value during the year.
F-57
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, the Company may enter into
off balance sheet financial instruments which are not reflected
in the consolidated financial statements. These instruments
include commitments to extend credit, standby letters of credit
and liability for assets held in trust. Such financial
instruments are recorded in the consolidated financial
statements when funds are disbursed or the instruments become
payable. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in
the balance sheet.
The Company's exposure to credit losses in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit
is represented by the contractual amount of those instruments.
The Company uses the same credit policies for these off balance
sheet financial instruments as it does for other instruments
that are recorded in the consolidated financial statements. A
summary of the Company's commitments is as follows:
1995 1994
---------- ----------
Commitments to extend credit $2,792,471 $2,885,600
Standby letters of credit 175,100 220,300
---------- ----------
$2,967,571 $3,105,900
========== ==========
Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since
many of the commitment amounts expire without being drawn upon,
the total commitment amounts do not necessarily represent future
cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved
in extending other loans to customers. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, is based on management's credit
evaluation of the customer. Collateral held varies but may
include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment and personal property.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support
public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
F-58
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Collateral held varies as specified above and is required in
instances which the Company deems necessary.
The Company does not anticipate any material losses as a result
of the commitments.
The nature of the business of the Company is such that it
ordinarily results in a certain amount of litigation. In the
opinion of management, there is no litigation in which the
outcome will have a material effect on the consolidated
financial statements.
NOTE 8. CONCENTRATIONS OF CREDIT
The Company makes agricultural, agribusiness, commercial,
residential and consumer loans to customers primarily in its
market area of Crisp County, Georgia and surrounding counties.
A substantial portion of the Company's customers' abilities to
honor their contracts is dependent on the agribusiness economy
in this market area.
Although the Company's loan portfolio is diversified, there is a
relationship in this region between the agricultural economy and
the economic performance of loans made to nonagricultural
customers. The Company's lending policies for agricultural and
nonagricultural customers require loans to be
well-collateralized and supported by cash flows. Collateral
for agricultural loans include equipment, crops, livestock, and
land. Credit losses from loans related to the agricultural
economy is taken into consideration by management in determining
the allowance for loan losses.
A substantial portion of the Company's loans are secured by real
estate in the Company's primary market area. In addition, a
substantial portion of the real estate owned is located in those
same markets. Accordingly, the ultimate collectibility of a
substantial portion of the Company's loan portfolio and the
recovery of a substantial portion of the carrying amount of real
estate owned are susceptible to changes in the market conditions
in the Company's primary market area.
F-59
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 8. CONCENTRATIONS OF CREDIT (Continued)
Most of the Company's loan customers are also depositors of the
Company. The concentrations of credit by type of loan are also
set forth in Note 3. Standby letters of credit are granted
primarily to commercial borrowers of the Company. The Company,
as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25%
of the Company's combined capital stock and capital surplus
accounts ($2,641,430) which amounted to $660,358 at December 31,
1995.
The Company has a concentration of funds on deposit at its
principle correspondent bank at December 31, 1995, as follows:
Noninterest-bearing accounts $1,404,124
Federal funds sold 1,480,000
----------
$2,884,124
==========
NOTE 9. STOCKHOLDERS' EQUITY
The primary source of funds available to the Parent Company is
the payment of dividends by the subsidiary. Banking regulations
limit the amount of dividends that may be paid without prior
approval of the subsidiary Bank's regulatory agency.
Approximately $249,600 are available to be paid as dividends by
the subsidiary Bank at December 31, 1995.
Banking regulations also require the Company to maintain minimum
capital levels in relation to Company assets. At December 31,
1994, the Company's capital ratios were considered adequate
based on regulatory requirements. The minimum capital
requirements and the actual capital ratios for the Bank at
December 31, 1995 are as follows:
Actual Requirement
-------- ------------
Leverage capital ratio 8.35 % 4.00 %
Risk based capital ratios:
Core capital 11.86 % 4.00 %
Total capital 13.12 % 8.00 %
F-60
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Company's
financial instruments are as follows:
Carrying Fair
Value Value
----------- -----------
Financial assets:
Cash and short-term investments $ 4,275,179 $ 4,275,179
=========== ===========
Investments in securities $10,825,904 $10,811,274
=========== ===========
Loans $33,376,795 $33,053,000
Allowance for loan losses 477,618 -
----------- -----------
Loans, net $32,899,177 $33,053,000
=========== ===========
Financial liabilities:
Noninterest-bearing demand $ 3,855,460 $ 3,855,460
Interest-bearing demand 10,088,278 10,088,278
Savings 2,996,337 2,996,337
Time deposits 29,270,761 29,288,000
----------- -----------
Total deposits $46,210,836 $46,228,075
=========== ===========
F-61
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. CONDENSED FINANCIAL INFORMATION ON CENTRAL BANKSHARES, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
---------- ----------
Assets
Cash $ 14,053 $ 12,055
Due from subsidiary - -
Unamortized organization costs 30,990 43,386
Investment in subsidiary 4,162,202 3,634,984
---------- ----------
Total assets $4,207,245 $3,690,425
========== ==========
Liabilities
Due to subsidiary $ - $ 651
---------- ----------
Stockholders' equity 4,207,245 3,689,774
---------- ----------
Total liabilities and
stockholders' equity $4,207,245 $3,690,425
========== ==========
F-62
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. CONDENSED FINANCIAL INFORMATION ON CENTRAL BANKSHARES, INC.
(PARENT COMPANY ONLY) (Continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
--------- ---------
Income, dividends received $108,885 $ 99,000
Expense, other 14,769 17,500
--------- ---------
Income before income tax
benefits and equity in undistributed
earnings of subsidiary 94,116 81,500
Income tax benefits 5,021 5,950
--------- ---------
Income before equity in
undistributed earnings of
subsidiary 99,137 87,450
Equity in undistributed earnings of
subsidiary 400,060 369,809
--------- ---------
Net income $ 499,197 $ 457,259
========= =========
F-63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. CONDENSED FINANCIAL INFORMATION ON CENTRAL BANKSHARES, INC.
(PARENT COMPANY ONLY) (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
-------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $499,197 $457,259
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of organization costs 12,396 12,390
Undistributed earnings of subsidiary (400,059) (369,809)
Decrease in due from subsidiary - 2,107
Increase (decrease) in due to subsidiary (651) 651
-------- --------
Total adjustments (388,314) (354,661)
-------- --------
Net cash provided by operating
activities 110,883 102,598
-------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid (108,885) -
Retirement of debt - (61,973)
Retirement of treasury stock - (28,570)
-------- --------
Net cash used in financing
activities (108,885) (90,543)
-------- --------
Net increase in cash 1,998 12,055
Cash at beginning of year 12,055 -
-------- --------
Cash at end of year $ 14,053 $ 12,055
======== ========
F-64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12. PENDING MERGER
The directors of the Company have entered into a definitive
merger agreement with ABC Bancorp, a multi-bank holding company
with headquarters in Moultrie, Georgia, whereby ABC Bancorp
would acquire all of the outstanding common stock of the Company
in exchange for common stock of ABC Bancorp. The merger is
subject to approval by the Company's shareholders and certain
regulatory authorities. Upon completion of the merger, Central
Bank & Trust will become a wholly-owned subsidiary of ABC
Bancorp. The merger will be accounted for as a pooling of
interests.
