<PAGE>
As filed with the Securities and Exchange Commission on July ____, 1997.
Registration No. 33-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
ABC BANCORP
(Exact name of registrant as specified in charter)
Georgia 6022 58-1456434
(State or other (Primary Standard (I.R.S. Employer I.D.
jurisdiction of Industrial No.)
incorporation or Classification Code Number)
registration)
310 First Street, S.E.
Moultrie, Georgia 31768
(912) 890-1111
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
Kenneth J. Hunnicutt, President
310 First Street, S.E.
Moultrie, Georgia 31768
(912) 890-1111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
Copy to:
Steven E. Fox, Esq. John T. McGoldrick, Jr., Esq.
Rogers & Hardin LLP Martin, Snow, Grant & Napier
229 Peachtree Street, N.E. 240 Third Street
2700 International Tower Macon, Georgia 31202-1606
Atlanta, Georgia 30303 (912) 743-7051
(404) 522-4700
-------------------
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger described herein and after the effective date of this
Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Offering Aggregate Amount of
Securities to be Amount to be Price Per Offering Registration
Registered(1) Registered(2) Unit Price(3) Fee(3)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $1.00 par 506,809 Not $5,485,507 $1,662.28
Value Applicable
=================================================================================
</TABLE>
(1) This Registration Statement relates to the shares of Common Stock of the
Registrant to be issued to holders of shares of common stock of Irwin
Bankcorp, Inc. ("Irwin") in connection with the Merger (as described
herein).
(2) Represents the maximum number of shares of the Registrant's Common Stock
issuable upon consummation of the Merger.
(3) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended,
the proposed maximum aggregate offering price is based on the book value of
Irwin's common stock as of March 31, 1997. At such date and assuming the
exercise of all then-outstanding options to acquire Irwin common stock,
there were 29,982 shares of Irwin common stock issued and outstanding
having an aggregate book value of $5,485,507.
----------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
IRWIN BANKCORP, INC.
IRWIN & 2ND STREET
OCILLA, GEORGIA 31774-0165
July 31, 1997
To the Shareholders of Irwin Bankcorp, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders of
Irwin Bankcorp, Inc. ("Irwin") to be held at the main office lobby of The Bank
of Ocilla, Georgia, Irwin & 2nd Street, Ocilla, Georgia on August 29, 1997 at
10:00 a.m. (the "Special Meeting"). At the Special Meeting, you will be asked
to consider and vote upon an Agreement and Plan of Merger dated as of May 15,
1997, between ABC Bancorp ("ABC") and Irwin (the "Merger Agreement"), which
provides for the merger (the "Merger") of Irwin with and into ABC. A copy of
the Merger Agreement is attached to the accompanying Proxy
Statement/Prospectus as Appendix A.
Upon consummation of the Merger (the "Effective Time"), each share (other
than treasury shares) of the common stock of Irwin outstanding immediately
prior thereto (the "Irwin Shares") will be converted into the right to receive
that number of whole shares of the common stock, $1.00 par value per share, of
ABC ("ABC Common Stock") equal to (i) 500,000, divided by (ii) the aggregate
number of then-outstanding Irwin Shares (the "Exchange Ratio"). The Exchange
Ratio is subject to adjustment (i) in the event of certain changes in the
number of outstanding shares of ABC Common Stock or (ii) upon the exercise,
prior to the Effective Time, of certain options to purchase Irwin Shares. Cash
will be paid in lieu of issuing fractional shares of ABC Common Stock.
Each shareholder who does not dissent from the Merger will receive the
number of shares of ABC Common Stock equal to the Exchange Ratio multiplied by
the aggregate number of Irwin Shares owned by such shareholder as of the
Effective Time, plus cash in lieu of a fractional share. Assuming that both
Irwin and ABC have the same number of shares of capital stock outstanding at
the Effective Time as they do currently, each Irwin Share would be converted
at such time into the right to receive 17.105713 shares of ABC Common Stock,
plus cash in lieu of a fractional share. (If all currently outstanding options
to purchase Irwin Shares are exercised prior to the Effective Time and if
there are no other changes to the outstanding capital stock of Irwin and ABC
between the date of this Proxy Statement/Prospectus and the Effective Time,
then each Irwin Share would be converted at the Effective Time into the right
to receive 16.903776 shares of ABC Common Stock, plus cash in lieu of a
fractional share.)
Also accompanying this letter are a Notice of Special Meeting and form of
Proxy for voting your Irwin Shares. Please sign, date and return to Irwin as
soon as possible the form of Proxy in the enclosed self-addressed, stamped
envelope. Before executing and returning the Proxy, you should carefully read
the accompanying Proxy Statement/Prospectus. It is important that your Irwin
Shares be voted whether or not you attend the Special Meeting. If you attend
the Special Meeting, you may vote in person if you wish, even though you
previously returned your Proxy.
Irwin's Board of Directors has fixed the close of business on July 24, 1997
as the record date for the Special Meeting. Accordingly, only shareholders of
record on that date will be entitled to notice of, and to vote at, the Special
Meeting or any adjournments or postponements thereof. Approval of the Merger
requires the affirmative vote of holders of two-thirds of the outstanding
Irwin Shares entitled to vote at the Special Meeting. Holders of 16,997 Irwin
Shares, representing approximately 58% of the shares currently entitled to
vote, have granted to ABC irrevocable proxies pursuant to which ABC intends to
vote such shares in favor of the Merger.
The Board of Directors of Irwin believes that the proposed Merger, on the
terms and conditions set forth in the accompanying Proxy Statement/Prospectus,
is in the best interests of Irwin and its shareholders and, therefore,
unanimously recommends that you vote in favor of the Merger and the Merger
Agreement.
We look forward to your attendance at the Special Meeting.
If you have any questions, please feel free to contact the undersigned at
(912) 468-9411.
Very truly yours,
C. LARRY YOUNG
Vice President
<PAGE>
IRWIN BANKCORP, INC.
IRWIN & 2ND STREET
OCILLA, GEORGIA 31774-0165
TELEPHONE: (912) 468-9411
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 29, 1997
To The Shareholders of Irwin Bankcorp, Inc.:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Irwin Bankcorp, Inc., Ocilla, Georgia ("Irwin"), will be held at
the main office lobby of The Bank of Ocilla, Georgia, Irwin & 2nd Street,
Ocilla, Georgia on August 29, 1997, at 10:00 a.m. local time, for the
following purposes:
1. To consider and vote upon the Agreement and Plan of Merger, dated as of
May 15, 1997, between ABC Bancorp ("ABC") and Irwin in the form set
forth in Appendix A to the accompanying Proxy Statement/Prospectus (the
"Merger Agreement"), and the transactions contemplated thereby,
including the merger of Irwin with and into ABC (the "Merger").
2. To transact such other business as may properly come before the Special
Meeting.
Notice is also given that Irwin's shareholders have the right to dissent and
demand an appraisal of the value of their shares in the event that the Merger
is approved and consummated. The rights of any dissenting shareholder to
receive the value of his or her shares through statutory appraisal process is
contingent upon strict compliance with the procedures set forth in Article 13
of the Georgia Business Corporation Code, a copy of which is attached as
Appendix B to the accompanying Proxy Statement/Prospectus.
Irwin's Board of Directors has fixed the close of business on July 24, 1997,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting and at any adjournments or postponements
thereof.
IRWIN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT.
By Order of the Board of Directors
RUBY NELL COURSON
Secretary
July 31, 1997
SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY BECAUSE HE OR SHE OWNS
SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. YOUR PROXY WILL
BE VOTED WITH RESPECT TO THE MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY
SPECIFICATIONS ON THE PROXY AND, IF NO SPECIFICATION IS MADE, YOUR PROXY WILL
BE VOTED FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
<PAGE>
PROSPECTUS OF ABC PROXY STATEMENT OF IRWIN
BANCORP BANKCORP, INC.
IRWIN BANKCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
AUGUST 29, 1997
This Proxy Statement/Prospectus is being furnished to shareholders of record
at July 24, 1997 of Irwin Bankcorp, Inc. ("Irwin") in connection with the
solicitation of proxies by Irwin for use at the Special Meeting of
Shareholders of Irwin to be held at the main office lobby of The Bank of
Ocilla, Georgia, Irwin & 2nd Street, Ocilla, Georgia on August 29, 1997, at
10:00 a.m. local time, and at any postponements or adjournments thereof (the
"Special Meeting"). This Proxy Statement/Prospectus and the form of proxy are
being first mailed on or about July 31, 1997.
At the Special Meeting, Irwin's shareholders will be asked to approve the
Agreement and Plan of Merger, dated as of May 15, 1997 (the "Merger
Agreement"), between Irwin and ABC Bancorp ("ABC"), and the transactions
contemplated thereby, including the merger of Irwin with and into ABC (the
"Merger" or the "Merger Proposal"). A copy of the Merger Agreement is attached
to this Proxy Statement/Prospectus as Appendix A.
Upon consummation of the Merger (the "Effective Time"), each share (other
than treasury shares) of common stock of Irwin outstanding immediately prior
thereto (the "Irwin Shares") will be converted into the right to receive that
number of whole shares of the common stock, $1.00 par value per share, of ABC
("ABC Common Stock") equal to (i) 500,000, divided by (ii) the aggregate
number of then-outstanding Irwin Shares (the "Exchange Ratio"). The Exchange
Ratio is subject to adjustment (i) in the event of certain changes in the
number of outstanding shares of ABC Common Stock or (ii) upon the exercise,
prior to the Effective Time, of certain options to purchase Irwin Shares. Cash
will be paid in lieu of issuing fractional shares of ABC Common Stock.
Each Irwin shareholder who does not dissent from the Merger will receive the
number of shares of ABC Common Stock equal to the Exchange Ratio multiplied by
the aggregate number of Irwin Shares owned by such shareholder as of the
Effective Time, plus cash in lieu of a fractional share. Assuming that both
Irwin and ABC have the same number of shares of capital stock outstanding at
the Effective Time as they do currently, each Irwin Share would be converted
at such time into the right to receive 17.105713 shares of ABC Common Stock,
plus cash in lieu of a fractional share. (If all currently outstanding options
to purchase Irwin Shares are exercised prior to the Effective Time and if
there are no other changes to the outstanding capital stock of Irwin and ABC
between the date of this Proxy Statement/Prospectus and the Effective Time,
then each Irwin Share would be converted at the Effective Time into the right
to receive 16.903776 shares of ABC Common Stock, plus cash in lieu of a
fractional share.)
Approval of the Merger requires the affirmative vote of the holders of two-
thirds of the outstanding Irwin Shares entitled to vote at the Special
Meeting. Holders of 16,997 Irwin Shares, representing approximately 58% of the
shares currently entitled to vote, have granted to ABC irrevocable proxies
pursuant to which ABC intends to vote such shares in favor of the Merger. Any
shareholder of Irwin has the right to dissent and demand an appraisal of the
value of his or her shares in the event that the Merger is approved and
consummated. The rights of any dissenting shareholder to receive the value of
his or her shares through statutory appraisal process is contingent upon
strict compliance with the procedures set forth in Article 13 of the Georgia
Business Corporation Code, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix B. A vote against the Merger will not, in and
of itself, satisfy the requirements of Article 13. See "PROPOSED MERGER--
Rights of Dissenting Shareholders."
<PAGE>
This Proxy Statement/Prospectus constitutes the Proxy Statement of Irwin and
the Prospectus of ABC covering the shares of ABC Common Stock to be issued
pursuant to the Merger Proposal. This Proxy Statement/Prospectus does not
cover any resales of ABC Common Stock to be received by the shareholders of
Irwin upon consummation of the Merger, and no person is authorized to make use
of this Proxy Statement/Prospectus in connection with any such resale.
The outstanding shares of ABC Common Stock are, and the shares offered
hereby will be, approved for quotation on the Nasdaq National Market. The
closing sale price of ABC Common Stock, as reported on the Nasdaq National
Market on July 25, 1997, was $17.00 per share. If all currently outstanding
options to purchase Irwin Shares are exercised prior to the Effective Time and
if there are no other changes to the outstanding capital stock of Irwin and
ABC between the date of this Proxy Statement/Prospectus and the Effective
Time, then, based on the closing sale price of ABC Common Stock as reported on
the Nasdaq National Market on July 25, 1997, the aggregate value of the ABC
Common Stock to be received in the Merger by the Irwin shareholders would be
$8,615,753.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
SHAREHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is July 31, 1997.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION........................... vi
DOCUMENTS INCORPORATED BY REFERENCE........................................ vi
SUMMARY.................................................................... 1
The Parties.............................................................. 1
The Special Meeting...................................................... 1
Financial Terms of the Merger............................................ 2
Reasons for the Proposed Merger.......................................... 2
Interests of Certain Persons in the Merger............................... 3
Recommendation of the Board of Directors of Irwin........................ 3
Dissenters' Rights....................................................... 3
Certain Federal Income Tax Consequences.................................. 3
Conditions; Amendments; Termination...................................... 3
Comparative Shareholders' Rights......................................... 4
Comparison of Certain Unaudited Per Share Data........................... 4
Selected Consolidated Financial Data..................................... 5
Summary of Pro Forma Financial Data...................................... 8
MARKET VALUE OF SECURITIES AND DIVIDENDS................................... 8
SPECIAL MEETING INFORMATION................................................ 10
Purpose of Special Meeting............................................... 10
Date, Time and Place..................................................... 10
Record Date.............................................................. 10
Vote Required............................................................ 10
Proxies.................................................................. 11
PROPOSED MERGER............................................................ 11
Background of the Merger................................................. 11
Reasons for the Merger................................................... 12
Recommendation of Irwin's Board of Directors............................. 13
Description of the Merger................................................ 13
Consideration for Shares................................................. 13
Payment of Cash in Lieu of Fractional Shares............................. 13
Surrender of Certificates................................................ 14
Effective Time of the Merger............................................. 14
Interests of Certain Persons in the Merger............................... 15
Rights of Dissenting Shareholders........................................ 15
Certain Federal Income Tax Consequences of the Merger.................... 16
Regulatory Approvals..................................................... 17
Issuance of Additional Shares............................................ 18
Business Pending the Merger.............................................. 18
Other Provisions of the Merger Agreement................................. 18
Operations of The Bank of Ocilla After the Merger........................ 19
Accounting Treatment..................................................... 19
Resale of ABC Common Stock............................................... 19
DESCRIPTION OF ABC BANCORP................................................. 20
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ABC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 20
General................................................................ 20
Results of Operations for Years Ended December 31, 1996, 1995 and
1994.................................................................. 21
Results of Operations for Three Months Ended March 31, 1997 and 1996... 22
Average Balances and Net Income Analysis............................... 24
Selected Quarterly Financial Data...................................... 25
Rate and Volume Analysis............................................... 25
Noninterest Income..................................................... 25
Noninterest Expense.................................................... 26
Asset/Liability Management............................................. 26
Maturities and Sensitivity of Loans to Changes in Interest Rates....... 28
Loan Portfolio......................................................... 29
Nonperforming Loans.................................................... 30
Summary of Loan Loss Experience........................................ 30
Allocation of Allowance for Loan Losses................................ 31
Investment Portfolio................................................... 31
Types of Investments................................................... 32
Deposits............................................................... 33
Return on Assets and Shareholders' Equity.............................. 33
Liquidity and Capital Resources........................................ 33
Commitments and Lines of Credit........................................ 34
Impact of Inflation.................................................... 35
DESCRIPTION OF ABC COMMON STOCK.......................................... 35
General................................................................ 35
Common Stock........................................................... 35
Preferred Stock........................................................ 36
Limitations on Directors' Liability.................................... 36
Transfer Agent......................................................... 36
CERTAIN REGULATORY CONSIDERATIONS RELATING TO ABC........................ 37
General................................................................ 37
Payment of Dividends and Other Restrictions............................ 37
Capital Adequacy....................................................... 38
Support of Subsidiary Banks............................................ 39
FDIC Insurance Assessments............................................. 39
Recent Legislative and Regulatory Action............................... 40
Monetary Policy........................................................ 41
Future Requirements.................................................... 41
COMPARATIVE RIGHTS OF SHAREHOLDERS....................................... 42
Liquidity and Marketability............................................ 42
Reporting Requirements................................................. 42
Management............................................................. 42
Special Meetings....................................................... 43
DESCRIPTION OF IRWIN BANKCORP, INC....................................... 43
Business............................................................... 43
Employees.............................................................. 44
Properties............................................................. 44
Litigation............................................................. 44
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................................................. 44
Security Ownership of Management and Principal Shareholders............ 46
Certain Regulatory Considerations Relating To Irwin.................... 47
IRWIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 47
General................................................................ 47
Results of Operations for Years Ended December 31, 1996, 1995 and
1994.................................................................. 47
Results of Operations for Three Months Ended March 31, 1997 and 1996... 48
Average Balances and Net Income Analysis............................... 50
Rate and Volume Analysis............................................... 51
Noninterest Income..................................................... 51
Noninterest Expense.................................................... 52
Asset/Liability Management............................................. 52
Maturities and Sensitivity of Loans to Changes in Interest Rates....... 53
Loan Portfolio......................................................... 54
Nonperforming Loans.................................................... 54
Summary of Loan Loss Experience........................................ 55
Allocation of Allowance for Loan Losses................................ 56
Investment Portfolio................................................... 56
Types of Investments................................................... 56
Deposits............................................................... 57
Return on Assets and Shareholders' Equity.............................. 58
Liquidity and Capital Resources........................................ 58
Commitments and Lines of Credit........................................ 59
Impact of Inflation.................................................... 59
Irwin Shares........................................................... 59
OTHER MATTERS............................................................ 60
EXPERTS.................................................................. 60
LEGAL OPINIONS........................................................... 60
</TABLE>
APPENDICES:
Appendix A: Agreement and Plan of Merger with Exhibits
Appendix B: Dissenters' Rights Under Article 13 of the Georgia Business
Corporation Code
v
<PAGE>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
ABC has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement (the "Registration Statement") on Form S-4 under the
Securities Act of 1933, as amended (the "1933 Act"), covering the shares of
ABC Common Stock to be issued in connection with the Merger. This Proxy
Statement/Prospectus also constitutes the Prospectus of ABC filed as part of
the Registration Statement. This Proxy Statement/Prospectus does not contain
all of the information set forth in the Registration Statement. The
Registration Statement and the exhibits thereto can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the Commission's
regional offices located at CitiCorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
ABC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and in accordance therewith files
proxy statements, annual and quarterly reports and other information with the
Commission. All such proxy statements, reports and other information may be
inspected and copied, at prescribed rates, at the public reference facilities
maintained by the Commission at the addresses set forth above.