F-65
<PAGE>
SOUTHLAND BANCORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
Unaudited
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1996 DECEMBER 31, 1995
- ---------------------------------------- -------------- -----------------
<S> <C> <C>
Cash and due from banks $ 2,667 $ 4,845
Investment securities held to maturity 11,968 1,660
Investment securities available for sale 13,212 19,271
Loans 76,054 71,371
Less allowance for loan losses (1,174) (1,229)
-------- --------
Net loans 74,880 70,142
Premises and equipment 2,543 2,695
Other real estate 246 339
Other assets 1,952 1,855
-------- --------
Total assets $107,468 $100,807
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Deposits:
Noninterest bearing $ 8,663 $ 9,295
Interest bearing 71,425 68,124
Time deposits $100,000 and over 7,777 7,409
-------- --------
Total deposits 87,865 84,828
Borrowings 12,008 8,525
Other liabilities 1,027 1,138
-------- --------
Total liabilities 100,900 94,491
-------- --------
Stockholders' Equity:
Common stock, Class A, no par:
1,800,000 shares authorized;
509,556 shares issued 26 26
Common stock, Class B, par value
$8.50 per share, 380 shares
authorized; none issued
Preferred stock, Class A, par value
$5.00 per share, 6,000 shares
authorized; none issued
Additional paid-in-capital 2,575 2,575
Unrealized holding (loss) gain on
investment securities available for (104) 4
sale,
net of tax
Retained earnings, substantially 4,137 3,777
restricted
Treasury shares at cost, 21,474 shares (66) (66)
-------- --------
Total stockholders' equity 6,568 6,316
Total liabilities and stockholders' $107,468 $100,807
equity ======== ========
See accompanying notes to consolidated financial statements
</TABLE>
F-66
<PAGE>
SOUTHLAND BANCORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
Unaudited
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Interest income:
Loans, including fees $2,041 $1,981
Interest-bearing deposits in other
financial institutions 15 --
Interest and dividends on investment
securities held to maturity
Taxable 199 13
Tax-exempt -- 1
Interest on investment securities
available for sale 201 275
------ ------
Total interest income 2,456 2,270
------ ------
Interest expense:
Deposits 1,042 930
Borrowings 164 150
------ ------
Total interest expense 1,206 1,080
------ ------
Net interest income 1,250 1,190
Provision for loan losses -- 52
------ ------
Net interest income after
provision for loan losses 1,250 1,138
------ ------
Other income:
Service charges on deposit accounts 161 159
Gain on sales of investment securities
available for sale 3 --
Gain on sales of loans 87 108
Other 148 101
------ ------
Total other income 399 368
------ ------
Other expenses:
Salaries and employee benefits 557 539
Net occupancy 91 107
Equipment 56 38
FDIC insurance 6 52
Other real estate, net 31 44
Other 335 302
------ ------
Total other expenses 1,076 1,082
------ ------
Earnings from continuing operations
before income taxes 573 424
Income tax expense 213 171
------ ------
Earnings from continuing operations 360 253
Discontinued operations net of
income tax benefit --- (12)
------ -------
Net earnings $ 360 $ 241
====== ======
Per share amounts:
Earnings from continuing operations $.74 $.52
====== ======
Net earnings $.74 $.49
====== ======
See accompanying notes to consolidated
financial statements
</TABLE>
F-67
<PAGE>
SOUTHLAND BANCORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 360 $ 241
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 93 97
Provision for loan losses -- 52
(Accretion) of discounts and
amortization of premiums on
investment securities 18 (2)
Gain on sales of investment
securities available for sale (3) --
Loss on sale premises and equipment 1 1
Gain on sale of other real estate -- (8)
Provisions for losses of other real estate 23 43
Gain on sales of loans (87) (108)
(Increase) decrease in other assets (57) 81
(Decrease) increase in other liabilities (111) 267
------- -------
Net cash provided by
operating activities 237 664
------- -------
Cash flows from investing activities:
Proceeds from calls of investment
securities available for sale 7,000 --
Proceeds from sales of investment
securities available for sale 2,080 --
Purchase of investment securities
held to maturity (9,000) --
Purchase of investment securities
available for sale (4,580) (2,936)
Principal repayments of investment
securities held to maturity 85 7
Principal repayments of investment
securities available for sale 510 322
Net purchases of Federal Home
Loan Bank stock (480) (2)
Net increase in loans (5,625) (1,920)
Proceeds from sales of loans 974 1,785
Purchase of premises and equipment (29) (39)
Proceeds from sale of premises
and equipment 58 (24)
Proceeds from sale of other real estate 70 260
------- -------
Net cash used in investing activities (8,937) (2,547)
------- -------
</TABLE>
continued
F-68
<PAGE>
<TABLE>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Cash flows from financing activities:
Net (decrease) increase in noninterest
bearing deposits (632) 559
Net increase in interest-bearing deposits 3,300 4,269
Net increase in time deposits,
$100,000 and over 371 1,858
Principal payments on notes payable (67) (1)
Net increase in Federal Home Loan
Bank advances 3,550 --
------- -------
Net cash provided by financing activities 6,522 6,685
------- -------
Net (decrease) increase in cash and
cash equivalents (2,178) 4,802
Cash and cash equivalents at
beginning of period 4,845 3,793
Cash and cash equivalents at end of period $ 2,667 $ 8,595
======= =======
Supplemental schedule of cash flow
information:
Cash paid during the period for:
Interest $ 1,374 $ 969
======= =======
Income taxes $ 5 $ --
======= =======
See accompanying notes to consolidated financial statements
</TABLE>
F-69
<PAGE>
SOUTHLAND BANCORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1995
(Unaudited)
(1) The accompanying unaudited consolidated financial statements, which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These financial statements and the
notes thereto should be read in conjunction with the annual financial
statements and the notes thereto for the years ended December 31, 1995,
1994, and 1993 included elsewhere in this Proxy Statement/Prospectus.
(2) All material intercompany balances and transactions have been eliminated.
(3) In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three months ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
F-70
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Southland Bancorporation:
We have audited the accompanying consolidated balance sheets of Southland
Bancorporation and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Southland
Bancorporation and subsidiary at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 9, the Company changed its method of accounting for
income taxes in 1993 to adopt the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. As discussed in Note
1, the Company changed its method of accounting for investments in debt and
equity securities at January 1, 1994 to adopt the provisions of Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities.
/s/ KPMG Peat Marwick LLP
--------------------------
Atlanta, Georgia
January 19, 1996
F-71
<PAGE>
SOUTHLAND AND BANCORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------- ------------ -----------
<S> <C> <C>
Cash and due from banks (note 2) $ 4,844,760 3,793,519
Investment securities available for sale (notes 3 and 8) 19,271,117 13,323,249
Investment security held to maturity (fair value of $1,659,470
and $1,681,655 in 1995 and 1994, respectively) (notes 3 and 8) 1,659,934 1,731,077
Loans held for sale -- 291,733
Loans, net of unearned income of $238,848 and $253,031 in
1995 and 1994, respectively (notes 4 and 8) 71,371,295 69,731,944
Less allowance for loan losses (note 4) (1,229,603) (1,331,778)
----------- ----------
Net loans 70,141,692 68,400,166
Premises and equipment, net (note 5) 2,695,917 3,040,736
Other real estate, net (note 6) 338,652 953,130
Deferred taxes (note 9) 424,816 713,207
Other assets 1,429,810 1,122,820
----------- ----------
Total assets $100,806,698 93,369,637
============ ==========
See accompanying notes to consolidated financial statements. (Continued)
</TABLE>
F-72
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1995 1994
------------------------------------- ---------- ----------
<S> <C> <C>
Deposits:
Noninterest-bearing $ 9,295,421 7,115,041
Interest-bearing 68,125,482 65,818,158
Time deposits $100,000 and over 7,406,845 6,405,120
------------ -----------
Total deposits 84,827,748 79,338,319
Borrowings (note 8) 8,524,969 8,479,214
Other liabilities 1,138,459 695,091
------------ -----------
Total liabilities 94,491,176 88,512,624
------------ -----------
Stockholders' equity (note 11):
Common stock, Class A, no par value; 1,800,000 shares
authorized; 509,556 shares issued 26,065 26,065
Common stock, Class B, par value $8.50 per share, 360
shares authorized, none issued -- --
Preferred stock, Class A, par value $5.00 per share,
6,000 shares authorized, none issued -- --
Additional paid-in capital 2,575,204 2,575,204
Net unrealized holding gain(loss) on investment securities
available for sale (notes 1 and 3) 3,638 (452,969)
Retained earnings, substantially restricted 3,777,134 2,775,232
Treasury stock at cost, 21,474 shares (66,519) (66,519)
------------ -----------
Total stockholders' equity 6,315,522 4,857,013
------------ -----------
Commitments and contingencies (notes 4 and 11)
Total liabilities and stockholders' equity $100,806,698 93,369,637
============ ==========
See accompanying notes to consolidated financial statements. (Continued)
F-73
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Statements of Earnings
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- ----------- ----------
<S> <C> <C> <C>
Interest income:
Loans, including fees $7,645,653 6,491,895 6,428,140
Federal funds sold -- 56,077 37,287
Investment securities held to maturity:
Taxable 155,049 59,969 33,472
Tax-exempt 2,851 7,934 14,355
Investment securities available for sale:
Taxable 1,229,420 777,430 463,200
Tax-exempt 177 -- --
---------- --------- ---------
Total interest income 9,033,150 7,393,305 6,976,454
Interest expense:
Deposits (including interest on time deposits $100,000