ALL INFORMATION CONCERNING ABC CONTAINED HEREIN HAS BEEN FURNISHED BY ABC,
AND ALL INFORMATION CONCERNING IRWIN CONTAINED HEREIN HAS BEEN FURNISHED BY
IRWIN. REFERENCES TO ABC AND IRWIN IN THIS PROXY STATEMENT/PROSPECTUS MEAN THE
RESPECTIVE CORPORATIONS AND THEIR CONSOLIDATED SUBSIDIARIES, EXCEPT AS THE
CONTEXT MAY OTHERWISE INDICATE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL ANY
SECURITIES COVERED BY THIS PROXY STATEMENT/PROSPECTUS IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER
THE DELIVERY HEREOF NOR ANY DISTRIBUTION OF SECURITIES BY ABC MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE RELATING
TO ABC WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(EXCLUDING UNINCORPORATED EXHIBITS) ARE AVAILABLE WITHOUT CHARGE TO EACH
PERSON (INCLUDING ANY BENEFICIAL OWNER) TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO SARA R.
HALL, ABC BANCORP, 310 FIRST STREET, S.E., P.O. BOX 1500, MOULTRIE, GEORGIA
31768; TELEPHONE NO. (912) 890-1111. IN ORDER TO INSURE TIMELY DELIVERY OF
SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 20, 1997.
The following documents of ABC (Commission File No. 0-16181) are hereby
incorporated by reference:
1. ABC's Annual Report on Form 10-K for the year ended December 31, 1996;
and
2. ABC's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
vi
<PAGE>
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained in this Proxy
Statement/Prospectus, 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 Proxy Statement/Prospectus except as so modified or superseded.
The information relating to ABC contained in this Proxy Statement/Prospectus
should be read together with the information in the documents incorporated
herein by reference.
vii
<PAGE>
SUMMARY
This summary is necessarily general and abbreviated and has been prepared to
assist Irwin shareholders in their review of this Proxy Statement/Prospectus.
The summary is not intended to be a complete explanation of the matters
covered in this Proxy Statement/Prospectus and is qualified in all respects by
reference to the more detailed information contained in, or incorporated by
reference into, this Proxy Statement/Prospectus, including the Appendices
hereto. Shareholders are urged to read carefully this Proxy
Statement/Prospectus, including each of the Appendices hereto and each of the
documents incorporated by reference herein.
Other than statements of historical fact, statements contained in this Proxy
Statement/Prospectus, including statements as to the benefits expected to be
realized as a result of the Merger and as to future financial performance,
constitute forward-looking statements. Holders of Irwin Shares are cautioned
not to place undue reliance on the forward-looking statements contained in
this Proxy Statement/Prospectus which speak only as of the date hereof.
Neither ABC nor Irwin undertakes any obligation to publicly release the
results of any revisions to such forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. There are a number of important factors
that could cause actual results to differ materially from those expressed or
implied by such forward-looking statements.
THE PARTIES
ABC Bancorp. ABC is a bank holding company organized under the laws of the
State of Georgia and registered with the Board of Governors of the Federal
Reserve System (the "FRB") pursuant to the Bank Holding Company Act of 1956,
as amended (the "BHCA"). ABC, through its subsidiaries, is engaged in the
commercial banking business. Its primary source of earnings is derived from
income generated by the ownership and operation of its nine wholly-owned
subsidiary banks located in south Georgia and southeastern Alabama. As of
March 31, 1997, ABC, on a consolidated basis, had total assets of
$631,713,000, total loans of $446,201,000, total deposits of $531,801,000 and
stockholders' equity of $58,446,000. ABC's net income for 1996 was $6,701,000,
or $1.02 per share; its net income for the three months ended March 31, 1997
was $1,732,000, or $.26 per share. ABC's principal executive offices are
located at 310 First Street, S.E., Moultrie, Georgia 31768, and its telephone
number is (912) 890-1111.
Irwin Bankcorp, Inc. Irwin is a bank holding company organized under the
laws of the State of Georgia and registered with the FRB pursuant to the BHCA.
Irwin owns all of the outstanding common stock of The Bank of Ocilla, Georgia
("The Bank of Ocilla"), a Georgia state bank that provides general banking
services in Irwin and Ben Hill Counties. As of March 31, 1997, Irwin, on a
consolidated basis, had total assets of $38,681,000, total loans of
$15,765,000, total deposits of $32,873,000 and stockholders' equity of
$5,348,000. Irwin's net income for 1996 was $457,000, or $15.75 per share; its
net income for the three months ended March 31, 1997 was $126,000, or $4.31
per share. Irwin's principal executive offices are located at Irwin & 2nd
Street, Ocilla, Georgia 31774-0165, and its telephone number is (912) 468-
9411.
THE SPECIAL MEETING
Date of Meeting, Time and Place. The Special Meeting will be held on August
29, 1997, at 10:00 a.m. at the main office of The Bank of Ocilla, Irwin & 2nd
Street, Ocilla, Georgia.
Record Date. All shareholders of record of Irwin as of the close of business
on July 24, 1997 (the "Record Date") will be entitled to notice of and to vote
at the Special Meeting.
Purpose of Special Meeting. The purpose of the Special Meeting is to
consider and vote upon the Merger Agreement between Irwin and ABC and the
transactions contemplated thereby, including the Merger. A copy of the Merger
Agreement is attached to this Proxy Statement/Prospectus as Appendix A.
Required Shareholder Vote. Approval of the Merger requires the affirmative
vote of the holders of two-thirds of the outstanding Irwin Shares entitled to
vote at the Special Meeting. Holders of 16,997 Irwin Shares,
<PAGE>
representing approximately 58% of the shares currently entitled to vote, have
granted to ABC irrevocable proxies pursuant to which ABC intends to vote such
shares in favor of the Merger.
FINANCIAL TERMS OF THE MERGER
Structure. Under the Merger Agreement, Irwin will be merged with and into
ABC. ABC will be the surviving corporation in the Merger. As a result of the
Merger, the separate corporate existence of Irwin will cease.
Consideration Amount. At the Effective Time, each Irwin Share (other than
treasury shares) outstanding immediately prior thereto will be converted into
the right to receive that number of whole shares of ABC Common Stock equal to
(i) 500,000, divided by (ii) the aggregate number of then-outstanding Irwin
Shares (the "Exchange Ratio"). The Exchange Ratio is subject to adjustment (i)
in the event of certain changes in the number of outstanding shares of ABC
Common Stock or (ii) in the event that C. Larry Young, Vice President and a
director of Irwin, or Don R. Vickers, a loan officer of The Bank of Ocilla,
who together hold options to purchase an aggregate of 752 Irwin Shares at an
aggregate exercise price of $108,959, exercise any or all such options prior
to the Effective Time, in which case the number of shares of ABC Common Stock
issuable by ABC at the Effective Time will be increased by (a) the aggregate
exercise price of all said options that are so exercised, divided by (b) 16.
Each Irwin Shareholder who does not dissent from the Merger will receive the
number of shares of ABC Common Stock equal to the Exchange Ratio multiplied by
the aggregate number of Irwin Shares owned by such shareholder as of the
Effective Time, plus cash in lieu of a fractional share. Assuming that both
Irwin and ABC have the same number of shares of capital stock outstanding at
the Effective Time as they do currently, each Irwin Share would be converted
at such time into the right to receive 17.105713 shares of ABC Common Stock,
plus cash in lieu of a fractional share. (If all currently outstanding options
to purchase Irwin Shares are exercised prior to the Effective Time and if
there are no other changes to the outstanding capital stock of Irwin and ABC
between the date of this Proxy Statement/Prospectus and the Effective Time,
then each Irwin Share would be converted at the Effective Time into the right
to receive 16.903776 shares of ABC Common Stock, plus cash in lieu of a
fractional share.)
REASONS FOR THE PROPOSED MERGER
The Board of Directors of Irwin has determined that the proposed Merger is
in Irwin's best interest and the best interests of its shareholders, customers
and employees and the communities in which Irwin operates. In particular, the
Board determined that the proposed Merger will provide Irwin with increased
financial resources and with the technical expertise available from ABC and
its bank subsidiaries. In addition, by receiving ABC Common Stock,
shareholders of Irwin may benefit from ownership of a larger financial
institution whose common stock is traded on the Nasdaq National Market.
Although the terms of the Merger have been reviewed and unanimously approved
by Irwin's Board of Directors, Irwin has not sought or received an opinion
from an independent third party regarding the fairness of the Merger to any of
Irwin's shareholders, nor was any special committee formed to negotiate or
make recommendations on behalf of Irwin's shareholders. Irwin did, however,
retain Scotty C. Jones, CPA, of Thigpen, Jones, Seaton & Co., P.C., to
evaluate ABC's offer, evaluate other potential offers and negotiate the terms
of the proposed transaction.
ABC's Board of Directors has concluded that the Merger is in the best
interests of ABC's shareholders and the employees, depositors and other
customers of ABC's subsidiaries, and is consistent with ABC's acquisition
strategy of developing a network of local banks in the southeastern United
States. ABC's Board believes that the additional banking and other resources
that will be available to Irwin as a result of the Merger will enhance Irwin's
service to its customers. See "PROPOSED MERGER--Reasons for the Merger."
2
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
ABC has agreed to cause The Citizens Security Bank (f/k/a The Citizens Bank
of Tifton), a Georgia state chartered bank and wholly-owned subsidiary of ABC
("Citizens Bank"), which will acquire The Bank of Ocilla by means of a merger
at the Effective Time and thereafter operate it as a branch bank (also
referred to herein as the "Branch"), to enter into an employment agreement (a
form of which is attached to the Merger Agreement as Exhibit 5) with C. Larry
Young, the Executive Vice President and Chief Executive Officer of The Bank of
Ocilla, pursuant to which Mr. Young will serve as the President of the Branch
following the Merger. ABC has also agreed to cause each officer and employee
of The Bank of Ocilla to be eligible to participate in ABC's employee benefit
plans. Furthermore, ABC has agreed to provide generally to employees of The
Bank of Ocilla fringe benefits (including health and welfare plans, vacation
benefits and severance benefits) on terms and conditions no less favorable
than those provided to other employees of ABC's other bank subsidiaries. See
"PROPOSED MERGER--Interests of Certain Persons in the Merger".
RECOMMENDATION OF THE BOARD OF DIRECTORS OF IRWIN
Irwin's Board of Directors has unanimously approved the Merger Agreement and
has agreed to support the Merger. The Board of Directors believes that the
terms of the Merger Proposal are in the best interests of Irwin's shareholders
and unanimously recommends to Irwin's shareholders that they vote in favor of
the Merger and the Merger Agreement. See "PROPOSED MERGER--Recommendation of
Irwin's Board of Directors."
DISSENTERS' RIGHTS
In accordance with the Georgia Business Corporation Code (the "GBCC"),
holders of Irwin Shares will be entitled to dissenters' rights in connection
with the Merger. The Merger Agreement provides, however, that if holders of
more than 5% of the Irwin Shares exercise their dissenters' rights, then ABC
may elect not to consummate the Merger. HOLDERS OF IRWIN SHARES WHO WISH TO
EXERCISE THEIR DISSENTERS' RIGHTS MUST SEND WRITTEN NOTICE OF THEIR INTENT TO
DEMAND PAYMENT FOR THEIR IRWIN SHARES BEFORE THE SHAREHOLDERS OF IRWIN VOTE ON
THE MERGER PROPOSAL AT THE SPECIAL MEETING ON AUGUST 29, 1997. Such written
notice should be sent to the attention of Ruby Nell Courson, Secretary, Irwin
Bankcorp, Inc., Irwin & 2nd Street, Ocilla, Georgia 31774-0165. See "PROPOSED
MERGER--Dissenters' Rights" and the text of Article 13 of the GBCC attached as
Appendix B to this Proxy Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger, if and when consummated in accordance with the Merger Agreement,
is expected to constitute a tax-free reorganization. Irwin shareholders will
recognize no gain or loss on the exchange of Irwin Shares, except with respect
to cash received in lieu of fractional shares. The foregoing summary is based
upon an opinion to Irwin provided by Rogers & Hardin LLP, counsel to ABC. Such
opinion is not binding on the Internal Revenue Service (the "Service"), and no
advance ruling has been sought or obtained from any federal, state, local or
other taxing authority, including the Service. All Irwin shareholders should
consult their own tax advisors as to the specific tax consequences to them of
the Merger. See "PROPOSED MERGER--Certain Federal Income Tax Consequences of
the Merger."
CONDITIONS; AMENDMENTS; TERMINATION
Consummation of the Merger is contingent upon the approval of the proposed
Merger by Irwin shareholders and certain regulatory authorities, including the
FRB and the Georgia Department of Banking and Finance (the "DBF"), and is
subject to numerous other conditions. See "PROPOSED MERGER--Other Provisions
of the Merger Agreement--Additional Conditions to the Merger."
The Merger Agreement may be amended at any time by mutual agreement of the
Boards of Directors of ABC and Irwin; provided that after the approval of
Irwin shareholders has been obtained, the Merger Agreement
3
<PAGE>
may not be amended or supplemented in any manner which will result in a
decrease in the consideration paid for Irwin Shares or which will otherwise
materially adversely affect the rights of Irwin's shareholders. The Merger
Agreement may also be terminated, and the Merger abandoned, notwithstanding
prior shareholder approval, by mutual agreement of Irwin and ABC or by either
of them in the event of failure to satisfy the conditions to the Merger prior
to December 31, 1997, or if either party shall have breached any material
representation or warranty contained in the Merger Agreement and such breach
has not been cured within 30 days of notice thereof to the breaching party.
See "PROPOSED MERGER--Other Provisions of the Merger Agreement--Waivers;
Amendments; Terminations."
COMPARATIVE SHAREHOLDERS' RIGHTS
The rights of shareholders of ABC and shareholders of Irwin differ in a
number of respects. For a description of the relative rights of such
shareholders, see "COMPARATIVE RIGHTS OF SHAREHOLDERS."
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following tables present unaudited selected historical (i) per common
share data for ABC and Irwin; (ii) ABC pro forma per common share data on the
basis described in Note 1; and (iii) Irwin pro forma equivalent per common
share data on the basis described in Note 2. The information is based on the
historical financial statements of ABC and Irwin. The pro forma data do not
purport to be indicative of the results of future operations or the actual
results that would have occurred had the Merger been consummated at the
beginnings of the periods presented. The pro forma data give effect to the
Merger and are based on numerous assumptions and estimates. If the Merger is
consummated as anticipated, it will be accounted for as a pooling of
interests. The information presented below should be read in conjunction with,
and is qualified in its entirety by, the separate consolidated financial
statements, including applicable notes, of ABC and Irwin, and the Unaudited
Pro Forma Condensed Consolidated Financial Data, and notes thereto, appearing
elsewhere herein.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
EQUIVALENT
IRWIN
PRO FORMA AMOUNT
ABC IRWIN COMBINED(1) PER SHARE(2)
----------- ------------- ---------------------------------
<S> <C> <C> <C> <C>
Net income per common
share.................. $ 0.26 $ 4.31 $ 0.26 $ 4.45
Dividends per common
share.................. 0.08 -- 0.07 1.20
Book value per common
share.................. 8.66 182.96 8.80 150.53
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
EQUIVALENT
IRWIN
PRO FORMA AMOUNT
ABC IRWIN COMBINED(1) PER SHARE(2)
----------- ------------- ---------------------------------
<S> <C> <C> <C> <C>
Net income per common
share.................. $ 1.02 $ 15.75 $ 1.01 $ 17.28
Dividends per common
share.................. 0.32 8.50 0.27 4.62
Book value per common
share.................. 8.55 181.18 8.69 148.65
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------
EQUIVALENT
IRWIN
PRO FORMA AMOUNT
ABC IRWIN COMBINED(1) PER SHARE(2)
----------- ------------- ---------------------------------
<S> <C> <C> <C> <C>
Net income per common
share.................. $ 0.96 $15.65 $ 0.95 $16.63
Dividends per common
share.................. 0.28 8.50 0.23 3.98
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------
EQUIVALENT
IRWIN
PRO FORMA AMOUNT
ABC IRWIN COMBINED(1) PER SHARE(2)
----------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
Net income per common
share.................. $ 0.75 $ 15.62 $ 0.76 $ 13.19
Dividends per common
share.................. 0.23 6.75 0.17 2.95
</TABLE>
- --------
(1) See unaudited Pro Forma Condensed Consolidated Financial Data included
elsewhere in this Proxy Statement/Prospectus.
(2) The equivalent share information for Irwin in the above table is computed
assuming an Exchange Ratio of 17.105713 shares of ABC Common Stock (with
an assumed market value of $16 per share) for each Irwin Share.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical financial data of ABC and
Irwin for each of the last five years and selected unaudited historical
financial data for the three months ended March 31, 1997 and 1996. The
selected historical financial data of each of ABC and Irwin have been derived
from, and should be read in conjunction with, the annual audited consolidated
financial statements of ABC and Irwin, as the case may be, including the notes
thereto, and the unaudited three months consolidated financial statements of
ABC and Irwin, as the case may be, including the notes thereto, appearing
elsewhere herein. The ABC Income Statement Data and Per Share Data for the
three months ended March 31, 1997 and 1996 and the Balance Sheet Data at March
31, 1997 include, in the opinion of ABC's management, all adjustments
necessary to present fairly the information for such periods. Such adjustments
consist only of normal recurring adjustments. The Irwin Income Statement Data
and Per Share Data for the three months ended March 31, 1997 and 1996 and the
Balance Sheet Data at March 31, 1997 include, in the opinion of Irwin's
management, all adjustments necessary to present fairly the information for
such periods. Such adjustments consist only of normal recurring adjustments.
The data presented are not necessarily indicative of results to be expected in
the future.
5
<PAGE>
ABC BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET
DATA:
Total assets........... $631,713 $482,196 $635,032 $491,139 $424,179 $389,874 $365,780
Total loans............ 446,201 317,520 438,390 305,242 270,990 232,209 214,410
Total deposits......... 531,801 421,838 545,738 432,181 375,129 346,897 328,737
Investment securities.. 119,899 92,534 118,138 84,505 80,401 77,045 60,647
Stockholders' equity... 58,446 47,745 57,674 46,771 41,082 30,070 28,963
SELECTED INCOME
STATEMENT DATA:
Interest income........ $ 13,496 $ 10,097 $ 47,776 $ 38,231 $ 30,548 $ 27,882 $ 23,446
Interest expense....... 5,865 4,474 21,135 16,225 11,782 11,267 10,482
-------- -------- -------- -------- -------- -------- --------
Net interest income.. 7,631 5,623 26,641 22,006 18,766 16,615 12,964
Provision for loan
losses................ 584 248 1,894 1,231 955 1,560 1,596
Other income........... 1,736 1,333 6,284 4,674 4,273 4,011 3,094
Other expenses......... 6,172 4,198 21,663 16,921 15,930 14,734 11,885
-------- -------- -------- -------- -------- -------- --------
Income before tax...... 2,611 2,510 9,368 8,528 6,154 4,332 2,577
Income tax expense..... 879 835 2,667 2,611 1,837 1,107 650
-------- -------- -------- -------- -------- -------- --------
Net income before
minority interest and
cumulative effect..... 1,732 1,675 6,701 5,917 4,317 3,225 1,927
Minority Interest...... -- -- -- -- -- 76 64
-------- -------- -------- -------- -------- -------- --------
Net income before
cumulative effect..... 1,732 1,675 6,701 5,917 4,317 3,149 1,863
Cumulative effect...... -- -- -- -- -- 346 --
-------- -------- -------- -------- -------- -------- --------
Net income........... $ 1,732 $ 1,675 $ 6,701 $ 5,917 $ 4,317 $ 3,495 $ 1,863
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Net income before
cumulative effect..... $ 0.26 $ 0.26 $ 1.02 $ 0.96 $ 0.75 $ 0.59 $ 0.35
Net income............. 0.26 0.26 1.02 0.96 0.75 0.65 0.35
Book value............. 8.66 7.53 8.55 7.55 6.68 5.82 5.41
Tangible book value.... 7.66 7.16 7.48 7.16 6.23 5.24 4.80
Dividends.............. 0.08 0.08 0.32 0.28 0.23 0.23 0.23
PROFITABILITY RATIOS:
Net income to average
total assets.......... 1.12% 1.42% 1.21% 1.34% 1.10% 0.95% 0.64%
Net income to average
stockholders' equity.. 11.77% 13.88% 12.53% 13.44% 13.28% 12.00% 6.66%
Net interest margin.... 5.40% 5.03% 5.29% 5.50% 5.20% 4.99% 5.05%
LOAN QUALITY RATIOS:
Net charge-offs to
total loans........... 0.08% 0.02% 0.39% 0.17% 0.26% 0.77% 0.66%
Reserve for loan losses
to total loans and
OREO.................. 1.58% 1.79% 1.57% 1.79% 1.76% 1.94% 2.20%
Nonperforming assets to
total loans and OREO.. 1.54% 1.40% 1.43% 1.13% 1.58% 2.03% 3.77%
Reserve for loan losses
to nonperforming
loans................. 128.07% 147.67% 127.92% 201.03% 115.06% 119.64% 67.49%
Reserve for loan losses
to total nonperforming
assets................ 103.49% 127.41% 109.25% 158.91% 111.77% 95.55% 58.26%
LIQUIDITY RATIOS:
Loans to total
deposits.............. 83.90% 75.27% 80.33% 70.63% 72.24% 66.94% 65.22%
Loans to average
earning assets........ 78.99% 70.97% 87.10% 76.25% 75.12% 69.68% 83.45%
Noninterest-bearing
deposits to total
deposits.............. 13.50% 14.11% 14.92% 17.28% 16.81% 14.47% 14.46%
CAPITAL ADEQUACY RATIOS:
Common stockholders'
equity to total
assets................ 9.25% 9.90% 9.08% 9.52% 9.69% 7.71% 7.92%
Total stockholders'
equity to total
assets................ 9.25% 9.90% 9.08% 9.52% 9.69% 7.71% 7.92%
Dividend payout ratio.. 30.77% 30.77% 31.37% 29.17% 30.67% 35.38% 65.71%
</TABLE>
6
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET
DATA:
Total assets........... $ 38,681 $ 38,658 $ 38,142 $40,104 $39,905 $36,506 $ 34,774
Total loans............ 15,765 15,250 14,454 14,229 14,585 14,271 15,205
Total deposits......... 32,873 32,936 32,167 34,136 34,516 31,406 30,125
Investment securities.. 16,382 16,657 17,128 17,190 15,799 17,136 12,093
Stockholders' equity... 5,348 5,230 5,296 5,184 4,671 4,561 4,111
SELECTED INCOME
STATEMENT DATA:
Interest income........ $ 697 $ 712 $ 2,810 $ 2,720 $ 2,473 $ 2,433 $ 2,567
Interest expense....... 291 307 1,189 1,142 935 932 1,151
--------- --------- --------- ------- ------- ------- --------
Net interest income.. 406 405 1,621 1,578 1,538 1,501 1,416
Provision for loan
losses................ 15 15 25 10 33 61 55
Other income........... 66 78 248 230 193 201 185
Other expenses......... 288 279 1,214 1,206 1,142 1,134 1,093
--------- --------- --------- ------- ------- ------- --------
Income before tax...... 169 189 630 592 556 507 453
Income tax expense..... 43 32 173 141 108 83 86
--------- --------- --------- ------- ------- ------- --------
Net income before
cumulative effect..... 126 157 457 451 448 424 367
Cumulative effect...... -- -- -- -- -- 205 --
--------- --------- --------- ------- ------- ------- --------
Net income........... $ 126 $ 157 $ 457 $ 451 $ 448 $ 629 $ 367
========= ========= ========= ======= ======= ======= ========
PER SHARE DATA:
Net income before
cumulative effect..... $ 4.31 $ 5.43 $ 15.75 $ 15.65 $ 15.62 $ 14.83 $ 12.82
Net income............. 4.31 5.43 15.75 15.65 15.62 22.00 12.82
Book value............. 182.96 180.58 181.18 179.59 162.10 159.15 143.55
Tangible book value.... 182.96 180.58 181.18 179.59 162.10 159.15 143.55
Dividends.............. -- -- 8.50 8.50 6.75 6.25 5.50
PROFITABILITY RATIOS:
Net income to average
total assets.......... 1.32% 1.61% 1.19% 1.23% 1.22% 1.78% 1.11%
Net income to average
stockholders' equity.. 9.47% 12.06% 8.72% 9.15% 9.71% 14.51% 9.27%
Net interest margin.... 4.53% 4.46% 4.56% 4.62% 4.51% 4.60% 4.61%
LOAN QUALITY RATIOS:
Net charge-offs to
total loans........... 0.00% (0.01)% 0.21% (0.02)% 0.08% 0.18% (0.07)%
Reserve for loan losses
to total loans and
OREO.................. 2.63% 2.77% 2.77% 2.85% 2.69% 2.63% 2.24%
Nonperforming assets to
total loans and OREO.. 0.14% 0.27% 0.01% -- -- -- 0.14%
Reserve for loan losses
to nonperforming
loans................. 1,886.36% 1,029.27% 40,000.00% N/A N/A N/A 1,619.05%
Reserve for loan losses
to total nonperforming
assets................ 1,886.36% 1,029.27% 40,000.00% N/A N/A N/A 1,619.05%
LIQUIDITY RATIOS:
Loans to total
deposits.............. 47.96% 46.30% 44.93% 41.68% 42.26% 45.44% 50.47%
Loans to average
earning assets........ 43.99% 41.95% 40.66% 41.69% 42.74% 43.73% 49.52%
Noninterest-bearing
deposits to total
deposits.............. 17.82% 17.57% 17.28% 21.02% 20.77% 17.28% 17.95%
CAPITAL ADEQUACY RATIOS:
Common stockholders'
equity to total
assets................ 13.83% 13.53% 13.88% 12.93% 11.71% 12.49% 11.82%
Total stockholders'
equity to total
assets................ 13.83% 13.53% 13.88% 12.93% 11.71% 12.49% 11.82%
Dividend payout ratio.. -- -- 53.97% 54.31% 43.21% 28.41% 42.90%
</TABLE>
7
<PAGE>
SUMMARY OF PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma financial data give effect to the
Merger as of the dates and for the periods indicated and pursuant to the
accounting basis described below. The unaudited pro forma financial data are
presented for informational purposes only and are not necessarily indicative
of the combined financial position or results of operations which actually
would have occurred if the Merger had been consummated at the date and for the
periods indicated or which may be obtained in the future. The information
should be read in conjunction with the unaudited Pro Forma Financial
Information appearing elsewhere in this Proxy Statement/Prospectus.
Selected Pro Forma Combined Financial Data for ABC and Irwin. The following
unaudited pro forma combined data give effect to the Merger as of March 31,
1997 and for the three-month period ended March 31, 1997 and as of December
31, 1996 and for each of the years ended December 31, 1996, 1995 and 1994,
assuming the Merger was accounted for as a pooling of interests. The data
assume that the Merger was consummated on March 31, 1997 for "Balance Sheet
Data" and at the beginning of each period presented for "Income Statement
Data."
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
1997 1996
--------------- ------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets............................ $670,394 $673,168
Cash.................................... 32,190 42,901
Federal funds sold...................... 5,787 8,620
Securities.............................. 136,281 135,266
Loans, net.............................. 454,433 445,571
Total deposits.......................... 564,674 577,905
Stockholders' equity.................... 63,794 62,970
Book value per common share............. 8.80 8.69
</TABLE>
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------
1997 1996 1995 1994
------------------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income....... $ 14,193 $ 50,586 $ 40,951 $ 33,021
Total interest expense...... 6,156 22,324 17,367 12,717
----------- ----------- ----------- -----------
Net interest income....... 8,037 28,262 23,584 20,304
Provision for loan losses... 599 1,919 1,241 988
----------- ----------- ----------- -----------
Net interest income after
provision for loan
losses................... 7,438 26,343 22,343 19,316
Total noninterest income.... 1,802 6,531 4,904 4,466
Total noninterest expense... 6,460 22,877 18,127 17,072
Income tax expense.......... 922 2,839 2,752 1,945
----------- ----------- ----------- -----------
Income from continuing
operations............... $ 1,858 $ 7,158 $ 6,368 $ 4,765
=========== =========== =========== ===========
Income from continuing
operations per share..... $ 0.26 $ 1.01 $ 0.95 $ 0.76
=========== =========== =========== ===========
</TABLE>
MARKET VALUE OF SECURITIES AND DIVIDENDS
ABC. ABC Common Stock is included in the Nasdaq National Market under the
symbol "ABCB". On May 22, 1997, the last day preceding the public announcement
of the Merger on which ABC Common Stock was traded, the closing sale price for
ABC Common Stock was $16.50 per share. On July 25, 1997, the closing sale
price for ABC Common Stock was $17.00 per share. ABC Common Stock was held by
1,333 shareholders of record as of March 31, 1997.
8
<PAGE>
Irwin shareholders are urged to obtain current market information for ABC
Common Stock. No assurance can be given as to the market price of ABC Common
Stock at the Effective Time. Because the Exchange Ratio is fixed, and neither
ABC nor Irwin has the right to terminate the Merger Agreement based on changes
in the market price of ABC Common Stock, the market value of the shares of ABC
Common Stock that Irwin shareholders will receive upon consummation of the
Merger may vary significantly from the market value of the shares of ABC
Common Stock that Irwin shareholders would receive if the Merger were
consummated on the date of this Proxy Statement/Prospectus.
The following table sets forth the quarterly range of high and low closing
sale prices per share of ABC Common Stock from January 1, 1995 through July
25, 1997, as reported on the Nasdaq National Market, together with the amount
of cash dividends per share declared by ABC during each such quarter. For a
discussion of ABC's policies concerning the declaration of dividends and
regulatory restrictions on such declaration, see "DESCRIPTION OF ABC COMMON
STOCK--General." The per share information presented below and elsewhere in
this Proxy Statement/Prospectus has been adjusted to reflect all stock splits
and stock dividends of ABC.
<TABLE>
<CAPTION>
PRICES OF COMMON STOCK
-----------------------
HIGH LOW CASH DIVIDENDS
----------- ----------- --------------
1997
----
<S> <C> <C> <C>
First Quarter....................... $ 16.41 $ 13.41 $0.08
Second Quarter...................... $ 20.50 $ 15.50 $0.08
Third Quarter (through July 25,
1997).............................. $ 17.375 $ 16.50 --
<CAPTION>
1996
----
<S> <C> <C> <C>
First Quarter....................... $ 12.00 $ 11.25 $0.08
Second Quarter...................... $ 15.00 $ 11.25 $0.08
Third Quarter....................... $ 15.75 $ 14.25 $0.08
Fourth Quarter...................... $ 15.75 $ 13.375 $0.08
<CAPTION>
1995
----
<S> <C> <C> <C>
First Quarter....................... $ 8.125 $ 7.25 $0.06
Second Quarter...................... $ 9.375 $ 7.625 $0.06
Third Quarter....................... $ 11.625 $ 9.125 $0.08
Fourth Quarter...................... $ 11.75 $ 10.75 $0.08
</TABLE>
Irwin. Irwin Shares are not publicly traded; however, there are occasional
transactions in Irwin Shares as a result of private negotiations. Irwin is
aware of the price paid in connection with certain sales of Irwin Shares but
is not aware of the price paid in all transfers of Irwin Shares. The last
transaction in Irwin Shares known to Irwin occurred on February 14, 1997 at a
price of $175.00 per Irwin Share. Irwin Shares were held by 143 shareholders
of record as of March 31, 1997.
9
<PAGE>
The following table sets forth the amount of cash dividends per share
declared by Irwin during each quarter since January 1, 1995. The Merger
Agreement prohibits the payment of any such dividends pending the Merger. See
"PROPOSED MERGER--Business Pending the Merger."
<TABLE>
<CAPTION>
CASH DIVIDENDS
--------------
1997
----
<S> <C>
First Quarter.............................................. --
Second Quarter............................................. --
Third Quarter (through July 25, 1997)...................... --
<CAPTION>
1996
----
<S> <C>
First Quarter.............................................. --
Second Quarter............................................. $2.00
Third Quarter.............................................. --
Fourth Quarter............................................. $6.50
<CAPTION>
1995
----
<S> <C>
First Quarter.............................................. --
Second Quarter............................................. $2.00
Third Quarter.............................................. --
Fourth Quarter............................................. $6.50
</TABLE>
SPECIAL MEETING INFORMATION
PURPOSE OF SPECIAL MEETING
The purpose of the Special Meeting is to enable Irwin shareholders to
consider and vote upon the Merger Proposal. Irwin's Board of Directors is not
presently aware of any other matter which may come before the Special Meeting.
DATE, TIME AND PLACE
The Board of Directors of Irwin is soliciting proxies ("Proxies") from
holders of Irwin Shares for use at the Special Meeting to be held August 29,
1997, at 10:00 a.m., at the main office lobby of The Bank of Ocilla, Irwin &
2nd Street, Ocilla, Georgia.
RECORD DATE
Only shareholders of record as of the close of business on the Record Date
will be entitled to notice of and to vote and give Proxies for purposes of
voting at the Special Meeting. At the close of business on the Record Date,
there were 29,230 Irwin Shares outstanding. Each Irwin Share outstanding has
one vote on the Merger Proposal.
VOTE REQUIRED
The affirmative vote of the holders of two thirds of Irwin Shares
outstanding on the Record Date are required to approve and adopt the Merger
Agreement. Abstentions will, therefore, have the effect of votes against the
Merger Agreement. Proxies marked "AGAINST" will not be voted in favor of any
postponements or adjournments for the purpose of soliciting additional
proxies. Holders of 16,997 Irwin Shares, representing approximately 58% of the
shares currently entitled to vote, have granted to ABC irrevocable proxies
pursuant to which ABC intends to vote such shares in favor of the Merger.