and over of $419,496, $197,533, and $304,566 in 1995,
1994, and 1993 respectively) 4,183,861 3,131,406 3,015,164
Federal funds purchased 1,138 44,912 --
Borrowings 589,708 419,867 244,622
---------- --------- ---------
Total interest expense 4,774,707 3,596,185 3,259,786
--------- --------- ---------
Net interest income 4,258,443 3,797,120 3,716,668
Provision for loan losses (note 4) (71,874) (582,022) (536,049)
---------- --------- ---------
Net interest income after provision for loan losses 4,186,569 3,215,098 3,180,619
---------- --------- ---------
Other income:
Service charges on deposit accounts 774,568 732,717 888,109
Loss on sales of investment securities available for sale (note 3) (1,553) -- --
Gain on sales of investment securities held to maturity (note 3) -- -- 35,301
Trading account gains -- -- 112,338
Gain on sales of loans 298,261 251,391 765,072
Loan servicing fees 166,121 104,512 --
Correspondent fees 161,373 -- --
Other 183,120 217,970 381,614
--------- --------- ---------
Total other income 1,581,890 1,306,590 2,182,434
--------- --------- ---------
See accompanying notes to consolidated financial staements. (Continued)
F-74
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Statements of Earnings, Continued
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Other expenses:
Salaries and employee benefits (note 7) 2,012,059 1,931,480 1,867,338
Net occupancy 680,976 790,681 660,298
Equipment 117,318 120,137 207,420
FDIC insurance 120,049 234,396 217,465
Other real estate, net 176,825 217,269 212,372
Other 993,625 1,203,880 1,177,888
---------- --------- ---------
Total other expenses 4,100,852 4,497,843 4,342,781
---------- --------- ---------
Earnings from continuing operations
before income taxes and cumulative
effect of change in accounting method 1,667,607 23,845 1,020,272
Income tax expense (benefit) (note 9) 643,358 (62,866) 371,853
---------- --------- ---------
Earnings from continuing operations
before cumulative effect of change
in accounting method 1,024,249 86,711 648,419
Discontinued operations:
Loss from operations of discontinued
insurance agency, net of income tax
benefits of $11,512, $44,134, and $29,853
in 1995, 1994, and 1993, respectively (note 12) (22,347) (85,673) (57,951)
---------- --------- ---------
Earnings before cumulative effect of change
in accounting method 1,001,902 1,038 590,468
Cumulative effect of change in accounting method (notes 1 and 9) -- -- 49,054
---------- --------- ---------
Net earnings $1,001,902 1,038 639,522
========== ========= =========
Per share amounts:
Earnings from continuing operations before cumulative
effect of change in accounting method $ 2.10 .18 1.33
========== ========= =========
Earnings before cumulative effect of change in
accounting method $ 2.05 -- 1.21
Cumulative effect of change in accounting method -- -- .10
---------- --------- ---------
Net earnings $ 2.05 -- 1.31
========== ========= =========
Weighted average common shares outstanding, including
common stock equivalents 488,082 488,082 488,082
========== ========= =========
See accompanying notes to consolidated financial statements.
F-75
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Net
unrealized
holding
gain (loss)
on
investment
Additional securities
Common Common paid-in available Retained Treasury
shares stock capital for sale, earnings stock Total
----------- ----------- ---------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992 509,566 $ 26,065 2,575,204 -- 2,134,672 (66,519) 4,669,422
Net Earnings -- -- -- -- 639,522 -- 639,522
-------- ---------- --------- ---------- ----------- ---------- ----------
Balance at December 31,
1993 509,566 26,065 2,575,204 -- 2,774,194 (66,519) 5,308,944
Effect of adoption of
FAS 115,
Accounting
for Certain
Investments
in Debt and
Equity
Securities, on
January 1, 1994 (note 1) -- -- -- 79,241 -- -- 79,241
Change in unrealized
gain (loss)
on investment
securities
available for
sale, net of
tax effect -- -- -- (532,210) -- -- (532,210)
Net earnings -- -- -- -- 1,038 -- 1,038
-------- ---------- --------- ---------- ----------- ---------- ----------
Balance at December 31,
1994 509,566 26,065 2,575,204 (452,969) 2,775,232 (66,519) 4,857,013
Net earnings -- -- -- -- 1,001,902 -- 1,001,902
Change in unrealized
gain
(loss) on
investment
securities
available
for sale, net of tax
effect -- -- -- 456,607 -- -- 456,607
-------- ---------- --------- ---------- ----------- ---------- ----------
Balance at December 31,
1995 509,566 $ 26,065 2,575,204 3,638 3,777,134 (66,519) 6,315,522
========= ========== ========= ========= =========== ========== =========
See accompanying notes to consolidated financial statements.
F-76
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,001,902 1,038 639,522
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 384,493 409,112 335,188
Provision for loan losses 71,874 582,022 536,049
Deferred tax expense (benefit) (16,014) (156,000) (68,000)
(Accretion) of discounts and amortization of
premiums on investment securities (19,310) 25,631 143,565
Loss on sales of investment securities available for sale 1,553 -- --
Gain on sales of investment securities held to maturity -- -- (35,301)
Proceeds from sale of trading securities -- -- 8,518,969
Gain on sale of trading securities -- -- (112,338)
Loss on sale of premises and equipment 744 633 11,646
Loss on sale of other real estate 37,433 101,973 68,424
Provision for losses of other real estate 104,059 86,063 64,926
Loss on sale of repossessed property -- 3,203 6,577
Gain on sales of loans (298,261) (251,391) (765,072)
Cumulative effect of change in accounting method -- -- (49,054)
(Increase) decrease in other assets (306,990) (553,958) 1,296,510
Increase (decrease) in other liabilities 443,368 312,749 (28,366)
------------ ----------- -----------
Net cash provided by operating activities 1,404,851 561,075 10,563,245
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment securities held to maturity -- -- 1,012,675
Proceeds from maturity of investment securities held to maturity 50,000 55,000 150,000
Proceeds from calls of investments securities held to maturity 10,000 15,000 --
Proceeds from calls of investment securities available for sale 10,000,000 -- --
Proceeds from sales of investment securities available for sale 1,631,744 -- --
Purchase of investment securities held to maturity -- -- (13,378,379)
Purchase of investment securities available for sale (18,290,798) (3,436,619) --
Principal repayments of investment securities held to maturity 15,762 18,059 1,052,971
Principal repayments of investment securities available for sale 1,487,436 1,524,388 --
Net (purchases) redemptions of Federal Home Loan Bank stock (2,100) 31,900 --
Net increase in loans (5,128,606) (23,120,487) (54,049,059)
Proceeds from sales of loans 3,928,589 27,078,423 54,144,972
Purchase of premises and equipment (95,066) (296,862) (1,324,208)
Proceeds from sale of premises and equipment 54,648 61,411 29,424
Proceeds from sale of other real estate 449,597 126,412 388,032
Proceeds from sale of repossessed property -- 10,500 22,858
------------ ----------- -----------
Net cash (used in) provided by investing activities (5,888,794) 2,067,125 (11,950,714)
------------ ----------- -----------
See accompanying notes to consolidated financial statements. (Continued)
F-77
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in noninterest bearing deposits 2,180,380 (947,186) (1,110,131)
Net increase (decrease) in interest-bearing deposits 2,307,324 (6,662,277) 4,330,503
Net increase (decrease) in time deposits, $100,000 and over 1,001,725 (104,604) 152,265
Principal payments on notes payable (6,437) (20,719) (105,468)
Proceeds from issuance of note payable 52,192 115,000 100,000
Net increase in Federal Home Loan Bank advances -- 1,000,000 700,000
---------- ---------- ----------
Net cash provided by (used in) financing activities 5,535,184 (6,619,786) 4,067,169
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 1,051,241 (3,991,586) 2,679,700
Cash and cash equivalents at beginning of year 3,793,519 7,785,105 5,105,405
---------- ---------- ----------
Cash and cash equivalents at end of year $4,844,760 3,793,519 7,785,105
========== ========== ==========
Supplemental schedule of cash flow information:
Cash paid during the year for:
Interest $4,312,181 3,523,087 3,358,402
========== ========== ==========
Income taxes $ 601,605 250,000 335,116
========== ========== ==========
Supplemental information on noncash transactions:
Transfers from loans to other real estate $ 160,196 478,401 685,131
========== ========== ==========
Transfers to investment securities available for sale
from investment securities held to maturity $ -- -- 12,270,147
========== ========== ==========
Transfers from investment securities available for sale
to investment securities held to maturity $ -- 75,643 --
========== ========== ==========
Transfer from premises and equipment to other real estate $ -- 145,618 --
========== ========== ==========
Loans to facilitate $ 183,585 306,959 --
========== ========== ==========
Effect of adoption of FAS 115, Accounting for Certain
Investments in Debt and Equity Securities, on
January 1, 1994 $ -- 79,241 --
========== ========== ==========
Change in unrealized gain (loss) on investment securities
available for sale, net of tax effect of $304,405 and
$354,807 in 1995 and 1994, respectively $ 456,607 (532,210) --
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-78
</TABLE>
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(A) ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION
----------------------------------------------------------
The accompanying consolidated financial statements include the accounts of
Southland Bancorporation (the Corporation) and its wholly-owned subsidiary,
Southland Bank (the Bank) collectively as the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company provides a full range of banking services to individual and
corporate customers in its primary market area of Dothan, Alabama and
surrounding counties. The Bank is subject to competition from other financial
institutions. The Company is subject to the regulations of certain federal and
state agencies and undergoes periodic examinations by those authorities.