10
<PAGE>
PROXIES
The accompanying Proxy is solicited by the Board of Directors of Irwin. The
Board of Directors requests that Irwin shareholders mark, sign and date the
accompanying Proxy and promptly return it to Irwin in the enclosed envelope.
If a Proxy is properly executed and returned prior to the Special Meeting, it
will be voted as indicated thereon; if no voting instructions are indicated
thereon, such Proxy will be voted in favor of the Merger Proposal. Although
the Board of Directors knows of no additional matters to be presented at the
Special Meeting as of the date of this Proxy Statement/Prospectus, the persons
named in such Proxy, or their substitutes, will have authority in their
discretion to vote on any such matters as may come before the Special Meeting.
It is currently expected that, on the scheduled date of the Special Meeting,
votes will be taken and the polls closed on the Merger Proposal. It is
possible, however, that there could be proposals for one or more adjournments
of the Special Meeting in order to permit further solicitation of proxies with
respect to approval of the Merger. The affirmative vote of a majority of the
shares voted on the question shall be necessary for the approval of any such
adjournment proposal. An instruction to vote a Proxy for approval of the
Merger will also be deemed to constitute authority to vote at the discretion
of the holder of the Proxy upon any such adjournment proposal. An instruction
to vote a Proxy against approval of the Merger will be deemed to constitute an
instruction to the holder of the Proxy to vote against any such adjournment
proposal.
Any shareholder giving a Proxy has the right to revoke it at any time before
it is exercised. Therefore, execution of the Proxy will not affect a
shareholder's right to vote in person if he or she attends the Special
Meeting. Revocation may be made before the Special Meeting by written notice
sent to Ruby Nell Courson, Secretary, Irwin Bankcorp, Inc., Irwin & 2nd
Street, Ocilla, Georgia 31774-0165, by executing a subsequently dated Proxy,
or by attending the Special Meeting and voting in person.
Irwin will bear the cost of soliciting Proxies. Solicitation will be made by
mail, as well as by telephone or in person by certain directors, officers and
employees of Irwin (who will receive no additional compensation for doing so).
Irwin does not intend to pay compensation for soliciting Proxies or use any
specially-engaged employees of Irwin or other paid solicitors.
PROPOSED MERGER
The following description of the material aspects of the Merger does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and incorporated herein by reference. All shareholders
are urged to read the Merger Agreement in its entirety.
BACKGROUND OF THE MERGER
During the past several years, there has been a trend toward consolidation
in the banking industry. This trend has enabled participants in business
combinations to benefit from the economies of scale and greater efficiencies
resulting from the shared services, technology and purchasing power of the
combined entities. Banks have increasingly sought suitable acquisition
candidates as a means of utilizing excess capital and obtaining the benefits
described above.
At a meeting of Irwin's Board of Directors in early 1997, the directors
discussed whether Irwin should consider a strategic merger with a larger
institution in order that The Bank of Ocilla might have the economies of scale
to deliver a broader range of banking services more efficiently to customers
in a very competitive market.
On March 31, 1997, two Irwin directors, Dr. W.C. Sams, Jr. and Mr. L.A.
Pate, met with Mr. Kenneth J. Hunnicutt, President of ABC, to discuss the
common interests and philosophy of the two organizations and the possibility
of a business combination. C. Larry Young has had a collegial professional
relationship with ABC
11
<PAGE>
and a personal relationship with Mr. Hunnicutt through their involvement with
the Georgia Bankers Association. Mr. Young and Mr. Hunnicutt have briefly
discussed the synergies of a possible business combination in the past, but
never engaged in any formal discussions concerning such a transaction. Mr.
Hunnicutt stated that ABC might be interested and suggested that the matter be
pursued further.
Subsequent to these discussions, the representatives of Irwin and ABC
engaged in many informal meetings and shared certain financial information.
Based on the information received from Irwin, an informal offer to purchase
was extended by ABC subject to further review of financial information.
On April 22, 1997, after further negotiations between ABC's management team
and representatives of Irwin, ABC and Irwin entered into a letter of intent
and continued their respective due diligence investigations. During the period
from April 22 to May 15, representatives of ABC and Irwin negotiated and
prepared a definitive merger agreement.
On May 13, 1997, the Board of Directors of Irwin authorized the execution of
the Merger Agreement and, subject to shareholder approval, approved the
Merger. In that regard, Irwin retained Scotty C. Jones, CPA, of Thigpen,
Jones, Seaton & Co., P.C., to evaluate ABC's offer, evaluate other potential
offers and negotiate the terms of the proposed transaction.
On May 15, 1997: (i) the Board of Directors of The Bank of Ocilla authorized
and approved the merger of The Bank of Ocilla with and into Citizens Bank;
(ii) the Board of Directors of ABC authorized and approved the Merger
Agreement and the Merger by written consent in lieu of a meeting; and (iii)
the Board of Directors of Citizens Bank approved the merger with The Bank of
Ocilla by written consent in lieu of a meeting.
REASONS FOR THE MERGER
In considering whether to approve the Merger with ABC, the Board of
Directors of Irwin evaluated the future role of Irwin in the changing banking
environment in light of its managerial resources, financial condition and
recent results of operations. The Board considered such things as potential
increased competition from bank and non-bank sources, prospects for future
growth through mergers, acquisitions and branching, and the ability of Irwin
to develop new commercial products on a cost-effective basis. The Irwin Board
also considered (i) information concerning the relative financial condition,
results of operations, dividend records and growth potential of Irwin and ABC;
(ii) the value of the consideration offered to Irwin's shareholders relative
to the market value and book value of Irwin Shares and Irwin's earnings; (iii)
the relative strengths and compatibility of the management of the two
organizations; (iv) the market price data and relative liquidity of ABC Common
Stock and the lack of an active market for Irwin stock; (v) the financial
terms of other recent business combinations in the banking industry,
particularly in Georgia; and (vi) the tax consequences of the Merger.
After reviewing these factors, the Board of Directors of Irwin concluded
that Irwin's employees and customers will benefit from the opportunities
offered by affiliation with a larger financial institution strategically
located in an expanded market in south Georgia and from a financial base which
will permit more rapid development of new products and services. The Board
also believes that the Merger will better enable Irwin to meet the needs of
the communities which it serves and will permit more aggressive competition
with other financial institutions located in and around south central Georgia.
Shareholders of Irwin who receive ABC Common Stock may, in addition to an
immediate recognition of value, benefit from ownership of a larger financial
institution and from ownership of common stock which is traded on the Nasdaq
National Market. The Merger will also provide Irwin with access to the
expertise of a larger institution, improving its service capabilities.
The terms of the Merger have been reviewed and unanimously approved by
Irwin's Board of Directors. After such review, the Board determined that the
Merger is fair to, and in the best interests of, Irwin's shareholders,
customers and employees and the communities in which Irwin operates based upon
its evaluation of the considerations described above.
12
<PAGE>
ABC's Board of Directors has also concluded that the Merger would be in the
best interests of ABC's shareholders and the employees, depositors and other
customers of ABC's subsidiaries. In particular, ABC's Board concluded that the
Merger would be consistent with ABC's acquisition strategy and would extend
ABC's current market base with a well-managed financial institution. ABC's
Board also believes that the additional banking and other resources that will
be available to Irwin as a result of the Merger will enhance Irwin's service
to its customers.
Irwin has not sought or received an opinion from an independent third party
regarding the fairness of the Merger to any of Irwin's shareholders, nor was
any special committee formed to negotiate or make recommendations on behalf of
any such shareholder.
RECOMMENDATION OF IRWIN'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF IRWIN HAS CAREFULLY CONSIDERED THE MERGER
PROPOSAL, HAS UNANIMOUSLY APPROVED THE MERGER, AND UNANIMOUSLY RECOMMENDS A
VOTE IN FAVOR OF THE MERGER AND THE MERGER AGREEMENT.
DESCRIPTION OF THE MERGER
Upon consummation of the transactions contemplated by the Merger Agreement,
Irwin will be merged with and into ABC, and Irwin's separate corporate
identity will cease to exist. ABC will be the surviving corporation after the
Merger, and the articles of incorporation and the bylaws of ABC will remain in
effect as they were immediately prior to the Merger. Simultaneous with the
Merger, The Bank of Ocilla will be merged with and into Citizens Bank and will
thereafter become a branch of Citizens Bank under the operation of its current
management. See "Operations of The Bank of Ocilla After the Merger."
CONSIDERATION FOR SHARES
At the Effective Time, each Irwin Share (other than treasury shares) will be
converted into the right to receive that number of whole shares of ABC Common
Stock equal to (i) 500,000, divided by (ii) the aggregate number of then-
outstanding Irwin Shares (the "Exchange Ratio"). The Exchange Ratio is subject
to adjustment (i) in the event of certain changes in the number of outstanding
shares of ABC Common Stock or (ii) in the event that C. Larry Young, Vice
President and a director of Irwin, or Don R. Vickers, a loan officer of The
Bank of Ocilla, who together hold options to purchase an aggregate of 752
Irwin Shares at an aggregate exercise price of $108,959, exercise any or all
such options prior to the Effective Time, in which case the number of shares
of ABC Common Stock issuable by ABC upon consummation of the Merger will be
increased by (a) the aggregate exercise price of all said options that are so
exercised, divided by (b) 16. Cash will be paid in lieu of issuing fractional
shares of ABC Common Stock.
Each Irwin Shareholder who does not dissent from the Merger will receive the
number of shares of ABC Common Stock equal to the Exchange Ratio multiplied by
the aggregate number of Irwin Shares owned by such shareholder as of the
Effective Time, plus cash in lieu of a fractional share. Assuming that both
Irwin and ABC have the same number of shares of capital stock outstanding at
the Effective Time as they do currently, each Irwin Share would be converted
at such time into the right to receive 17.105713 shares of ABC Common Stock,
plus cash in lieu of a fractional share. (If all currently outstanding options
to purchase Irwin Shares are exercised prior to the Effective Time and if
there are no other changes to the outstanding capital stock of Irwin and ABC
between the date of this Proxy Statement/Prospectus and the Effective Time,
then each Irwin Share would be converted at the Effective Time into the right
to receive 16.903776 shares of ABC Common Stock, plus cash in lieu of a
fractional share.)
PAYMENT OF CASH IN LIEU OF FRACTIONAL SHARES
No fractional shares of ABC Common Stock will be issued in the Merger. Each
Irwin shareholder who would otherwise have been entitled to receive a fraction
of a share of ABC Common Stock will receive, in lieu
13
<PAGE>
thereof, cash in an amount equal to (i) the average of the daily closing price
of a share of ABC Common Stock as reported on the Nasdaq National Market for
the 20 consecutive trading days immediately preceding five consecutive
calendar days immediately preceding the Effective Time, multiplied by (ii) the
fraction of a share of ABC Common Stock to which such Irwin shareholder would
otherwise be entitled.
SURRENDER OF CERTIFICATES
If the Merger is approved at the Special Meeting, a Letter of Transmittal
for use in surrendering certificates representing Irwin Shares ("Old
Certificates") in exchange for ABC Common Stock will be mailed to Irwin
shareholders as soon as practicable after the date of the Special Meeting.
Shareholders will be instructed to send their Old Certificates to the Exchange
Agent named in the Letter of Transmittal (the "Exchange Agent") in accordance
with the instructions contained therein. If the Merger is not consummated, the
Exchange Agent will return any Old Certificates it has received to the persons
surrendering such Old Certificates in accordance with the Letter of
Transmittal.
If any certificates for shares of ABC Common Stock are to be issued in a
name other than that for which an Old Certificate surrendered or exchanged is
issued, the Old Certificate so surrendered must be properly endorsed and
otherwise in proper form for transfer, and the person requesting the exchange
must affix any requisite stock transfer tax stamps to the Old Certificate
surrendered, provide funds for their purchase, or establish to the
satisfaction of the Exchange Agent that such taxes are not payable.
Unless and until Old Certificates (or evidence that the Old Certificates
have been lost, stolen or destroyed, accompanied by such security or indemnity
as shall be requested by Irwin) are presented to the Exchange Agent, the
holder thereof shall not be entitled to any consideration to be paid in the
Merger or to any dividends payable on ABC Common Stock. To the extent
permitted by law, former Irwin shareholders will be entitled to vote after the
Effective Time at any meeting of ABC shareholders the number of shares of ABC
Common Stock into which their respective Irwin Shares have been converted,
regardless of whether they have exchanged certificates representing their
Irwin Shares for certificates representing ABC Common Stock. At or after the
Effective Time, upon surrender of his or her Old Certificates (or evidence
that the Old Certificates have been lost, stolen or destroyed, accompanied by
such security or indemnity as is requested by Irwin) to the Exchange Agent,
the holder thereof will be paid the consideration to which the holder is
entitled under the Merger Agreement, including any dividends which theretofore
became payable on any shares of ABC Common Stock to which the holder is
entitled. In no event will any holder of Irwin Shares exchanged in the Merger
be entitled to receive any interest on any amounts held by the Exchange Agent
or ABC.
After the consummation of the Merger, there will be no transfers on the
stock transfer books of Irwin or ABC of any Irwin Shares. If, after the
consummation of the Merger, Old Certificates are properly presented to ABC,
they will be cancelled and exchanged for the consideration specified in the
Merger Agreement, subject to applicable law and to the extent that ABC has not
paid any amounts to a public official pursuant to applicable abandoned
property laws. SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES AT
THIS TIME, BUT SHOULD WAIT FOR RECEIPT OF THE LETTER OF TRANSMITTAL.
EFFECTIVE TIME OF THE MERGER
As used in this Proxy Statement/Prospectus, "Effective Time" means the date
on which ABC files an appropriate certificate of merger in the office of the
Georgia Secretary of State, or such other date as specified in such
certificate of merger. The Effective Time cannot occur before completion of
all conditions under the Merger Agreement or authorized waiver thereof. See
"--Other Provisions of the Merger Agreement." The Merger Agreement provides
that the parties shall use their reasonable efforts to cause the Effective
Time to occur on (i) the last business day of the month in which occurs the
last to occur of (a) the effective date of any required consent (including
regulatory consents) and (b) the date on which Irwin's shareholders approve
the Merger Agreement; or (ii) such later time as the parties may mutually
agree. It is currently anticipated that the Effective Time will occur on, or
as soon as practicable after, August 29, 1997. If the Merger has not occurred
by December
14
<PAGE>
31, 1997, unless such date is otherwise extended by agreement of the parties,
either party may terminate the Merger Agreement in its entirety without
penalty.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
ABC has agreed to cause Citizens Bank, which will acquire The Bank of Ocilla
by means of a merger at the Effective Time and thereafter operate it as a
branch bank (the "Branch"), to enter into an employment agreement (a form of
which is attached to the Merger Agreement as Exhibit 5) with C. Larry Young,
the Executive Vice President and Chief Executive Officer of The Bank of
Ocilla, pursuant to which Mr. Young will serve as the President of the Branch
following the Merger.
Following the Merger, ABC intends to provide generally to officers and
employees of the Branch fringe benefits (including health and welfare plans,
vacation benefits and severance benefits) on terms and conditions no less
favorable than those provided to officers and employees of ABC's other bank
subsidiaries from time to time. ABC will also cause each eligible officer and
employee of the Branch to participate in ABC's SEP/IRA Retirement Plan (the
"SEP Plan") according to the terms of the SEP Plan. For purposes of the
eligibility and vesting provisions under ABC's pension plan, officers and
employees of the Branch will receive credit for years of service at The Bank
of Ocilla. Under the SEP Plan, officers or employees of the Branch who have
been employed by The Bank of Ocilla during three of the five calendar years
preceding the Effective Time are eligible to participate in the SEP Plan.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Irwin Shares are entitled to dissenters' rights under Article 13
of the GBCC ("Article 13"). As described below, such rights allow Irwin
shareholders to dissent from the Merger and to obtain instead payment of "fair
value" for their Irwin Shares. A person having a beneficial interest in Irwin
Shares held of record in the name of another person, such as a trustee,
guardian, custodian, broker or nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner to
perfect whatever dissenters' rights the beneficial owner may have.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the GBCC and is qualified in its entirety by the
full text of Article 13 which is reprinted in its entirety as Appendix B to
this Proxy Statement/Prospectus. All references in Article 13 and in this
summary to a "shareholder" are to the record holder of Irwin Shares as to
which dissenters' rights are asserted, if any.
An Irwin shareholder wishing to exercise dissenters' rights must deliver to
Irwin before the vote on the Merger Agreement a written notice of such
shareholder's intent ("Notice of Intent") to demand payment for such
shareholder's Irwin Shares. In addition, such shareholder must not vote in
favor of approval of the Merger Agreement. A vote against approval of the
Merger Agreement, however, will not, in and of itself, constitute a written
demand for dissenters' rights satisfying the requirements of Article 13.
Under Article 13, Irwin must provide written notification ("Dissenters'
Notice") to each dissenting shareholder within ten days after the consummation
of the Merger (i) stating where the demand for payment (the "Payment Demand")
must be sent and where and when certificates for certificated Irwin Shares
must be deposited and (ii) setting a date by which Irwin must receive the
Payment Demand, which date (the "Payment Demand Date") may not be fewer than
30 nor more than 60 days after the date on which the Dissenters' Notice is
delivered. A shareholder in receipt of a Dissenters' Notice must deliver a
Payment Demand and deposit such shareholder's certificates on or prior to the
Payment Demand Date in accordance with the terms of the Dissenters' Notice.
Within ten days after receipt of the Payment Demand or within ten days after
consummation of the Merger, whichever is later, Irwin must make a written
offer to each dissenting shareholder who has filed a Payment Demand to pay an
amount estimated to be the "fair value" of the Irwin Shares plus accrued
interest. If the dissenting shareholder accepts Irwin's offer by written
notice to Irwin within 30 days of Irwin's offer, payment must be made within
60 days after the offer was made or consummation of the Merger, whichever
occurs later.
15
<PAGE>
A dissenting shareholder may notify Irwin, in writing, of such shareholder's
own estimate of the "fair value" of his or her Irwin Shares and demand payment
thereof, provided that such notice is delivered within 30 days after Irwin's
offer. In addition, if Irwin does not offer payment within the time period set
forth in the preceding paragraph, a dissenting shareholder may demand delivery
of certain financial information regarding Irwin (which Irwin must provide
within ten days after receipt of such demand) and may, at any time within
three years of the consummation of the Merger, notify Irwin of such
shareholder's own estimate of the fair value of such shareholder's Irwin
Shares and demand payment thereof.
If a Payment Demand remains unsettled, then Irwin, within 60 days after
receipt of the Payment Demand, must bring an action in a court of competent
jurisdiction in the county contemplated by Section 14-2-1330(b) of the GBCC
requesting that the "fair value" of the Irwin Shares be determined together
with accrued interest. If Irwin fails to bring such action within such 60-day
period, Irwin will be required to pay each dissenter whose demand remains
unsettled the amount demanded by such dissenting shareholder.
The costs and expenses of any such action shall be determined by the court
and shall be assessed against Irwin. Notwithstanding the foregoing, all or any
part of such costs and expenses may be apportioned and assigned as the court
may deem equitable against any and all of the dissenting shareholders who are
party to the action and to whom Irwin shall have made an offer to pay for the
Irwin Shares, if the court finds that such shareholder acted arbitrarily,
vexatiously or not in good faith in making a Payment Demand. Such expenses may
include reasonable compensation and expenses of appraisers appointed by the
court and fees and expenses of counsel and experts employed by Irwin. If the
court finds that Irwin failed to comply with the requirements of Article 13,
the court may award to any shareholder who is a party to the proceeding such
sum as the court may determine to be reasonable compensation to any attorneys
or experts employed by the shareholder in the action.
Only a shareholder of record is entitled to assert dissenters' rights for
Irwin Shares registered in that holder's name. The demand for dissenters'
rights should be exercised by or on behalf of the holder of record fully and
correctly, as such shareholder's name appears on his or her stock
certificates. If Irwin Shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if Irwin Shares are owned of record by more than
one person, such as a joint tenancy or tenants in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including
one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record, provided the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
acting for such owner or owners.
If any holder of Irwin Shares who demands dissenters' rights with respect to
his or her Irwin Shares fails to perfect, or effectively withdraws or loses,
his or her right to dissent, he or she will no longer have the right to
receive the "fair value" of his or her Irwin Shares. Rather, such a
shareholder will only be entitled to receive the consideration described
above. An Irwin Shareholder will fail to perfect, or effectively withdraw or
lose, his or her right to dissent if he or she fails to deliver a Notice of
Intent to Irwin prior to the vote on the Merger Agreement, fails to vote
against approval of the Merger Agreement or abstain with respect to the Merger
Agreement, fails to file a Payment Demand with Irwin or delivers to Irwin a
written withdrawal of his or her Payment Demand.
Failure to follow all of the steps required by Article 13 for perfecting
dissenters' rights will result in the loss of such rights. Consequently, any
shareholder of Irwin who desires to exercise his or her dissenters' rights is
urged to consult his or her legal advisor before attempting to exercise such
rights.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Tax Opinion. The following discussion of certain Federal income tax
consequences of the Merger is based upon an opinion received from Rogers &
Hardin LLP, counsel for ABC. Such opinion is not binding upon the Internal
Revenue Service (the "Service"), and no advance ruling has been sought or
obtained from any federal, state, local or other taxing authority, including
the Service. Insofar as the opinion of Rogers & Hardin LLP is
16
<PAGE>
directed to the tax treatment of Irwin shareholders, it does not purport to
apply to all Irwin shareholders. Certain Irwin shareholders may be in special
circumstances which are not addressed in such opinion. The opinion also
considers only Federal income taxes and does not take into account the
application of other Federal taxes or state or local taxes. FOR THESE REASONS,
IRWIN SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AT THEIR OWN
EXPENSE AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER.
The opinion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable regulations promulgated or proposed thereunder,
current rulings of the Service and judicial decisions as in effect on the date
of such opinion, all of which are subject to modification or challenge at any
time and perhaps with retroactive effect.
Tax-free Reorganization. The Merger, if and when consummated in accordance
with the Merger Agreement, will constitute a tax-free reorganization for
Federal income tax purposes within the meaning of Section 368(a)(1)(A) of the
Code.
Exchange of Irwin Shares Solely for ABC Common Stock. An Irwin shareholder
who receives solely shares of ABC Common Stock pursuant to the Merger will
recognize no gain or loss, except with respect to cash received in lieu of a
fractional share of ABC Common Stock, if any. See "Cash in Lieu of Fractional
Shares of ABC Common Stock" below. The aggregate basis of the shares of ABC
Common Stock actually received by such Irwin shareholder will be the same as
the tax basis of the Irwin Shares surrendered in exchange therefor, as reduced
by the ratable portion of such basis allocated to any fractional share
interest to which he or she may have been entitled. The holding period of the
ABC Common Stock received by such a shareholder will include the holding
period of the Irwin Shares surrendered in the exchange, provided the Irwin
Shares were held as a capital asset as of the Effective Time.
Cash in Lieu of Fractional Shares of ABC Common Stock. The payment of cash
to Irwin shareholders in lieu of fractional shares of ABC Common Stock will be
treated as if such fractional shares were distributed as part of the exchange
and then redeemed by ABC, and the payment received by Irwin shareholders will
be treated as having been received as a distribution in full payment in
exchange for such fractional shares of ABC Common Stock. The resulting gain or
loss will be capital gain or loss (assuming the ABC Common Stock is a capital
asset in the Irwin shareholder's hands), which will be long term in nature if
the Irwin Shares exchanged therefor have been held (or are deemed to have been
held) more than one year.
Backup Withholding. Absent an applicable exemption, ABC must withhold 31% of
the cash consideration to which any Irwin shareholder is entitled in the
Merger unless the shareholder provides his or her tax identification number
and certifies, under penalty of perjury, that such number is correct.
Accordingly, if requested by ABC, each Irwin shareholder should complete an
IRS Form W-9 or substitute form to provide the information and certification
necessary to avoid this "backup withholding."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER WILL VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH IRWIN SHAREHOLDER AND OTHER FACTORS, EACH
IRWIN SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES TO HIM OR HER OF THE MERGER (INCLUDING THE APPLICATION AND
EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
REGULATORY APPROVALS
The Merger requires the approval of the FRB under the BHCA and the DBF. The
Merger was approved by the FRB and the DBF on July 23, 1997. The Merger may
not be consummated for 15 days after approval by the FRB, during which time an
action may be brought by the United States Department of Justice challenging
the Merger on antitrust grounds.
17
<PAGE>
ISSUANCE OF ADDITIONAL SHARES
The Merger Agreement prohibits the issuance or sale of Irwin Shares or
options to purchase Irwin Shares pending the consummation of the Merger,
except that Irwin is permitted to issue up to an additional 752 Irwin Shares
upon the exercise of certain outstanding options prior to the consummation of
the Merger. See "PROPOSED MERGER--Consideration for Shares".
BUSINESS PENDING THE MERGER
The Merger Agreement provides, among other limitations, that, pending
consummation of the Merger, Irwin will operate in the ordinary course, will
use its best efforts to preserve its businesses and business organizations
intact, will comply with all applicable laws and will make no material changes
in its customary business practices.
OTHER PROVISIONS OF THE MERGER AGREEMENT
Representations and Warranties. The Merger Agreement contains
representations and warranties by the parties regarding, among other things,
their respective organizations, authorization to enter into the Agreement,
capitalization, pending and threatened litigation, contractual obligations,
compliance with applicable laws and regulations, financial statements and
filings with regulatory agencies. None of such representations and warranties
will survive the consummation of the Merger.
Additional Conditions to the Merger. The obligations of Irwin and ABC to
consummate the Merger are subject to the following additional conditions,
among others: approval and adoption of the Merger Agreement and the Merger by
the requisite vote of Irwin shareholders as solicited by this Proxy
Statement/Prospectus; absence of any order, judgment or decree of any court or
any government agency having jurisdiction over Irwin or over ABC restraining
or prohibiting the consummation of the Merger; the inclusion of the ABC Common
Stock to be issued in the Merger in the Nasdaq National Market; and the
effectiveness of the Registration Statement of which this Proxy
Statement/Prospectus is a part and the absence of a stop order suspending such
effectiveness. In addition, the obligation of ABC to consummate the Merger is
further subject to the satisfaction or waiver of a number of conditions,
including the continued truth and accuracy in all material respects of the
representations or warranties made by Irwin in the Merger Agreement; Irwin's
performance of all of its obligations under the Merger Agreement; Irwin's
earning at least a certain amount of net income during the period between
January 1, 1997 and the fifth calendar day prior to the Effective Time; ABC's
receipt of an opinion of counsel to Irwin with respect to certain corporate
matters; ABC's receipt of a letter from Irwin's independent accountants with
respect to the financial information of Irwin contained herein; the execution
of an employment agreement between Citizens Bank and C. Larry Young in
substantially the form attached as Exhibit 5 to the Merger Agreement; and
ABC's receipt of an opinion from Mauldin & Jenkins LLC regarding pooling of
interests accounting treatment of the Merger. Irwin's obligation to consummate
the Merger is also subject to the satisfaction or waiver of a number of
conditions, including the continued truth and accuracy in all material
respects of the representations or warranties made by ABC set forth in the
Merger Agreement; ABC's performance of all of its obligations under the Merger
Agreement; and Irwin's receipt of an opinion of counsel to ABC with respect to
certain corporate matters.
Waivers; Amendments; Terminations. Any term or condition of the Merger
Agreement may be waived by the party entitled to the benefits thereof, and the
Agreement may be amended or supplemented at any time by written agreement of
the parties, except that after the Merger is approved by Irwin shareholders,
no such amendment or supplement may result in a decrease in the consideration
for Irwin Shares or otherwise materially adversely affect the rights of Irwin
shareholders without their approval. The Merger Agreement provides that it may
be terminated (i) by the mutual consent of both parties; (ii) by either party
in the event of a material breach by the other party of any representation or
warranty contained in the Merger Agreement which cannot be or has not been
cured within 30 days after the giving of notice of such breach to such party;
(iii) by either party in the event that any consent or regulatory approval
necessary to consummate the Merger has been denied by final
18
<PAGE>
nonappealable action of such authority or if any action taken by such
authority is not appealed with the limit for such appeal or if Irwin's
shareholders fail to approve the Merger and the Merger Agreement; (iv) at any
time after December 31, 1997, by either party in the event the Merger has not
been consummated on or before such date; (v) by either party if it becomes
clear that certain conditions precedent to such party's obligations cannot be
satisfied on or prior to December 31, 1997; or (vi) by Irwin upon the payment
of the termination fee discussed below in connection with its acceptance of an
alternative proposal. In the event of termination as a result of a material
breach of the Merger Agreement, the non-breaching party is entitled to
liquidated damages in the amount of $300,000.
Expenses of the Merger. Irwin and ABC each will bear their respective costs
and expenses incurred in connection with the Merger, including the fees,
expenses and disbursements of their respective counsel and auditors and one-
half of the printing expenses and filing fees in connection with this Proxy
Statement/Prospectus, whether or not the Merger is consummated.
Notwithstanding the foregoing, in the event that the Merger Agreement (i) is
terminated by Irwin pursuant to Section 9.1(g) thereof upon execution of a
definitive agreement with a third party or in the event that, if prior to the
termination of the Merger Agreement, Irwin receives a takeover proposal and,
within one year of such termination, enters into, approves, recommends or
takes action with respect to a merger, consolidation or other business
combination with any other person, then Irwin is required to pay to ABC the
sum of ABC's expenses plus $300,000, or (iii) is terminated by Irwin pursuant
to Section 9.1(d)(ii) thereof where no takeover proposal has been made, then
Irwin is required to reimburse ABC for its expenses.
OPERATIONS OF THE BANK OF OCILLA AFTER THE MERGER
Upon consummation of the Merger, The Bank of Ocilla will be merged with and
into Citizens Bank and will thereafter become a branch of Citizens Bank under
the operation of its current management. ABC has agreed to provide generally
to officers and employees of The Bank of Ocilla comparable employee benefits
that ABC provides to officers and employees of its other banking subsidiaries
from time to time. See "--Interest of Management in the Merger."
After the Effective Time, ABC anticipates that there will be a close liaison
and a high level of cooperation among all of ABC's subsidiaries resulting in
an improved ability to meet the needs of the communities served by Irwin and
ABC.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling of interests" transaction.
RESALE OF ABC COMMON STOCK
All shares of ABC Common Stock received by Irwin shareholders in the Merger
will be freely transferable, except that shares of ABC Common Stock received
by persons who are deemed to be "affiliates" (as such term is defined under
the 1933 Act) of Irwin prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the 1933 Act (or Rule 144 in the case of such persons who become affiliates of
ABC) or as otherwise permitted under the 1933 Act. Persons who may be deemed
to be affiliates of ABC or Irwin generally include individuals or entities
that control, are controlled by, or are under common control with, such party
and may include certain officers and directors of such party as well as
principal shareholders of such party. The Merger Agreement requires Irwin to
use reasonable efforts to deliver or cause to be delivered to ABC a letter
agreement from each Irwin affiliate to the effect that such person will not
offer or sell or otherwise dispose of any of the shares of ABC Common Stock
issued to such persons in or pursuant to the Merger in violation of the 1933
Act or the rules and regulations promulgated by the Commission thereunder.
In addition, in order to qualify the Merger as a "pooling of interests" for
accounting purposes, affiliates of Irwin may not sell the ABC Common Stock
that they receive in the Merger until 30 days of combined financial results of
ABC and Irwin have been published following the Merger.
19
<PAGE>
DESCRIPTION OF ABC BANCORP
ABC is a bank holding company organized under the laws of the State of
Georgia and registered with the FRB pursuant to the BHCA. ABC, through its
subsidiaries, is engaged in the commercial banking business. Its primary
source of earnings is derived from income generated by the ownership and
operation of its nine wholly-owned subsidiary banks (the "Subsidiary Banks")
located in south Georgia and southeastern Alabama. As of March 31, 1997, ABC,
on a consolidated basis, had total assets of $631,713,000, total loans of
$446,201,000, total deposits of $531,801,000 and stockholders' equity of
$58,446,000. ABC's net income for 1996 was $6,701,000, or $1.02 per share; and
its net income for the three months ended March 31, 1997 was $1,732,000, or
$.26 per share. ABC's principal executive offices are located at 310 First
Street, S.E., Moultrie, Georgia 31768, and its telephone number is (912) 890-
1111.
Additional information concerning ABC is contained in documents incorporated
in this Proxy Statement/Prospectus by reference. These documents are available
without charge upon written request to Sara R. Hall, ABC Bancorp, 310 First
Street, S.E., P.O. Box 1500, Moultrie, Georgia 31768; telephone no. (912) 890-
1111. In order to assure timely delivery of these documents, any request
should be made by August 20, 1997.
ABC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's principal asset is its ownership of the Subsidiary Banks.
Accordingly, its results of operations are primarily dependent upon the
results of operations of the Subsidiary Banks. The Subsidiary Banks conduct a
commercial banking business which consists of attracting deposits from the
general public and applying those funds to the origination of commercial,
consumer and real estate loans (including commercial loans collateralized by
real estate). The Subsidiary Banks' profitability depends primarily on net
interest income, which is the difference between interest income generated
from interest-earning assets (i.e., loans and investments) less the interest
expense incurred on interest-bearing liabilities (i.e., customer deposits and
borrowed funds). Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities and the interest rate
paid and earned on these balances. Net interest income is dependent upon the
Subsidiary Banks' interest rate spread, which is the difference between the
average yield earned on its interest-earning assets and the average rate paid
on its interest-bearing liabilities. When interest-earning assets approximate
or exceed interest-bearing liabilities, any positive interest rate spread will
generate interest income. The interest rate spread is impacted by interest
rates, deposit flows and loan demand. Additionally, and to a lesser extent,
the profitability of the Subsidiary Banks is affected by such factors as the
level of noninterest income and expenses, the provision for loan losses and
the effective tax rate. Noninterest income consists primarily of service
charges on deposit accounts and other fees and income from the sale of loans
and investment securities. Noninterest expenses consist of compensation and
benefits, occupancy-related expenses, deposit insurance premiums paid to the
FDIC and other operating expenses.
The results of operations for the years ended December 31, 1996, 1995 and
1994 include the operations of Central Bank & Trust, First National Bank of
South Georgia and Merchants & Farmers Bank which were acquired by ABC in 1996
and accounted for as pooling of interest transactions. The results of
operations for the year ended December 31, 1996 also include the operations of
Southland Bank ("Southland Bank"), which was acquired by ABC on June 21, 1996,
since the date of its acquisition, which transaction was accounted for as a
purchase. Because the acquisition of Southland Bank was accounted for as a
purchase transaction, significant amounts of increases in average balances and
income and expense data are attributable to the inclusion of the operations of
Southland Bank from June 21, 1996, whereas no operations of Southland Bank
have been included in the consolidated financial data for 1995 and 1994.