A substantial portion of the Company's loans are secured by real estate in
the Company's primary market area. In addition, a substantial portion of other
real estate is located in those same markets. Accordingly, the ultimate
collectibility of a substantial portion of the Company's loan portfolio and the
recovery of a substantial portion of the carrying amount of other real estate
are susceptible to changes in market conditions in the Company's primary market
area.
The accounting principles and reporting policies of the Company, and the
methods of applying these principles, conform with generally accepted accounting
principles and with general practice within the banking industry. Certain items
in the prior year's financial statements have been reclassified to conform with
the current financial statement presentation.
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan losses
and the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowance
for loan losses, management periodically reviews the creditworthiness of
significant borrowers and evaluates the collateral position of delinquent loans.
Management obtains independent appraisals for significant properties in
determining the allowance for loan losses and the valuation of other real
estate.
Management believes that the allowances for losses on loans and other real
estate are adequate. While management uses available information to recognize
losses on loans
F-79
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
(A) ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION, CONTINUED
---------------------------------------------------------------------
and other real estate, future additions to the allowances may be necessary
based on changes in economic conditions, particularly in the Company's primary
market area. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowances for
losses on loans and other real estate. Such agencies may require the Company to
recognize additions to the allowances based on their judgments about information
available to them at the time of their examination.
(B) CASH EQUIVALENTS
----------------
For purposes of the statements of cash flows, the Company considers amounts
due from financial institutions and federal funds sold to be cash equivalents.
Federal funds sold are generally sold for one-day periods.
(C) INVESTMENT SECURITIES
---------------------
The Company adopted Statement of Financial Accounting Standards (FAS) 115,
Accounting for Certain Investments in Debt and Equity Securities, effective
January 1, 1994. In accordance with FAS 115, investments are classified in
three categories: held to maturity securities (reported at amortized cost),
trading securities (reported at fair value), and available for sale securities
(reported at fair value). Designation of an investment security as held to
maturity, trading, or available for sale is made at the time the security is
purchased, based on the Company's intent and ability to hold the security.
Investment securities to be held to maturity are carried at cost adjusted for
amortization of premiums and accretion of discounts to maturity. Unrealized
gains or losses on trading securities are included in earnings. The Company did
not have any trading account securities at December 31, 1995 or 1994. Unrealized
gains or losses on available for sale securities are excluded from earnings and
reported as a separate component of stockholders' equity, net of the related
income tax effect. Gains or losses on the sale of investment securities are
computed on the specific identification method, and recognized in earnings on
the trade date.
At adoption of FAS 115, the Company transferred certain investment
securities with a total amortized cost of $12,270,147 and fair value of
$12,393,960 from held to maturity to investment securities available for sale.
The unrealized net holding gains on investment securities available for sale at
January 1, 1994 totaled $123,813 and were included as a separate component of
stockholders' equity of $79,241, net of income taxes of $44,572 upon the
Corporation's adoption of FAS 115.
F-80
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
(C) INVESTMENT SECURITIES, CONTINUED
--------------------------------
Purchase premiums and discounts on investment securities are amortized and
accreted to interest income using the level yield method on the outstanding
principal balances. In establishing the accretion of discounts and amortization
of premiums, the Company utilizes market based prepayment assumptions. Interest
and dividend income are recognized when earned.
A decline in the fair value below cost of any available for sale or held to
maturity security that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.
(D) LOANS AND INTEREST INCOME
-------------------------
Loans are stated at principal amounts outstanding less unearned income and
the allowance for loan losses. Interest income on loans is credited to earnings
based on the principal amount outstanding at the respective rate of interest
except for add on installment loans for which interest is recognized on the
"Rule of 78's" method. It is the general policy of the Bank to discontinue the
accrual of interest when principal or interest payments are delinquent for more
than 90 days and the ultimate collection of either is in doubt.
Loans held for sale are carried at the lower of aggregate cost or market.
Gains or losses on disposition are recorded in other income, based on the net
proceeds received and the recorded investment in the loan sold. For sales of
the Small Business Association (SBA) guaranteed portion of loans, the basis in
the portion of the loan sold is determined by allocating the loan carrying value
to the portion sold and portion retained based on the relative fair values of
the portion sold and portion retained. Such gains or losses are adjusted by the
amount of any excess servicing fee receivables resulting from the transactions.
Accrual of interest on loans is discontinued either when reasonable doubt
exists as to the full, timely collection on interest or principal or when a loan
becomes contractually past due by 90 days or more with respect to interest or
principal. When a loan is placed on nonaccrual status, all interest previously
accrued, but not collected, is reversed against current period interest income.
Income on such loans is then recognized only to the extent that cash is received
and where the future collection of principal is probable. Interest accruals are
recorded on such loans only when they are brought fully current with respect to
interest and principal and when, in the judgment of management, the loans are
estimated to be fully collectible as to both principal and interest.
F-81
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
(D) LOANS AND INTEREST INCOME, CONTINUED
------------------------------------
In May 1993, the Financial Accounting Standards Board (FASB) issued FAS
114, Accounting by Creditors for Impairment of a Loan. FAS 114 requires
impaired loans to be measured based on the present value of expected future cash
flows, discounted at the loan's effective interest rate, or at the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent, beginning in 1995. In October 1994, the FASB issued FAS
118, Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures, which amends the requirements of FAS 114 regarding interest income
recognition and related disclosure requirements. Initial adoption of FAS 114
and FAS 118 must be reflected prospectively. The Company adopted FAS 114 and
FAS 118 on January 1, 1995 and the impact to the consolidated financial
statements was not material. At December 31, 1995, pursuant to the definition
within FAS 114, the Company had $480,000 of impaired loans, which includes one
loan for $180,000 with a valuation allowance of $68,000. No valuation allowance
was deemed necessary for the remaining $300,000 of impaired loans.
(E) ALLOWANCE FOR LOAN LOSSES
-------------------------
Additions to the allowance for loan losses are based on management's
evaluation of the loan portfolio under current economic conditions, including
such factors as the volume and character of loans outstanding, past loss
experience, general economic conditions, and such other factors which, in
management's judgment, deserve recognition in estimating loan losses. Loans are
charged to the allowance when, in the opinion of management, such loans are
deemed to be uncollectible. Provisions for loan losses and recoveries of loans
previously charged to the allowance are added to the allowance.
(F) PREMISES AND EQUIPMENT
----------------------
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the respective assets which range from 3 to 30 years. Leasehold
improvements are amortized on a straight-line basis over the life of the
respective lease or, if shorter, the estimated useful life of the improvements.
F-82
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
(G) OTHER REAL ESTATE
-----------------
Other real estate is reported net of the allowance for losses. Other real
estate represents property acquired through foreclosure or deeded to the Bank in
lieu of foreclosure on real estate mortgage loans on which the borrowers have
defaulted as to payment of principal and interest. For real estate acquired
through foreclosure, a new cost basis is established through a charge to the
allowance for loan losses, at fair value at the time of foreclosure less costs
to sell. Subsequent to foreclosure, foreclosed assets are carried at the lower
of fair value less estimated costs to sell, or cost, with the difference
recorded as a valuation allowance, on an individual asset basis. Subsequent
decreases in fair value and increases in fair value, up to the value established
at foreclosure, are recognized as charges or credits to other expense.
(H) INCOME TAXES
------------
During 1993, the Company adopted FAS 109 Accounting for Income Taxes.
Under the asset and liability method of FAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable earnings in the years in which those
temporary differences are expected to be recovered or settled. Under FAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in earnings in the period that includes the enactment date.
Upon adoption in 1993, the Company applied the provisions of FAS 109
without restating prior years' financial statements. The cumulative effect of
the change in the method of accounting for income taxes was $49,054 and is
reported separately in the 1993 financial statements.
(I) EMPLOYEE BENEFIT PLAN
---------------------
The Bank has a defined contribution plan which covers substantially all
employees. The Bank contributes amounts to the defined contribution plan
subject to minimums established by regulation and maximums allowed for tax
purposes.
F-83
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
(J) EARNINGS PER SHARE
------------------
Earnings per common share is based on the weighted average number of shares
outstanding during each period. The effect of outstanding stock options is not
significant to the computation of earnings per share.
(K) RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In October 1995, the FASB issued FAS 123, Accounting for Stock-Based
Compensation. FAS 123 establishes financial accounting and reporting standards
for stock-based employee compensation plans. Those plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. Such instruments include
stock purchase plans, stock options, restricted stock, and stock appreciation
rights. FAS 123 also applies to transactions in which an entity issues its
equity instruments to acquire goods or services from nonemployees.
A new method of accounting for stock-based compensation arrangements with
employees is established by FAS 123. The new method is a fair value based
method rather than the intrinsic value based method. However, FAS 123 does not
require an entity to adopt the new fair value based method for purposes of
preparing its basic financial statements. Entities are allowed (1) to continue
to use their existing method or (2) adopt the FAS 123 fair value based method.
The selected method would apply to all of an entity's compensation plans and
transactions
FAS 123 requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. The accounting requirements of this
statement are effective for transactions entered into in fiscal years that begin
after December 15, 1995. The disclosure requirements are effective for
financial statements for fiscal years beginning after December 15, 1995. The
Company has not determined the impact of adopting FAS 123.
(2) CASH AND DUE FROM BANKS
-----------------------
The Bank is required to maintain certain daily reserve balances in
accordance with Federal Reserve Board requirements. The required balances were
$25,000 and $68,000 at December 31, 1995 and 1994, respectively.
F-84
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES
---------------------
The amortized cost, gross unrealized gains and losses, and approximate
fair value of investment securities held to maturity at December 31, 1995 and
1994, respectively, were as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Debt securities:
State and political subdivisions $ 15,015 1,357 -- 16,372
U.S. government agencies 33,808 3,863 -- 37,671
Mortgage-backed securities 1,008,611 322 6,006 1,002,927
---------- ------ --------- ---------
1,057,434 5,542 6,006 1,056,970
Other securities:
Stock in Federal Home Loan
Bank of Atlanta 602,500 -- -- 602,500
---------- ------ --------- ---------
$1,659,934 5,542 6,006 1,659,470
========== ====== ========= =========
1995
-----------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
<C> <C> <C> <C>
State and political subdivisions $ 74,017 1,406 -- 75,423
U.S. government agencies 46,286 3,820 -- 50,106
Mortgage-backed securities 1,010,374 84 54,732 955,726
---------- ------ --------- ---------
1,130,677 5,310 54,732 1,081,255
Other securities:
Stock in Federal Home Loan
Bank of Atlanta 600,400 -- -- 600,400
---------- ------ --------- ---------
$1,731,077 5,310 54,732 1,681,655
========== ====== ========= =========
</TABLE>
The stock in the Federal Home Loan Bank of Atlanta, which is carried at cost,
has no contractual maturity, has no quoted fair value, and no ready market
exists; therefore, the fair value of such stock is assumed to approximate cost
in the above summary. The investment in the stock is required by law of every
member of the Federal Home Loan Bank system.
F-85
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES, CONTINUED
--------------------------------
The amortized cost and approximate fair value of investment securities held to
maturity at December 31, 1995, 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>
1995
-------------------------
Approximate
Amortized fair
cost value
--------- -----------
<S> <C> <C>
Due after one year through five years $ 15,015 16,372
Due after five years through ten years -- --
Due after ten years 33,808 37,671
--------- ---------
48,823 54,043
Mortgage-backed securities 1,008,611 1,002,927
--------- ---------
$ 1,057,434 1,056,970
=========== =========
</TABLE>
There were no sales of investment securities held to maturity during 1995 or
1994. Proceeds from sales of investments securities during 1993 were
$1,012,675. Gross gains of $35,301 were realized on those sales in 1993.
The amortized cost, gross unrealized gains and losses, and approximate fair
value of investment securities available for sale at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
1995
---------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
State and political subdivisions $ 357,519 -- 2 357,517
U.S. government agencies 7,982,427 26,636 -- 8,009,063
Mortgage-backed securities 10,934,921 16,713 47,097 10,904,537
----------- ------- ------ ----------
$19,274,867 43,349 47,099 19,271,117
=========== ======= ====== ==========
</TABLE>
In 1994, the Bank transferred four investment securities from available for
sale to held to maturity. These securities carried total unrealized holding
gains of $11,520 at the date of transfer. These unrealized holding gains are
included as a component of amortized cost and are being amortized over the
remaining life of the securities. The total unamortized holding gains at
December 31, 1995 and 1994 amounted to $9,813 and $10,667, respectively. The
portion of these unamortized holding gains included in the unrealized gain on
available for sale securities, net of tax, at December 31, 1995 and the
unrealized loss on available for salesecurities, net of tax, at December 31,
1994 was $5,888 and $6,400, respectively.
F-86
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES, CONTINUED
--------------------------------
The amortized cost, gross unrealized gains and losses, and approximate fair
value of investment securities available for sale at December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1994
-------------------------------------------------
<S> <C> <C> <C> <C>
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
---------- ---------- ----------- -----------
Mortgage-backed securities $14,088,864 -- 765,615 13,323,249
=========== ===== ======= ==========
</TABLE>
The amortized cost and approximate fair value of investment securities
available for sale at December 31, 1995, 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>
1995
-----------------------
Approximate
Amortized fair
cost value
---------- -----------
<S> <C> <C>
Due after one year through five years $5,982,427 6,009,063
Due after five years through ten years 2,000,000 2,000,000
Due after ten years 357,519 357,517
Mortgage-backed securities 10,934,921 10,904,537
----------- -----------
$19,274,867 19,271,117
=========== ==========
</TABLE>
Proceeds from sales of investment securities available for sale were
$1,631,744 for the year ended December 31, 1995. Gross losses of $1,553 were
realized on those sales for the year ended December 31, 1995. No sales of
investment securities available for sale occurred during 1994 or 1993.
Securities having an approximate amortized cost of $1,308,000 and $2,075,000
at December 31, 1995 and 1994, respectively, were pledged to secure public
funds. In addition, securities having an approximate amortized cost of
$2,100,000 and $647,000 at December 31, 1995 and 1994, respectively, were
pledged to secure FHLB advances.