20
<PAGE>
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
ABC's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the
control of ABC, the ability to generate net interest income is dependent upon
the ability of the Subsidiary Banks to obtain an adequate spread between the
rate earned on interest-earning assets and the rate paid on interest-bearing
liabilities. Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.
The primary component of consolidated earnings is net interest income, or
the difference between interest income on interest-earning assets and interest
paid on interest-bearing liabilities. The net interest margin is net interest
income expressed as a percentage of average interest-earning assets. Interest-
earning assets consist of loans, investment securities and Federal funds sold.
Interest-bearing liabilities consist of deposits, Federal Home Loan Bank
borrowings and other short-term borrowings. A portion of interest income is
earned on tax-exempt investments such as state and municipal bonds. In an
effort to state this tax-exempt income and its resultant yields on a basis
comparable to all other taxable investments, an adjustment is made to analyze
this income on a taxable-equivalent basis.
Net interest margin decreased 20 basis points or 3.58% to 5.39% in 1996 as
compared to 5.59% in 1995. This decrease in net interest margin resulted from
a decrease of 5 basis points in average yield earned on interest-earning
assets accompanied by an increase of 8 basis points in average rate paid on
interest-bearing liabilities. Interest earned on loans decreased 19 basis
points and interest earned on Federal funds sold decreased 90 basis points,
while interest paid on interest-bearing deposits increased 9 basis points. Net
interest income on a taxable-equivalent basis was $27,109,000 in 1996 as
compared to $22,379,000 in 1995, representing an increase of $4,730,000 or
21.14%. Taxable-equivalent net interest income of Southland Bank accounted for
$2,782,000 or approximately 59% of the total increase. Net interest income on
a taxable-equivalent basis was $22,379,000 in 1995 as compared to $19,172,000
in 1994, representing an increase of $3,207,000 or 16.73%. Net interest margin
increased 5.27% to 5.59% in 1995 from 5.31% in 1994 on an increase of 10.97%
in average interest-earning assets and an increase of 9.37% in average
interest-bearing liabilities. Although interest earned on earning assets
increased 106 basis points to 9.64% in 1995 as compared to 8.58% in 1994,
interest paid on interest-bearing liabilities increased 99 basis points to
4.83% in 1995 compared to 3.84% in 1994. Interest rates were very aggressive
in 1995 as compared to 1994.
Average interest-earning assets increased $102,970,000 or 25.72% to
$503,295,000 in 1996 from $400,325,000 in 1995. Average interest-earning
assets of Southland Bank accounted for $58,454,000 or approximately 57% of the
total increase. Average loans increased $87,312,000; average investments
increased $21,314,000; and average Federal funds sold decreased $5,656,000.
The increase in average interest-earning assets was funded by an increase in
average deposits of $87,824,000, or 22.96%, to $470,369,000 in 1996 from
$382,545,000 in 1995. Average deposits of Southland Bank accounted for
$49,406,000 or approximately 56% of the total increase in average deposits. By
comparison, average interest-earning assets increased by $39,560,000, or
10.97%, to $400,325,000 in 1995 from $360,765,000 in 1994. During 1995,
average deposits increased $31,589,000, or 9.00%, to $382,545,000 from
$350,956,000 in 1994. Approximately 14% of the average deposits were
noninterest-bearing deposits in 1996. In 1995, approximately 15% of the total
deposits were noninterest-bearing deposits.
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has
determined to be adequate. The provision for loan losses charged to earnings
amounted to $1,894,000 in 1996, $1,231,000 in 1995 and $955,000 in 1994. The
increase in the
21
<PAGE>
provision for loan losses in 1996 of $663,000, or 53.86%, as compared with
1995 was accompanied by an increase of 43.62% in total loans in 1996 and an
increase in the allowance for loan losses of 25.33%. The allowance for loan
losses increased $1,389,000 to $6,873,000 at December 31, 1996 from $5,484,000
at December 31, 1995. The addition of $1,211,000 to the allowance for loan
losses upon acquisition of Southland Bank accounted for the major portion of
the increase in the allowance. Net charge-offs represented 90.60% of the
provision for loan losses in 1996 as compared to 42.49% in 1995. The loan
charge-offs for 1996 represented .45% of average loans outstanding during the
year as compared to .18% for 1995 and .27% for 1994. At December 31, 1996, the
allowance for loan losses was 1.57% of total loans outstanding as compared to
an allowance for loan losses of 1.80% of total loans outstanding at December
31, 1995 and 1.76% of total loans outstanding at December 31, 1994. The
determination of the allowance rests upon management's judgment about factors
affecting loan quality and assumptions about the local and national economy.
Management considers the year-end allowance for loan losses adequate to cover
potential losses in the loan portfolio.
Average total assets increased $112,035,000, or 25.46%, to $552,023,000 in
1996 as compared to $439,988,000 in 1995. Average total assets of Southland
Bank accounted for $66,295,000 or approximately 59% of the increase in average
total assets. The increase in average total assets was accompanied by an
increase in average deposits of $87,824,000, or 22.96%, of which $49,406,000
was attributable to average deposits of Southland Bank. Average total assets
increased $47,186,000, or 12.01%, to $439,988,000 in 1995 as compared to
$392,802,000 in 1994 and was accompanied by an increase in average total
deposits of $31,589,000, or 9.00%, to $382,545,000 in 1995 from $350,956,000
in 1994.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The net interest margin on a taxable-equivalent basis was 5.50% for the
three months ended March 31, 1997 as compared to 5.39% for the three months
ended March 31, 1996. The increase of 11 basis points in the net margin was
attributable to an increase in yield on loans.
Net interest income on a taxable-equivalent basis was $7,771,000 for the
three months ended March 31, 1997 as compared to $5,720,000 for the three
months ended March 31, 1996, representing an increase of approximately 36%.
Approximately $1,500,000, or 73%, of this increase was attributable to the net
interest income contributed by Southland Bank for the three months ended March
31, 1997.
The provision for loan losses charged to earnings amounted to $584,000 for
the three months ended March 31, 1997 as compared to $248,000 during the three
months ended March 31, 1996. Southland Bank's provision for loan losses for
the three months ended March 31, 1997 amounted to $135,000. At March 31, 1997,
the allowance for loan losses was l.60% of total loans outstanding as compared
to an allowance for loan losses of 1.57% at December 31, 1996.
The following is a comparison of noninterest income for the three months
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Service charges on deposits........................... $1,225,000 $ 967,000
Other service charges, commissions and fees........... 477,000 316,000
Other income.......................................... 34,000 50,000
---------- ----------
Total noninterest income.......................... $1,736,000 $1,333,000
========== ==========
</TABLE>
Total noninterest income for the three months ended March 31, 1997 increased
$403,000 over the amount for the same period in 1996. Southland Bank
contributed $184,000 in service charges on deposits, $106,000 in other service
charges and $5,000 in other income to noninterest income for the three months
ended March 31, 1997.
22
<PAGE>
The following is an analysis of noninterest expense for the three months
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Salaries and employee benefits........................ $3,403,000 $2,280,000
Occupancy and equipment expense....................... 918,000 626,000
Deposit insurance premium............................. 62,000 28,000
Data processing fees.................................. 92,000 148,000
Other expense......................................... 1,697,000 1,116,000
---------- ----------
Total noninterest expense......................... $6,172,000 $4,198,000
========== ==========
</TABLE>
Total noninterest expense for the three months ended March 31, 1997
increased $1,974,000 over the amount for the same period in 1996. Noninterest
expense incurred by Southland Bank for the three months ended March 31, 1997
amounted to $1,061,000, representing approximately 54% of the total increase.
Salaries and employee benefits for the three months ended March 31, 1997
increased $1,123,000 over the amount for the same period in 1996.
Approximately 50% of this increase, or $557,000, was attributable to Southland
Bank. The remaining increase in salaries and employee benefits resulted from
normal increases in salaries and bonuses and the addition of several employees
by the parent company, including three senior executives.
Deposit insurance premiums for the three months ended March 31, 1997
increased $34,000 over the amount for the same period in 1996. Southland Bank
accounted for $14,000 of the total increase.
Data processing fees for the three months ended March 31, 1997 decreased
$56,000 from the amount for the same period in 1996. This decrease resulted
from savings derived from the centralization of various accounting functions.
All other noninterest expense for the three months ended March 31, 1997
increased $581,000 over the amount recorded during the same period in 1996.
Southland Bank incurred $490,000 in other operating expense during the three
months ended March 31, 1997.
The following is a condensed summary of net income during the three months
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net interest income................................... $7,631,000 $5,623,000
Provision for loan losses............................. 584,000 248,000
Other income.......................................... 1,736,000 1,333,000
Other expense......................................... 6,172,000 4,198,000
---------- ----------
Income before income taxes............................ 2,611,000 2,510,000
Applicable income taxes............................... 879,000 835,000
---------- ----------
Net income........................................ $1,736,000 $1,333,000
========== ==========
</TABLE>
Total assets decreased $3.3 million, or .5%, to $631.7 million at March 31,
1997 from $635.0 million at December 31, 1996. Total earning assets increased
$6.2 million, or 1.1%, to $569.1 million at March 31, 1997 from $562.9 million
at December 31, 1996. Total loans, net of the allowance for loan losses,
increased $7.6 million, or 1.8%, to $439.1 million at March 31, 1997 from
$431.5 million at December 31, 1996.
Total deposits decreased $13.9 million, or 2.5%, to $531.8 million at March
31, 1997 from $545.7 million at December 31, 1996. Approximately 13.5% and
14.9% of deposits were noninterest-bearing as of March 31, 1997 and December
31, 1996, respectively.
23
<PAGE>
AVERAGE BALANCES AND NET INCOME ANALYSIS
The following table sets forth the amount of ABC's interest income or
interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest rate for total interest-earning
assets and total interest-bearing liabilities, net interest spread and net
yield on average interest-earning assets. Federally tax-exempt income is
presented on a taxable equivalent basis assuming a 34% Federal tax rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1996 1995 1994
-------------------------- -------------------------- --------------------------
AVERAGE AVERAGE AVERAGE
INTEREST YIELD/ INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning
assets:
Loans, net of unearned
interest.............. $380,527 $40,711 10.70% $293,215 $31,929 10.89% $256,970 $25,239 9.82%
Investment securities:
Taxable............... 84,454 5,197 6.15 69,230 4,113 5.94 67,190 3,618 5.38
Tax-exempt............ 18,996 1,377 7.25 12,906 1,098 8.51 14,093 1,194 8.47
Federal funds sold..... 19,318 959 4.96 24,974 1,464 5.86 22,512 903 4.01
-------- ------- -------- ------- -------- -------
Total interest-
earning assets...... 503,295 48,244 9.59 400,325 38,604 9.64 360,765 30,954 8.58
-------- ------- -------- ------- -------- -------
Noninterest-earning
assets:
Cash................... $ 23,945 $ 20,066 $ 20,290
Allowance for loan
losses................ (6,358) (5,217) (4,986)
Unrealized loss on
available for sale
securities............ (348) (175) (387)
Other assets........... 31,489 24,989 17,120
-------- -------- --------
Total noninterest
earning assets...... 48,728 39,663 32,037
-------- -------- --------
Total assets........ $552,023 $439,988 $392,802
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing
liabilities:
Savings and interest-
bearing demand
deposits.............. $138,749 $ 4,246 3.06 $114,574 $ 3,534 3.08 $123,301 $ 3,491 2.83
Time deposits.......... 267,269 15,500 5.80 211,206 12,709 5.72 177,097 7,943 4.49
Other short-term
borrowings............ 5,713 221 3.87 5,560 301 5.41 3,477 111 3.19
Other borrowings....... 19,113 1,168 6.11 4,332 311 7.18 3,052 237 7.77
-------- ------- -------- ------- -------- -------
Total interest-
bearing
liabilities......... 430,844 21,135 4.91 335,672 16,225 4.83 306,927 11,782 3.84
-------- ------- -------- ------- -------- -------
Noninterest-bearing
liabilities and stock-
holders' equity:
Demand deposits........ 64,351 56,765 50,558
Other liabilities...... 3,328 3,538 2,803
Stockholders' equity... 53,500 44,013 32,514
-------- -------- --------
Total noninterest-
bearing liabilities
and stockholders'
equity.............. 121,179 104,316 85,875
-------- -------- --------
Total liabilities and
stockholders'
equity.............. $552,023 $439,988 $392,802
======== ======== ========
Interest rate spread.... 4.68% 4.81% 4.74%
===== ===== ====
Net interest income..... 27,109 22,379 19,172
======= ======= =======
Net interest margin..... 5.39% 5.58% 5.31%
===== ===== ====
</TABLE>
24
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED DECEMBER 31, 1996
-----------------------------------------------
FOURTH THIRD SECOND FIRST
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Interest income............ $ 13,509 $ 13,308 $ 10,861 $ 10,098
Net interest income........ 7,468 7,268 6,279 5,626
Net income................. 1,483 1,701 1,851 1,666
PER SHARE DATA:
Net income................. 0.22 0.26 0.30 0.26
Dividends.................. 0.08 0.08 0.08 0.08
<CAPTION>
QUARTERS ENDED DECEMBER 31, 1995
-----------------------------------------------
FOURTH THIRD SECOND FIRST
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Interest income............ $ 10,187 $ 9,790 $ 9,448 $ 8,806
Net interest income........ 5,822 5,449 5,445 5,280
Net income................. 1,593 1,508 1,429 1,387
PER SHARE DATA:
Net income................. 0.26 0.25 0.23 0.23
Dividends.................. 0.08 0.08 0.06 0.06
</TABLE>
RATE AND VOLUME ANALYSIS
The following table reflects the changes in net interest income resulting
from changes in interest rates and from asset and liability volume. Federally
tax-exempt interest is presented on a taxable-equivalent basis assuming a 34%
Federal tax rate. The change in interest attributable to rate has been
determined by applying the change in rate between years to average balances
outstanding in the later year. The change in interest due to volume has been
determined by applying the rate from the earlier year to the change in average
balances outstanding between years. Thus, changes that are not solely due to
volume have been consistently attributed to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 VS. 1995 1995 VS. 1994
--------------------------- ----------------------------
CHANGES DUE TO CHANGES DUE TO
INCREASE ---------------- INCREASE -----------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
---------- ------ -------- ---------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning
assets:
Interest and fees on
loans................. $8,782 $ (726) $ 9,508 $6,690 $ 3,130 $ 3,560
Interest on securities:
Taxable................ 1,084 180 904 495 385 110
Tax-exempt............. 279 (239) 518 (96) 5 (101)
Interest on Federal
funds................. (505) (173) (332) 561 462 99
------ ------ -------- ------ ------- -------
Total interest
income............... $9,640 $ (958) $ 10,598 $7,650 $ 3,982 $ 3,668
------ ------ -------- ------ ------- -------
Expense from interest-
bearing liabilities:
Interest on savings and
interest-bearing
demand deposits....... $ 712 $ (34) $ 746 $ 43 $ 290 $ (247)
Interest on time
deposits.............. 3,421 215 3,206 4,136 2,606 1,530
Interest on short-term
deposits.............. (80) (88) 8 190 124 66
Interest on other
borrowings............ 857 (204) 1,061 74 (25) 99
------ ------ -------- ------ ------- -------
Total interest
expense.............. $4,910 $ (111) $ 5,021 $4,443 $ 2,995 $ 1,448
------ ------ -------- ------ ------- -------
Net interest income... $4,730 $ (847) $ 5,577 $3,207 $ 987 $ 2,220
====== ====== ======== ====== ======= =======
</TABLE>
NONINTEREST INCOME
The most significant increase in noninterest income was an increase in
service charges on deposit accounts and other income. The increase in service
charges on deposit accounts resulted from an increase in average
25
<PAGE>
deposits of $87,824,000, of which $49,406,000 was attributable to the average
deposits of Southland Bank. The increase in service charges on deposit
accounts of $250,000 (7.32%), in 1995 over 1994 resulted from an increase in
average deposits of $31,589,000 (9.00%). Total other income increased $644,000
in 1996 over 1995, of which $505,000 was attributable to other income of
Southland Bank.
The following is a comparison of noninterest income for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service charges on deposit accounts................. $ 4,554 $ 3,666 $ 3,416
Other service charges, commissions and fees......... 500 422 336
Other income........................................ 1,230 586 521
------- ------- -------
$ 6,284 $ 4,674 $ 4,273
======= ======= =======
</TABLE>
NONINTEREST EXPENSE
Salaries and employee benefits increased $2,147,000, or 25.09%, in 1996 over
1995, of which $1,202,000 was attributable to Southland Bank. The remaining
increase in salaries and employee benefits resulted from normal increases in
salaries and bonuses and the addition of several employees by the parent
company, including three senior executives. Equipment and occupancy expense
increased $497,000, or 19.56%, in 1996 over 1995, of which $366,000 was
attributable to Southland Bank. Amortization of intangible assets increased
$177,000 in 1996 over 1995. The entire amount of the increase resulted from
the amortization of the excess of purchase price over net book value of assets
acquired upon the acquisition of Southland Bank which was accounted for as a
purchase transaction. Merger and acquisition expense of $708,000 in 1996
resulted from the acquisition of four financial institutions during 1996.
Stationery and supplies expense increased $227,000 in 1996 over 1995, of which
$81,000 was attributable to Southland. Also contributing to the increase in
stationery and supplies expense was the implementation of a system for
rendering customer account statements known as an "image item processing
system". All other noninterest expense increased $986,000 in 1996 over 1995,
of which $526,000 was attributable to Southland Bank. Following is an analysis
of noninterest expense for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Salaries and employee benefits...................... $10,705 $ 8,558 $ 7,816
Equipment and occupancy............................. 3,038 2,541 2,454
Merger and acquisition expense...................... 708 -- --
Amortization of intangible assets................... 487 310 310
Data processing fees................................ 500 486 566
Directors fees...................................... 462 424 395
FDIC premiums....................................... 367 481 801
Stationery and supplies expense..................... 592 365 338
Other expense....................................... 4,804 3,756 3,250
------- ------- -------
$21,663 $16,921 $15,930
======= ======= =======
</TABLE>
ASSET/LIABILITY MANAGEMENT
A principal objective of ABC's asset/liability management strategy is to
minimize its exposure to changes in interest rates by matching the maturity
and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is overseen in part through the direction of ABC's
Asset and Liability Committee (the "ABC ALCO Committee") which establishes
policies and monitors results to control interest rate sensitivity.
26
<PAGE>
As part of ABC's interest rate risk management policy, the ABC ALCO
Committee examines the extent to which its assets and liabilities are
"interest rate-sensitive" and monitors its interest rate-sensitivity "gap." An
asset or liability is considered to be interest rate-sensitive if it will
reprice or mature within the time period analyzed, usually one year or less.
The interest rate-sensitivity gap is the difference between the interest-
earning assets and interest-bearing liabilities scheduled to mature or reprice
within such time period. A gap is considered positive when the amount of
interest rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities. A gap is considered negative when the amount of interest rate-
sensitive liabilities exceeds the interest rate-sensitive assets. During a
period of rising interest rates, a negative gap would tend to adversely affect
net interest income, while a positive gap would tend to result in an increase
in net interest income. During a period of falling interest rates, a negative
gap would tend to result in an increase in net interest income, while a
positive gap would tend to adversely affect net interest income. If ABC's
assets and liabilities were equally flexible and moved concurrently, the
impact of any increase or decrease in interest rates on net interest income
would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ABC ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or periods
of repricing, they may not react identically to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition,
certain assets, such as adjustable rate mortgage loans, have features
(generally referred to as "interest rate caps") which limit changes in
interest rates on a short-term basis and over the life of the asset. In the
event of a change in interest rates, prepayment and early withdrawal levels
also could deviate significantly from those assumed in calculating the
interest-rate gap. The ability of many borrowers to service their debts also
may decrease in the event of an interest-rate increase.
The following table sets forth the distribution of the repricing of ABC's
earning assets and interest-bearing liabilities as of December 31, 1996, the
interest rate sensitivity gap (i.e., interest rate sensitive assets less
interest rate sensitive liabilities), the cumulative interest rate sensitivity
gap ratio (i.e., interest rate sensitive assets divided by interest rate
sensitivity liabilities) and the cumulative sensitivity gap ratio. The table
also sets forth the time periods in which earning assets and liabilities will
mature or may reprice in accordance with their contractual terms. However, the
table does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
ABC's customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different times within
such period and at different rates.
27
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
MATURING OR REPRICING WITHIN
---------------------------------------------------------
ZERO TO THREE THREE MONTHS ONE TO FIVE OVER FIVE
MONTHS TO ONE YEAR YEARS YEARS TOTAL
------------- ------------ ----------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Federal funds sold.... $ 5,120 $ -- $ -- $ -- $ 5,120
Investment securi-
ties................. 14,182 19,390 55,461 29,105 118,138
Loans................. 185,495 55,328 163,300 34,267 438,390
-------- --------- -------- ------- --------
204,797 74,718 218,761 63,372 561,648
-------- --------- -------- ------- --------
INTEREST-BEARING LIABIL-
ITIES:
Interest-bearing de-
mand deposits (1).... -- 37,229 79,548 -- 116,777
Savings (1)........... -- -- 43,332 -- 43,332
Certificates less than
$100,000............. 77,590 110,451 37,142 -- 225,183
Certificates, $100,000
and over............. 26,909 42,412 9,677 -- 78,998
Other short-term
borrowings........... 997 -- -- -- 997
Other borrowings...... 15,000 8,750 -- 450 24,200
-------- --------- -------- ------- --------
120,496 198,842 169,699 450 489,487
-------- --------- -------- ------- --------
Interest rate sensitiv-
ity gap................ $ 84,301 $(124,124) $ 49,062 $62,922 $ 72,161
======== ========= ======== ======= ========
Cumulative interest rate
sensitivity gap........ $ 84,301 $ (39,823) $ 9,239 $72,161
======== ========= ======== =======
Interest rate sensitiv-
ity gap ratio.......... 1.70 0.38 1.29 140.83
======== ========= ======== =======
Cumulative interest rate
sensitivity gap ratio.. 1.70 0.88 1.02 1.15
======== ========= ======== =======
</TABLE>
- --------
(1) The Company has found that NOW checking accounts and savings deposits are
generally not sensitive to changes in interest rates and, therefore, it
has placed such liabilities in the "One to Five Years" category. It has
also found that the money-market check deposits reprice between three
months to one year on the average.
MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES
ABC's loan portfolio, as of December 31, 1996, was made up primarily of
short-term fixed rate loans or variable rate loans. The average contractual
life on installment loans is approximately three years, while mortgages are
generally variable over one to five-year periods. Total loans as of December
31, 1996 are shown in the following table according to the following maturity
classifications: (i) one year or less; (ii) after one year through five years;
and (iii) after five years.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
MATURITY:
One year or less................................. $240,823
After one year through five years................ 163,300
After five years................................. 34,267
--------
$438,390
========
</TABLE>
28
<PAGE>
The following table summarizes loans at December 31, 1996 with the due dates
after one year which (i) have predetermined interest rates or (ii) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Predetermined interest rates....................... $197,367
Floating or adjustable interest rates.............. 200
--------
$197,567
========
</TABLE>
Records were not available to present the above information in each category
listed in the first paragraph above and could not be reconstructed without
undue burden.
LOAN PORTFOLIO
Management believes that ABC's loan portfolio is adequately diversified. The
loan portfolio contains no foreign or energy-related loans or significant
concentrations in any one industry, with the exception of residential real
estate mortgage loans, which constituted approximately 27% of ABC's loan
portfolio as of December 31, 1996. As of December 31, 1996, ABC had
outstanding loan commitments of $63 million. The amounts of loans outstanding
at the indicated dates is shown in the following table according to type of
loan.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ --------------------------------------------
1997 1996 1995 1994 1993 1992
------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial and
industrial............. $ 65,327 $ 68,283 $ 45,892 $ 38,133 $ 30,886 $ 27,578
Agricultural............ 37,546 34,232 21,704 23,063 14,760 15,622
Real estate--
construction........... 12,710 13,542 3,589 3,688 5,787 3,247
Real estate--mortgage,
farmland............... 55,004 49,807 46,255 40,290 34,563 26,322
Real estate--mortgage,
commercial............. 93,854 88,854 59,053 47,884 37,469 30,361
Real estate--mortgage,
residential............ 116,546 117,022 71,345 65,598 62,101 62,140
Consumer installment
loans.................. 63,359 64,433 56,004 50,691 44,324 47,312
Other................... 1,855 2,217 1,400 1,643 2,319 1,828
-------- -------- -------- -------- -------- --------
446,201 438,390 305,242 270,990 232,209 214,410
Less reserve for
possible loan losses... 7,118 6,873 5,484 4,775 4,514 4,735
-------- -------- -------- -------- -------- --------
Total loans.......... $439,083 $431,517 $299,758 $266,215 $227,695 $209,675
======== ======== ======== ======== ======== ========
</TABLE>
29
<PAGE>
NONPERFORMING LOANS
A loan is placed on nonaccrual status when, in management's judgment, the
collection of the interest income appears doubtful. An interest receivable
that has been accrued in prior years and is subsequently determined to have
doubtful collectibility is charged to the allowance for possible loan losses.
Interest on loans that are classified as nonaccrual is recognized when
received. Past due loans are loans whose principal or interest is past due 90
days or more. In some cases, where borrowers are experiencing financial
difficulties, loans may be restructured to provide terms significantly
different from the original contractual terms.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------
1997 1996 1995 1994 1993 1992
------------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans accounted for on a
nonaccrual basis........... $5,577 $4,977 $2,271 $3,518 $3,260 $6,396
Installment loans and term
loans contractually past
due ninety days or more as
to interest or principal
payments and still
accruing................... 78 396 457 274 513 620
Loans, the terms of which
have been renegotiated to
provide a reduction or
deferral of interest or
principal because of
deterioration in the
financial position of the
borrower................... -- -- -- 358 -- --
Loans now current about
which there are serious
doubts as to the ability of
the borrower to comply with
present loan repayment
terms...................... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total....................... $5,655 $5,373 $2,728 $4,150 $3,773 $7,016
====== ====== ====== ====== ====== ======
</TABLE>
As of March 31, 1997 and December 31, 1996, 1995, 1994, 1993 and 1992, total
nonperforming loans were approximately 1.27%, 1.23%, .89%, 1.53%, 1.62% and
3.27%, respectively, of total loans outstanding at such dates.
In the opinion of management, any loans classified by regulatory authorities
as substandard or special mention that have not been disclosed above do not
(i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Any loans classified by regulatory authorities as loss have been
charged off.
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are past loan experience, composition of the loan portfolio, evaluation of
possible future losses, current economic conditions and other relevant
factors. ABC's allowance for loan losses was approximately $6.9 million at
December 31, 1996, representing 1.57% of year-end total loans outstanding,
compared with approximately $5.5 million at December 31, 1995, which
represented 1.80% of year-end total loans outstanding.
The allowance for loan losses is reviewed quarterly based on management's
evaluation of current risk characteristics of the loan portfolio, as well as
the impact of prevailing and expected economic business conditions. Management
considers the allowance for loan losses adequate to cover possible loan losses
on each outstanding loan with particular emphasis on any problem loans.
30
<PAGE>
The following table presents an analysis of ABC's loan loss experience for
the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average amount of loans
outstanding............ $439,118 $380,527 $293,215 $256,970 $228,607 $180,067
======== ======== ======== ======== ======== ========
Balance of reserve for
possible loan losses at
beginning of period.... 6,873 5,484 4,776 4,514 4,735 1,859
-------- -------- -------- -------- -------- --------
Charge offs:
Commercial, financial,
industrial and
agricultural.......... (23) (739) (301) (479) (573) (454)
Real estate............ (39) (1,242) (103) (338) (1,883) (1,057)
Consumer............... (498) (275) (562) (450) (472) (346)
Recoveries:
Commercial, financial
and agricultural...... 46 89 96 100 336 27
Real estate............ 32 275 126 265 556 282
Consumer............... 143 176 221 209 254 127
-------- -------- -------- -------- -------- --------
Net charge-offs...... (339) (1,716) (523) (693) (1,782) (1,421)
-------- -------- -------- -------- -------- --------
Additions to reserve
charged to operating
expenses............... 584 1,894 1,231 955 1,561 1,597
-------- -------- -------- -------- -------- --------
Allowance for loan
losses of acquired
subsidiary............. -- 1,211 -- -- -- 2,700
-------- -------- -------- -------- -------- --------
Balance of reserve
for possible loan
losses.............. $ 7,118 $ 6,873 $ 5,484 $ 4,776 $ 4,514 $ 4,735
======== ======== ======== ======== ======== ========
Ratio of net loan
charge-offs to average
loans.................. .08% .45% .18% .27% .78% .79%
======== ======== ======== ======== ======== ========
</TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the dates indicated. Management believes the
allowance can be allocated only on an approximate basis. The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, --------------------------------------------------------
1997 1996 1995 1994
------------------ ------------------ ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial,
industrial and
agricultural........... $1,625 23% $1,569 23% $1,271 22% $1,219 23%
Real estate............. 2,950 62 2,848 62 1,951 58 1,796 58
Consumer................ 1,344 15 1,298 15 1,056 19 1,041 19
Unallocated............. 1,199 -- 1,158 -- 1,206 -- 719 --
------ --- ------ --- ------ --- ------ ---
$7,118 100% $6,873 100% $5,484 100% $4,775 100%
====== === ====== === ====== === ====== ===
</TABLE>
INVESTMENT PORTFOLIO
ABC manages the mix of asset and liability maturities in an effort to
control the effects of changes in the general level of interest rates on net
interest income. See "--Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on ABC due to the rate variability and short-term maturities of its earning
assets. In particular, approximately 55% of its loan portfolio is comprised of
loans which mature within one year or less. Mortgage loans, primarily with
five- to fifteen-year maturities, are also made on a variable rate basis with
rates being adjusted every one to five years. Additionally, 25% of the
investment portfolio matures within one year.
31
<PAGE>
TYPES OF INVESTMENTS
The amortized cost and approximate fair value of investment securities at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1996:
U.S. Government and agency
securities................. $69,618 $232 $(429) $69,421
Mortgage-backed securities.. 12,391 134 (52) 12,473
State and municipal
securities................. 3,918 58 -- 3,976
Other securities............ 300 -- (22) 278
------- ---- ----- -------
$86,227 $424 $(503) $86,148
======= ==== ===== =======
December 31, 1995:
U.S. Government and agency
securities................. $53,363 $430 $(183) $53,610
Mortgage-backed securities.. 11,264 173 (15) 11,422
Other securities............ 300 -- (18) 282
------- ---- ----- -------
$64,927 $603 $(216) $65,314
======= ==== ===== =======
Securities Held to Maturity
December 31, 1996:
U.S. Government and agency
securities................. $11,238 $-- $(200) $11,038
State and municipal
securities................. 16,426 493 (28) 16,891
Mortgage-backed securities.. 4,326 27 (44) 4,309
------- ---- ----- -------
$31,990 $520 $(272) $32,238
======= ==== ===== =======
December 31, 1995:
U.S. Government and agency
securities................. $ 59 $ 1 $ -- $ 60
State and municipal
securities................. 14,428 337 (106) 14,659
Mortgage-backed securities.. 4,704 10 (25) 4,689
------- ---- ----- -------
$19,191 $348 $(131) $19,408
======= ==== ===== =======
</TABLE>
The following table represents maturities and weighted average yields of
investment securities held by ABC at December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------------------------------------------------------------
AFTER ONE YEAR BUT AFTER FIVE YEARS BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS
----------------- ------------------ -------------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
--------- ------- ---------- -------- ----------- --------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. government
agencies (1).......... $ 21,572 5.98% $ 62,331 6.20% $ 13,116 6.35% $ 717 6.17%
Obligations of states
and other political
subdivisions (1)(2)... 255 9.77 6,917 7.28 8,231 7.55 4,999 7.31
</TABLE>
- --------
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the acquisition price of each security in that
range.
(2) Yields on securities of state and political subdivisions are stated on a
tax equivalent basis using a tax rate of 34%.
32
<PAGE>
DEPOSITS
Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995
------------- -------------
AMOUNT RATE AMOUNT RATE
-------- ---- -------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand
deposits.................. $ 64,351 -- % $ 56,765 -- %
Interest-bearing demand and
savings deposits.......... 138,749 3.06 114,574 3.08
Time deposits.............. 267,269 5.80 211,206 5.72
-------- --------
Total deposits.......... $470,369 $382,545
======== ========
</TABLE>
ABC has a large, stable base of time deposits, with little or no dependence
on volatile deposits of $100,000 or more. The time deposits are principally
certificates of deposit and individual retirement accounts obtained for
individual customers.
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1996, are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through 12 months and (iii) over 12 months.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Three months or less....................................... $26,909
Over three through twelve months........................... 42,412
Over twelve months......................................... 9,677
-------
Total.................................................. $78,998
=======
</TABLE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following table shows return on assets (net income divided by average
total assets), return on equity (net income divided by average shareholders'
equity), dividend payout ratio (dividends declared per share divided by net
income per share) and shareholders' equity to asset ratio (average
shareholders' equity divided by average total assets) for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Return on assets................................. 1.21% 1.34% 1.10%
Return on equity................................. 12.53 13.44 13.28
Dividend payout ratio............................ 31.37 29.17 30.67
Equity to assets ratio........................... 9.69 10.00 8.28
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow requirements of
customers, who may be either depositors desiring to withdraw funds or
borrowers needing assurance that sufficient funds will be available to meet
their credit needs, and the ability of ABC and the Subsidiary Banks to meet
those needs. ABC and the Subsidiary Banks seek to meet liquidity requirements
primarily through management of short-term investments (principally Federal
funds sold) and monthly amortizing loans. Another source of liquidity is the
repayment of maturing single payment loans. In addition, the Subsidiary Banks
maintain relationships with correspondent banks which could provide funds to
them on short notice, if needed.
33
<PAGE>
The liquidity and capital resources of ABC and the Subsidiary Banks are
monitored on a periodic basis by state and Federal regulatory authorities. At
December 31, 1996, the Subsidiary Banks' short-term investments were adequate
to cover any reasonably anticipated immediate need for funds. During 1996, ABC
increased its capital $5,996,000 by the issuance of ABC Common Stock in
connection with business combinations completed during the year and the
exercise of options by shareholders of pooled subsidiaries prior to such
combinations. It also increased its capital by retaining net earnings of
$5,019,000 after payment of dividends. After recording a decrease in capital
of $112,000 for unrealized losses on securities available for sale, net of
taxes, total capital increased $10,903,000 during 1996. At December 31, 1996,
total capital of ABC amounted to $57,674,000. ABC and the Subsidiary Banks are
aware of no events or trends likely to result in a material change in their
liquidity. At December 31, 1996, ABC had binding commitments for capital
expenditures of $250,000. The Company anticipates that approximately
$4,500,000 will be required for capital expenditures during 1997. As of June
1, 1997, the Company anticipates that approximately $4,000,000 in cash will be
required to complete the purchase of a banking center located in a surrounding
area.