F-87
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
-----------------------------------
At December 31, 1995 and 1994, the composition of the loan
portfolio was as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial, financial, and agricultural $29,382,692 22,113,615
Real estate - mortgage 38,290,739 42,903,896
Installment loans 3,635,583 4,218,936
Other 62,281 495,497
---------- ----------
Total loans 71,371,295 69,731,944
Less allowance for loan losses (1,229,603) (1,331,778)
----------- ----------
Loans, net $70,141,692 68,400,166
=========== ==========
A summary of the transactions in the allowance for loan losses follows:
1995 1994 1993
---- ---- ----
Balance at beginning of year $1,331,778 883,083 880,780
Provision charged to operating expense 71,874 582,022 536,049
Recoveries of loans previously charged off 163,129 156,113 42,830
Loans charged off (337,178) (289,440) (576,576)
-------- ---------- ---------
Balance at end of year $1,229,603 1,331,778 883,083
========== ========= =========
</TABLE>
Nonaccrual loans at December 31, 1995 and 1994 totaled $303,000 and
$1,200,000, respectively. Foregone interest on these loans was $42,840 in 1995,
$85,659 in 1994, and $12,211 in 1993.
Certain directors and officers of the Bank are loan customers of the Bank.
Total loans outstanding to these persons at December 31, 1995 and 1994 amounted
to $482,410 and $393,216, respectively. The change from 1994 to 1995 reflects
payments of $431,089 and advances of $520,283. Such loans are made in the
ordinary course of business on substantially the same terms as those prevailing
at the time for comparable transactions with other customers, including interest
rate and collateral, and in the opinion of management do not represent more than
a normal credit risk or present unfavorable features.
Proceeds from the sale of loans during 1995, 1994, and 1993 were
$3,928,589, $27,078,423, and $54,144,972 and realized gains were $298,261,
$251,391, and $765,072, respectively. There were no sales of real estate
mortgage loans in 1995. Sales of real estate mortgage loans accounted for
$19,786,981 and $45,797,271 of total sales in 1994 and 1993, respectively. At
December 31, 1995 and 1994, the Company was servicing certain Small Business
Administration loans for others with aggregate principal balances of
approximately $14,612,000 an $13,705,000, respectively.
F-88
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) PREMISES AND EQUIPMENT
----------------------
A summary of premises and equipment at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Construction in progress $ 38,900 17,300
Land 541,943 553,063
Buildings 2,423,210 2,466,627
Furniture and equipment 2,789,727 2,723,332
Leasehold improvements 50,650 50,650
--------- ---------
5,844,430 5,810,972
Less accumulated depreciation and amortization 3,148,513 2,770,236
---------- ---------
Total $2,695,917 3,040,736
========= =========
</TABLE>
Depreciation and amortization charged to operating expense was $384,493,
$409,112, and $335,188 in 1995, 1994, and 1993 respectively.
(6) OTHER REAL ESTATE
-----------------
A summary of the transactions in the allowance for losses of other
real estate for the years ended December 31, 1995, and 1994, and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 226,394 140,332 105,406
Provision charged to earnings 104,059 91,000 64,926
Charge-offs (34,988) (4,938) (30,000)
------- ------- -------
Balance at end of year $ 295,465 226,394 140,332
======= ======= =======
</TABLE>
Other real estate, net, as of December 31, 1995 and 1994 totaled
$338,652 and $953,130, respectively, and consist primarily of commercial
properties.
(7) EMPLOYEE BENEFIT PLAN
---------------------
Employees of the Bank may contribute up to 15 percent of their annual
salary to the Bank's defined contribution retirement plan. Under the provisions
of the plan, the Bank is required to match the employees' contributions up to 3
percent of their annual salary and may make additional discretionary
contributions.
Contributions to the plan by the Bank totaled $84,905, $81,164, and $78,340
for the years ended December 31, 1995, 1994, and 1993, respectively.
F-89
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(8) BORROWINGS
----------
Borrowings at December 31, 1995 and 1994 are summarized as follows:
December 31
-------------------
1995 1994
---- ----
Advances from the Federal Home Loan Bank of
Atlanta under the terms of the adjustable rate
credit program, maturing in equal amounts of
$2,000,000 on March 30, 1996, 1997 and 1998,
respectively, and $1,000,000 on January 28,
1996. The interest rates at December 31,
1995 range from 5.8875 percent to 5.9575 percent
and are based on the 90-day LIBOR rate. The
advances are collateralized by real estate
mortgage loans of $7,861,834 and $5,966,345
at December 31, 1995 and 1994, respectively,
and by securities having an approximate
amortized cost of $2,100,000 and $647,000 at
December 31, 1995 and 1994, respectively. $7,000,000 7,000,000
Notes payable to various individuals, including
certain directors, bearing interest at a prime
rate (8.50 at December 31, 1995) plus one percent.
Principal and interest payments are due quarterly
through March 2001. 1,400,000 1,400,000
Note payable to an individual bearing interest
at 13 percent with principal and interest payments
due monthly through 2016. 124,969 79,214
---------- ---------
$8,524,969 8,479,214
========== =========
The Bank has available a revolving line of credit with the Federal Home Loan
Bank of Atlanta bearing interest under the terms of an adjustable rate credit
program. The amount available was $10,000,000 at December 31, 1995 and 1994,
respectively. Advances drawn on the line of credit are to be collateralized by
U.S. government agencies securities.
F-90
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(8) BORROWINGS, CONTINUED
--------------------
Aggregate maturities of borrowings at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Total
----------
<S> <C>
1996 $3,563,310
1997 2,184,364
1998 2,185,552
1999 206,890
2000 164,463
Thereafter 220,390
----------
$8,524,969
==========
</TABLE>
(9) INCOME TAXES
------------
As discussed in note 1, the Company adopted FAS 109 as of January 1, 1993.
Total income tax expense (benefit) for the years ended December 31, 1995,
1994, and 1993 was allocated as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Income from continuing operations $ 643,358 (62,866) 371,853
========= =========== ===========
Loss from discontinued operations $ (11,512) (44,134) (29,853)
========= =========== ===========
Stockholders' equity, for unrealized gains (losses)
on investment securities available for sale $ 304,405 (301,979) --
========= =========== ===========
Components of income tax expense (benefit) for the years ended December
31, 1995, 1994, and 1993
are as follows:
1995
-------------------------------
Current Deferred Total
------- -------- ------
Federal $580,141 (15,794) 564,347
State 67,719 (220) 67,499
-------- ----------
Totals $647,860 (16,014) 631,846
======== ========= ========
1994
---------------------------------
Current Deferred Total
------- -------- -----
Federal $ 49,000 (143,000) (94,000)
State -- (13,000) (13,000)
-------- --------- ---------
Totals $ 49,000 (156,000) (107,000)
======== ======== ========
</TABLE>
F-91
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
(9) INCOME TAXES, CONTINUED
-----------------------
1993
------------------------------
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $382,000 (58,000) 324,000
State 28,000 (10,000) 18,000
-------- --------- -------
Totals $410,000 (68,000) 342,000
======== ========= =======
</TABLE>
The provisions for income taxes for 1995, 1994, and 1993 are more than that
computed by applying the U.S. federal corporate tax rate of 34 percent to
earnings from continuing operations before income taxes and cumulative effect of
a change in accounting method for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
Amount computed at statutory rate $ 566,986 8,107 346,892
Increase (reduction) in income taxes resulting from:
Tax exempt interest (4,942) (4,630) (4,874)
State income tax, net of federal income tax benefit 46,869 (8,580) 11,880
Internal Revenue Service exam settled -- (59,443) --
Other, net 34,445 1,680 17,955
------- -------- -------
$ 643,358 (62,866) 371,853
========= ========= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Loans, principally due to allowance for loan losses $ 328,385 431,807
Unrealized loss on investment securities available for sale -- 301,979
Premises and equipment, principally due to differences
in depreciation -- 8,238
Other real estate 124,521 17,922
Deferred compensation 31,135 --
Deferred income -- 10,699
Other 28,160 --
------- -------
Total gross deferred tax assets 512,201 770,645
Less valuation allowance -- --
-------- -------
Net deferred tax assets 512,201 770,645
-------- -------
</TABLE>
F-92
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
(9) INCOME TAXES, CONTINUED
-----------------------
<S> <C> <C>
1995 1994
------ ------
Deferred tax liabilities:
Tax exempt discount accretion 1,814 1,448
Unrealized gain on investment securities
available for sale 2,425 --
Federal Home Loan Bank stock dividends 3,187 8,439
Prepaid expenses 25,069 13,742
Repossessed property 29,700 29,700
Premises and equipment, principally due to
differences in depreciation 22,387 --
Other 2,803 4,109
-------- -------
Total gross deferred tax liabilities 87,385 57,438
-------- -------
Net deferred tax asset $424,816 713,207
======== =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projection for future taxable income over the
periods which the temporary differences resulting in the deferred tax assets are
deductible, management believes it is more likely than not that the Company will
realize the benefits of these deductible differences.
(10) STOCK OPTIONS
-------------
The Corporation has granted nonqualified compensatory stock options to
certain employees. The options may only be exercised at five years from the
grant date. The following is summary of the options outstanding at December 31,
1995:
<TABLE>
<CAPTION>
Options Exercise
Grant date granted price Total
---------- -------- ------- --------
<S> <C> <C> <C>
January 22, 1992 5,436 $ 8.33 $45,282
January 4, 1993 5,556 9.68 53,782
January 22, 1994 5,763 10.00 57,630
-------- --------
16,755 $156,694
======== ========
</TABLE>
No options were granted during the year ended December 31, 1995. Options
forfeited totaled 3,529, 3,296, and 4,494 during the years ended December 31,
1995, 1994, and 1993, respectively. The exercise price for options granted is
based on a discounted per share book value at the date of grant, as no
ready market is available.
F-93
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, and standby
letters of credit. Such instruments involve elements of credit risk in excess
of the amounts recognized in the financial statements.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of these
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does in granting credit in transactions recorded
in the financial statements.
The off-balance sheet financial instruments whose contract amounts
represent credit risk as of December 31, 1995, are as follows:
Commitments to extend credit $2,662,000
Standby letters of credit $ 19,000
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.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and
private borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Bank holds various assets as collateral supporting those
commitments for which collateral is deemed necessary.
The Bank is involved in various legal actions arising in the normal course
of business. In the opinion of management, based upon consultation with legal
counsel, the ultimate resolution of the proceedings will not have a material
adverse effect upon the financial position of the Bank.
On November 26, 1989, the Bank entered into a Memorandum of Understanding
with the Federal Deposit Insurance Corporation and the Banking Department of the
State of Alabama whereby the Bank agreed to take certain affirmative actions.
The Memorandum was revised in March 1993. The actions required of the Bank
primarily include (a) developing a management plan which defines lines of
authority and responsibilities for each officer; (b) retaining qualified
management including a chief executive officer and senior lending officer; (c)
establishing a committee of directors to review each officer's performance at
least annually; (d) developing a three-year capital plan that provides for
maintenance of specified levels of capital, projections of growth and future
capital needs and contingency plans that identify alternate sources of capital;
F-94
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) COMMITMENTS AND CONTINGENCIES, CONTINUED
----------------------------------------
(e) establishing a program for maintaining an adequate allowance for loan
losses; (f) reducing substandard assets to specified levels by certain dates;
(g) developing written action plans to eliminate the basis of criticism for
significant classified loans; (h) ceasing extension of credit to borrowers with
loans classified below certain levels; (i) revising the funds management policy
to include an increase in the minimum target ratio for liquidity and reducing
the Bank's reliance upon potentially volatile liabilities to fund long-term
assets; (j) preparation of annual budgets; (k) obtaining regulatory approval
prior to paying dividends and (l) correcting certain internal control
deficiencies and violations of rules and regulations.
On September 12, 1994, the Corporation entered into a Memorandum of
Understanding with the Federal Reserve Bank of Atlanta (FRB) whereby the
Corporation agreed to take certain affirmative actions. The actions required of
the Corporation primarily include (a) no increase in its borrowings or insurance
of debt without the prior written approval of the FRB; (b) by no later than
September 30, 1994, the Corporation will submit to the FRB, and thereafter
comply with, a written plan to service its outstanding debt and any other cash
obligations for at least a five-year period; (c) the Corporation will
immediately notify the FRB of any anticipated deviations to the written plan;
(d) the Corporation will not (i) purchase or redeem treasury stock or (ii)
declare or pay dividends to its stockholders without the prior written approval
of the FRB. The Corporation is to submit its request to the FRB thirty days
before the date on which it wishes to take any such action; (e) the Corporation
will maintain a separate checking account ("separate account") for the proceeds
of any insurance of debt (including debt incurred in connection with the
issuance of equity) approved by the FRB; (f) the Corporation will notify the FRB
at least thirty days prior to the payment of any salary or other compensation at
the parent company level. Along with such notification, the Corporation will
provide the FRB with justification for such compensation payment(s) and
information detailing the source of funding for the payment(s); (g) within
thirty days of the end of each calendar quarter, the Corporation will continue
to submit to the FRB a written progress report detailing the form and manner of
all actions taken to comply with this Memorandum and the results thereof. The
Corporation submitted the debt service/capital plan (the Plan) to the FRB which
was approved by the Corporation's board of directors on September 30, 1994.
According to the Plan, the Corporation will (1) issue up to $1,000,000 in new
equity, in maximum amounts of $250,000 in each of the next four years, (2) use
the equity proceeds, in part, to retire 25 percent of the principal balance of
its outstanding debt over the next five years, (3) extend the maturities of the
remaining principal balance of the debt maturing in the next five years, and (4)
establish a cash reserve of approximately $500,000 that can be used for capital
injections into the Corporation, if necessary, or for longer-term debt servicing
needs. No corporate dividends or corporate salary expenses are projected in the
Plan.
At December 31, 1995, the Corporation and Bank believe they were in
compliance with the requirements as defined in each of the memorandums of
understanding.
F-95
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(12) SALE OF INSURANCE AGENCY
------------------------
During 1995, the Bank sold the property and casualty book of business
developed by its subsidiary, Southland Insurance Agency, Inc. In conjunction
with the sale, the Bank discontinued its insurance agency operations.
Accordingly, all related operating activity for the insurance agency has been
reclassified and reported as discontinued operations. Under the terms of the
sales agreement, the sales price is based on a percentage of future insurance
premiums underwritten by the buyer and is to be adjusted upon the one-year
anniversary of the sales agreement based on policies in force at that time. The
Company did not recognize any gain on the sale in 1995. Such gain will be
recorded when the sales proceeds are determined in 1996.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
FAS 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether
or not recognized on the face of the balance sheet, for which it is
practicable to estimate that value. Fair value estimates are made at a
specific point in time, based on relevant market information and
information about the financial instrument. These estimated do not reflect
any premium or discount that could result form offering for sale at one
time the Company's entire holdings of a particular financial instrument.
Because no market exists for a portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates. Fair value estimates
are based on existing on-and-off balance sheet financial instruments
without attempting to estimate the value of anticipated future business and
the value of assets and liabilities that are not considered financial
instruments. In addition, the tax ramifications related to the realization
of the unrealized gains and losses can have a significant effect on fair
value estimates and have not been considered in any of the estimates The
assumptions used in the estimation of the fair value of the Company's
financial instruments are explained below. Where quoted market prices are
not available, fair values are based on estimates using discounted cash
flow and other valuation techniques. Discounted cash flows can be
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. The following fair value estimates
cannot be substantiated by comparison to independent markets and should not
be considered representative of the liquidation value of the Company's
financial instruments, but rather a good-faith estimate of the fair value
of financial instruments held by the Company. FAS 107 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
(A) CASH AND DUE FROM BANKS
-----------------------
Fair value equals the carrying value of such assets.
(B) INVESTMENT SECURITIES
---------------------
The fair value of investment securities is based on quoted market prices.
(C) LOANS
-----
The fair value of loans is calculated using discounted
cash flows by loan type. The discount rate used to determine the
present value of the loan portfolio is an estimated market discount
rate that reflects the credit and interest rate risk inherent in the
loan portfolio. The estimated maturity is based on the Company's
historical experience with repayments adjusted to estimate the effect
of current market conditions. The carrying amount of accrued interest
approximates its fair value.
F-96
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
----------------------------------------------
(D) DEPOSITS
--------
As required by FAS 107, the fair value of deposits with no stated maturity,
such as non-interest bearing demand deposits, NOW accounts, savings, and
money market deposit accounts, is equal to their carrying values.
Certificates of deposit have been valued using discounted cash flows. The
discount rate used is based on estimated market rates for deposits of
similar remaining maturities.
(E) BORROWINGS
----------
The fair value of borrowings has been determined using discounted cash
flows. The discount rate used is based on estimated market rates for
borrowings of similar remaining maturities.
The carrying value and estimated fair value of the Company's financial
instruments at December 31, 1995 are as follows (in thousands):
Estimated
Carrying fair
amount value
-------- ---------
Financial assets:
Cash and due from banks $ 4,845 4,845
======= ======
Investment securities $20,931 20,931
======= ======
Loans, net $70,142 69,985
======= ======
Financial liabilities:
Deposits $84,828 85,041
======= ======
Borrowings $ 8,525 8,540
======= ======
F-97
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(14) FINANCIAL INFORMATION OF SOUTHLAND BANCORPORATION (PARENT COMPANY ONLY)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
------- ----- ------
<S> <C> <C>
Cash and cash equivalents $ 180,496 11,090
Investment in Bank 7,628,333 6,274,556
Premises and equipment 680 --
Other assets 73,743 67,342
---------- ----------
Total assets $7,883,252 6,352,988
========== ==========
Liabilities and Stockholders' Equity
-----------------------------------
Liabilities:
Note payable $1,524,969 1,479,214
Other liabilities 42,761 16,761
---------- ---------
Total liabilities 1,567,730 1,495,975
Stockholders' equity:
Common stock 26,065 26,065
Additional paid-in capital 2,575,204 2,575,204
Net unrealized loss on investment securities
available for sale 3,638 (452,969)
Retained earnings 3,777,134 2,775,232
Treasury stock (66,519) (66,519)
---------- ----------
Total stockholders' equity 6,315,522 4,857,013
---------- ----------
Total liabilities and stockholders' equity $7,883,252 6,352,988
========== ==========
Statements of Earnings
Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
---- ---- ----
Interest income $ 479 485 1,432
Interest expense (146,851) (119,875) (100,754)
Dividends from Bank 300,000 -- 50,000
Other expense (93,896) (2,699) (230)
---------- -------- ---------
Income (loss) before income tax benefit 59,732 (122,089) (49,552)
Income tax benefit 45,000 44,000 34,000
Undistributed equity in earnings of Bank 897,170 79,127 655,074
---------- -------- ---------
Net earnings $1,001,902 1,038 639,522
========== ======== =========
</TABLE>
F-98
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(14) FINANCIAL INFORMATION OF SOUTHLAND BANCORPORATION (PARENT COMPANY ONLY),
------------------------------------------------------------------------
CONTINUED
---------
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31, 1995, and 1994, and 1993
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $1,001,902 1,038 639,522
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:
Undistributed equity in earnings of Bank (897,170) (79,127) (655,074)
Increase in other assets (6,401) (44,269) 23,073
Increase (decrease) in other liabilities 26,000 16,761 (102,749)
--------- -------- --------
Net cash provided by (used in)
operating activities 124,331 (105,597) (95,228)
--------- --------- -------
Cash flows from investing activities:
Purchase of premises and equipment (680) -- --
--------- --------- -------
Net cash used in financing activities (680) -- --
--------- --------- -------
Cash flows from financing activities:
Principal payments on note payable (6,437) (20,719) (105,468)
Proceeds from issuance of note payable 52,192 115,000 100,000
--------- -------- -------
Net cash provided by (used in)
financing activities 45,755 94,281 (5,468)
--------- -------- -------
Increase (decrease) in cash and cash equivalents 169,406 (11,316) (100,696)
Cash and cash equivalents, beginning of year 11,090 22,406 123,102
--------- -------- --------
Cash and cash equivalents, ending of year $ 180,496 11,090 22,406
========= ======== ========
Supplemental schedule of cash flow information:
Cash paid during the year for:
Interest $ 145,931 114,096 100,226
========= ======== ========
Income taxes $ -- 250,000 335,116
========= ======== ========
</TABLE>
F-99
<PAGE>
SOUTHLAND BANCORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(14) FINANCIAL INFORMATION OF SOUTHLAND BANCORPORATION (PARENT COMPANY ONLY),
------------------------------------------------------------------------
CONTINUED
---------
Dividends paid by the Bank are the primary source of funds available to the
Corporation for payment of dividends to its stockholders and other needs.
Federal and state statutes and regulations impose restrictions on the amount of
dividends that may be declared by the Bank. In addition, the Bank is also
required to maintain minimum amounts of capital as defined by banking
regulators, which could further limit the availability of dividends from the
Bank. Regulatory authorities have restricted the Bank from paying any dividends
without obtaining prior regulatory consent (see note 11). On March 29, 1995,
the Bank obtained approval to pay quarterly dividends of $100,000 to the
Corporation following the end of each calendar quarter beginning March 31, 1995.
Payment of these dividends is contingent upon the Bank meeting certain capital
and core earnings requirements. Accordingly, at December 31, 1995,
substantially all of the Corporation's investment in the Bank is restricted as
to dividend payments by the Bank to the Corporation.
(15) PENDING MERGER
--------------
On December 8, 1995, the Company and ABC Bancorp (ABC) announced the
signing of an Agreement and Plan of Merger (the Agreement) which provides for
the merger of the Company with and into ABC. The transaction is expected to be
accounted for as a purchase. The Agreement is subject to approval by the
shareholders of the Corporation and certain regulatory authorities, and is
expected to close in 1996.
Under the terms of the Agreement, upon consumption of the merger, each
outstanding share of the Corporation's stock will be converted into cash and
stock of ABC, based on each shareholders' elections, in an amount equal to 1.8
times the book value of the Corporations' stock at the valuation date, as
defined in the Agreement. In any case, the number of shares of the
Corporation's stock to be converted into cash will not be less than 35 percent
nor more than 49 percent of the total outstanding shares of the Corporation.
F-100
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- --------
Exhibit No. 2.1 Merger Agreement*
Exhibit No. 10.1 Employment Agreement*
Exhibit No. 23.1 Consent of Mauldin & Jenkins
Exhibit No. 23.2 Consent of Mauldin & Jenkins
Exhibit No. 23.3 Consent of KPMG Peat Marwick LLP
Exhibit No. 23.4 Consent of Francis & Co., CPA's
Exhibit No. 99 Press Release*
- -----------------
* Previously filed.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated January 24, 1996
relating to the consolidated financial statements of ABC Bancorp included in the
ABC Bancorp's Amendment No. 1 to Report on Form 8-K.
/s/ Mauldin & Jenkins
MAULDIN & JENKINS
July 15, 1996
Albany, Georgia
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated January 26, 1996
relating to the consolidated financial statements of Central Bankshares, Inc.
included in ABC Bancorp's Amendment No. 1 to Report on Form 8-K.
/s/ Mauldin & Jenkins
-------------------------
MAULDIN & JENKINS
July 15, 1996
Albany, Georgia
<PAGE>
Exhibit 23.3
------------
Independent Accountants' Consent
--------------------------------
The Board of Directors
Southland Bancorporation:
We consent to the inclusion of our report dated January 19, 1996, with respect
to the consolidated balance sheets of Southland Bancorporation and subsidiary as
of December 31, 1995 and 1994, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in Amendment No.
1 to the Form 8-K of ABC Bancorp dated June 21, 1996.
Our report refers to a change in the method of accounting for income taxes in
1993 to adopt the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," and a change in the method of accounting for
investments in debt and equity securities to adopt the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," at January 1, 1994.
/s/ KPMG Peat Marwick LLP
Atlanta, Georgia
July 15, 1996
<PAGE>
EXHIBIT 23.4
[LETTERHEAD OF FRANCIS & CO., CPAs]
We hereby consent to the use in this Report on Form 8-K of our report dated
February 9, 1996, relating to the financial statements of First National
Financial Corporation, Albany, Georgia.
Atlanta, Georgia
July 15, 1996
/s/ Francis and Company, CPAs