During the three months ended March 31, 1997, total capital increased
$772,000 to $58,446,000 at March 31, 1997. This increase in capital resulted
from the retention of net earnings of $1,193,000 (after deducting dividends to
shareholders of $539,000), and an increase of $421,000 in unrealized losses on
securities available for sale, net of taxes.
In accordance with risk capital guidelines issued by the FRB, ABC is
required to maintain a minimum standard of total capital to weighted risk
assets of 8%. Additionally, all member banks must maintain "core" or "Tier 1"
capital of at least 4% of total assets ("leverage ratio"). Member banks
operating at or near the 4% capital level are expected to have well-
diversified risks, including no undue interest rate risk exposure, excellent
control systems, good earnings, high asset quality, and well managed on- and
off-balance sheet activities; and, in general, be considered strong banking
organizations with a composite 1 rating under the CAMEL rating system of
banks. For all but the most highly-rated banks meeting the above conditions,
the minimum leverage ratio is to be 4% plus an additional 100 to 200 basis
points.
The following table summarizes the regulatory capital levels of ABC at
December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------
ACTUAL REQUIRED EXCESS
--------------- --------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Leverage capital............. $52,028 9.11% $22,844 4.00% $29,184 5.11%
Risk-based capital:
Core Capital................ 52,028 11.96 17,401 4.00 34,627 7.96
Total Capital............... 57,484 13.21 34,812 8.00 22,672 5.21
</TABLE>
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, the Subsidiary Banks have granted
commitments to extend credit to approved customers. Generally, these
commitments to extend credit have been granted on a temporary basis for
seasonal or inventory requirements and have been approved by each of the
Subsidiary Bank's Board of Directors. The Subsidiary Banks have also granted
commitments to approved customers for standby letters of credit. These
commitments are recorded in the financial statements when funds are disbursed
or the financial instruments become payable. The Subsidiary Banks use the same
credit policies for these off-balance sheet commitments as they do for
financial instruments that are recorded in the consolidated financial
statements. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Because many of the
commitment amounts expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
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<PAGE>
Following is a summary of the commitments outstanding at December 31, 1996
and 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit..................... $ 58,693 $ 45,370
Credit card commitments.......................... 3,077 2,883
Standby letters of credit........................ 1,331 1,444
----------- -----------
$ 63,101 $ 49,697
=========== ===========
</TABLE>
IMPACT OF INFLATION
The consolidated financial statements and related consolidated financial
data presented herein have been prepared in accordance with generally accepted
accounting principles and practices within the banking industry which require
the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact
on a financial institution's performance than the effects of general levels of
inflation.
DESCRIPTION OF ABC COMMON STOCK
GENERAL
ABC's authorized capital stock consists of 15,000,000 shares of Common
Stock, $1.00 par value per share, of which 6,745,701 shares were issued and
outstanding as of March 31, 1997, and 5,000,000 shares of preferred stock,
none of which are issued and outstanding. ABC has reserved 595,883 shares of
ABC Common Stock for issuance pursuant to outstanding options to purchase such
shares.
COMMON STOCK
The holders of ABC Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors and paid by ABC out of funds legally
available therefor and to share ratably in the assets of ABC available for
distribution after the payment of all prior claims in the event of any
liquidation, dissolution or winding-up of ABC. All outstanding shares of ABC
Common Stock are duly authorized and validly issued, fully paid and
nonassessable.
Under FRB policy, a bank holding company is expected to act as a source of
financial strength to each of its subsidiary banks and to commit resources to
support each such bank. Consistent with this policy, the FRB has stated that,
as a matter of prudent banking, a bank holding company generally should not
maintain a rate of cash dividends unless the available net income of the bank
holding company is sufficient to fully fund the dividends, and the prospective
rate of earnings retention appears to be consistent with its capital needs,
asset quality, and overall financial condition.
The ability of ABC to pay cash dividends is currently influenced, and in the
future could be further influenced, by bank regulatory policies or agreements
and by capital guidelines. Accordingly, the actual amount and timing of future
dividends, if any, will depend on, among other things, future earnings, the
financial condition of ABC and each of its Subsidiary Banks, the amount of
cash on hand at the holding company level, outstanding debt obligations, if
any, and the requirements imposed by regulatory authorities.
Holders of ABC Common Stock are entitled to one vote per share on all
matters requiring a vote of shareholders. The ABC Common Stock does not have
cumulative voting rights, which means that the holders of
35
<PAGE>
more than 50% of the outstanding shares of ABC Common Stock voting for the
election of directors can elect 100% of the directors if they choose to do so.
In such event, the holders of the remaining shares of ABC Common Stock will
not be able to elect any of the directors.
PREFERRED STOCK
No shares of Preferred Stock have been issued. ABC's Board of Directors is
authorized to issue the Preferred Stock, without shareholder approval, in one
or more series and to fix and determine, among other things: the dividend
payable with respect to such shares of Preferred Stock, including whether and
in what manner such dividend shall be accumulated, and whether such dividend
is payable in shares of stock in connection with the possible implementation
of a shareholder rights plan or otherwise; whether such shares shall be
redeemable and, if so, the prices, terms and conditions of such redemption;
the amount payable on such shares in the event of voluntary or involuntary
liquidation; the nature of any purchase, retirement or sinking fund
provisions; the nature of any conversion rights with respect to such shares;
and the extent of the voting rights, if any, of such shares. Certain of such
rights may, under certain circumstances, adversely affect the rights or
interests of holders of Common Stock. In addition, the Preferred Stock may be
issued as a defensive device to thwart an attempted hostile takeover of ABC.
LIMITATIONS ON DIRECTORS' LIABILITY
ABC's Articles of Incorporation provide that no director of ABC shall be
liable to ABC or its shareholders for monetary damages for breach of duty of
care or other duty as a director, except for liability (i) for any
appropriation, in violation of his duties, of any business opportunity of ABC,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases, or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of ABC and its
shareholders (through shareholders' derivative suits on behalf of ABC) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior),
except in the situations described above. Insofar as indemnification for
liabilities arising under the 1933 Act may be permitted to directors, officers
and controlling persons of ABC pursuant to the foregoing, ABC has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable.
TRANSFER AGENT
SunTrust Bank, Atlanta currently acts as the transfer agent for the ABC
Common Stock.
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<PAGE>
CERTAIN REGULATORY CONSIDERATIONS RELATING TO ABC
GENERAL
As a bank holding company, ABC is subject to the regulation and supervision
of the FRB and the DBF. The Subsidiary Banks are subject to supervision and
examination by applicable state and federal banking agencies, including the
Office of the Comptroller of the Currency, the FRB, the FDIC and the DBF. The
Subsidiary Banks are also subject to various requirements and restrictions
under federal and state law, including requirements to maintain reserves
against deposits, restrictions on the types and amounts of loans that may be
granted and the interest that may be charged thereon, and limitations on the
types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of
the Subsidiary Banks. In addition to the impact of regulation, commercial
banks are affected significantly by the actions of the FRB as it attempts to
control the money supply and credit availability in order to influence the
economy.
The BHCA requires every bank holding company to obtain the prior approval of
the FRB before (i) it may acquire direct or indirect ownership or control of
more than 5% of the voting shares of any bank that it does not already
control; (ii) it or any of its subsidiaries, other than a bank, may acquire
all or substantially all of the assets of a bank; and (iii) it may merge or
consolidate with any other bank holding company. In addition, a bank holding
company is generally prohibited from engaging in, or acquiring, direct or
indirect control of the voting shares of any company engaged in non-banking
activities. This prohibition does not apply to activities found by the FRB, by
order or regulation, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the activities
that the FRB has determined by regulation or order to be closely related to
banking are (i) making or servicing loans and certain types of leases; (ii)
performing certain data processing services; (iii) acting as fiduciary or
investment or financial advisor; (iv) providing discount brokerage services;
(v) underwriting bank eligible securities; (vi) underwriting debt and equity
securities on a limited basis through separately capitalized subsidiaries; and
(vii) making investments in corporations or projects designed primarily to
promote community welfare.
In addition, the DBF requires information with respect to the financial
condition, operations, management and intercompany relationships of ABC and
the Subsidiary Banks and related matters. The DBF may also require such other
information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may examine ABC. ABC is an
"affiliate" of the Subsidiary Banks under the Federal Reserve Act, which
imposes certain restrictions on (i) loans by the Subsidiary Banks to ABC; (ii)
investments in the stock or securities of ABC by the Subsidiary Banks; (iii)
the Subsidiary Bank's taking the stock or securities of an "affiliate" as
collateral for loans by the Subsidiary Banks to a borrower; and (iv) the
purchase of assets from ABC by the Subsidiary Banks. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
PAYMENT OF DIVIDENDS AND OTHER RESTRICTIONS
ABC is a legal entity separate and distinct from its subsidiaries. There are
various legal and regulatory limitations under federal and state law on the
extent to which ABC's subsidiaries can pay dividends or otherwise supply funds
to ABC.
The principal source of ABC's cash revenues is dividends from its
subsidiaries, and there are certain limitations under federal and Georgia law
on the payment of dividends by such subsidiaries. The prior approval of the
FRB or the applicable state commissioner, as the case may be, is required if
the total of all dividends declared by any state member bank of the Federal
Reserve System in any calendar year exceeds the bank's net profits (as
defined) for that year combined with its retained net profits for the
preceding two calendar years, less any required transfers to surplus or a fund
for the retirement of any preferred stock. The relevant federal and state
regulatory agencies also have authority to prohibit a state member bank or
bank holding company, which would include ABC and the Subsidiary Banks from
engaging in what, in the opinion of such regulatory body,
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<PAGE>
constitutes an unsafe or unsound practice in conducting its business. The
payment of dividends could, depending upon the financial condition of the
subsidiary, be deemed to constitute such an unsafe or unsound practice.
Under Georgia law (which would apply to any payment of dividends by the
Subsidiary Banks to ABC), the prior approval of the DBF is required before any
cash dividends may be paid by a state bank if (i) total classified assets at
the most recent examination of such bank exceed 80% of the equity capital (as
defined, which includes the reserve for loan losses) of such bank; (ii) the
aggregate amount of dividends declared or anticipated to be declared in the
calendar year exceeds 50% of the net profits (as defined) for the previous
calendar year; or (iii) the ratio of equity capital to adjusted total assets
is less than 6%.
In addition, the Subsidiary Banks are subject to limitations under Section
23A of the Federal Reserve Act with respect to extensions of credit to,
investments in, and certain other transactions with, ABC. Furthermore, loans
and extensions of credit are also subject to various collateral requirements.
CAPITAL ADEQUACY
The FRB has adopted risk-based capital guidelines for bank holding
companies. The minimum ratio of total capital ("Total Capital") to risk-
weighted assets (including certain off-balance sheet items, such as standby
letters of credit, is 8%). At least half of the Total Capital is to be
composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a
limited amount of perpetual preferred stock, less goodwill ("Tier I Capital").
The remainder may consist of subordinated debt, other preferred stock and a
limited amount of loan loss reserves.
In addition, the FRB has established minimum leverage ratio guidelines for
bank holding companies. These guidelines provide for a minimum ratio of Tier I
Capital to total assets, less goodwill (the "Leverage Ratio") of 3% for bank
holding companies that meet certain specified criteria, including those having
the highest regulatory rating. All other bank holding companies generally are
required to maintain a Leverage Ratio of at least 3% plus an additional
cushion of 100 to 200 basis points. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the FRB has indicated that it will consider a "tangible Tier I
capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Section 38 to the Federal Deposit Insurance Act, as revised in December
1992, implements the prompt corrective action provisions that Congress enacted
as a part of the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "FDIC Act"). The "prompt corrective action" provisions set forth five
regulatory zones in which all banks are placed largely based on their capital
positions. Regulators are permitted to take increasingly harsh action as a
bank's financial condition declines. Regulators are also empowered to place in
receivership or require the sale of a bank to another depository institution
when a bank's capital leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision
than banks with lesser amounts of capital.
Under the regulations of the Federal Deposit Insurance Corporation (the
"FDIC") implementing the prompt corrective action provisions of the FDIC Act,
financial institutions are placed in the following five categories based upon
capitalization ratios: (i) a "well capitalized" institution has a total risk-
based capital ratio of at least 10%, a Tier I risk-based ratio of at least 6%
and a leverage ratio of at least 5%; (ii) an "adequately capitalized"
institution has a total risk-based capital ratio of at least 8%, a Tier I
risk-based ratio of at least 4% and a leverage ratio of at least 4%; (iii) an
"undercapitalized" institution has a total risk-based capital ratio of under
8%, a Tier I risk-based ratio of under 4% or a leverage ratio of under 4%;
(iv) a "significantly undercapitalized" institution has a total risk-based
capital ratio of under 6%, a Tier I risk-based ratio of under 3% or a leverage
ratio of under 3%; and (v) a "critically undercapitalized" institution has a
leverage ratio of 2% or less. Institutions in any of the three
undercapitalized categories would be prohibited from declaring dividends or
making capital
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<PAGE>
distributions. The FDIC regulations also establish procedures for
"downgrading" an institution to a lower capital category based on supervisory
factors other than capital.
The downgrading of an institution's category is automatic in two situations:
(i) whenever an otherwise well-capitalized institution is subject to any
written capital order or directive; and (ii) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The Federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower capital level based on safety and soundness
considerations relating to factors other than capital levels.
All insured institutions regardless of their level of capitalization are
prohibited by the FDIC Act from paying any dividend or making any other kind
of capital distribution or paying any management fee to any controlling person
if following the payment or distribution the institution would be
undercapitalized. While the prompt corrective action provisions of the FDIC
Act contain no requirements or restrictions aimed specifically at adequately
capitalized institutions, other provisions of the FDIC Act and the agencies'
regulations relating to deposit insurance assessments, brokered deposits and
interbank liabilities treat adequately capitalized institutions less favorably
than those that are well-capitalized.
Under the FDIC's regulations, all of the Subsidiary Banks are "well
capitalized" institutions.
SUPPORT OF SUBSIDIARY BANKS
Under FRB policy, ABC is expected to act as a source of financial strength
to, and to commit resources to support, each of the Subsidiary Banks. This
support may be required at times when, absent such FRB policy, ABC may not be
inclined to provide it. In the event of a bank holding company's bankruptcy,
any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Under the Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA"), a depository institution insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC
in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of
default." "Default" is defined generally as the appointment of a conservator
or receiver, and "in danger of default" is defined generally as the existence
of certain conditions indicating that a default is likely to occur in the
absence of regulatory assistance. The FDIC's claim for damages is superior to
claims of shareholders of the insured depository institution or its holding
company, but is subordinate to claims of depositors, secured creditors and
holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution.
FDIC INSURANCE ASSESSMENTS
The Subsidiary Banks are subject to FDIC deposit insurance assessments for
the Bank Insurance Fund (the "BIF"). Since 1989, the annual FDIC deposit
insurance assessments increased from $.083 per $100 of deposits to a minimum
level of $.23 per $100 of deposits, an increase of 177%. The FDIC implemented
a risk-based assessment system whereby banks are assessed on a sliding scale
depending on their placement in nine separate supervisory categories, from
$.23 per $100 of deposits for the healthiest banks (those with the highest
capital, best management and best overall condition) to as much as $.31 per
$100 of deposits for the less-healthy institutions, for an average $.259 per
$100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for "healthy" banks 83%
from $.23 per $100 in deposits to $.04 per $100 in deposits, while retaining
the $.31 level for the riskiest banks. The average assessment rate was
therefore reduced from $.232 to $.044 per $100 of deposits. The new rate took
effect on September 29, 1995. On November 14, 1995, the FDIC again lowered the
BIF premium for "healthy" banks from $.04 per
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<PAGE>
$100 of deposits to zero for the highest rated institutions (92% of the
industry). As a result, the Subsidiary Banks paid only the legally required
annual minimum payment of $10,000 per year for insurance as of January 1997.
On September 30, 1996, the President signed the Deposit Insurance Fund Act
of 1996 ("DIFA") which was part of the omnibus spending bill enacted by
Congress at the end of its 1996 session. DIFA provides that the FDIC may not
set semi-annual assessments with respect to the BIF in excess of the amount
needed to maintain the 1.25% designated reserve ratio or, if the reserve ratio
is less than the designated reserve ratio, to increase the reserve ratio to
the designated reserve ratio. In addition, DIFA mandates the merger of BIF and
the Savings Association Insurance Fund (the "SAIF"), effective January 1,
1999, only if no insured depository institution is a savings association on
that date. The combined deposit insurance fund would be called the "deposit
insurance fund" or "DIF."
DIFA also imposes assessments against both SAIF and BIF deposits to avoid
predicted default on the bonds issued by the Financing Corporation ("FICO"),
which is predicted to occur as early as 1998, as deposits in savings
institutions continue to decline. DIFA amends the Federal Home Loan Bank Act
to impose the FICO assessment against both SAIF and BIF deposits beginning
after December 31, 1996. The assessment imposed on insured depository
institutions with respect to any BIF-assessable deposit will be assessed at a
range equal to one-fifth of the rate (approximately 1.3 basis points) of the
assessments imposed on insured depository institutions with respect to any
SAIF-assessable deposit (approximately 6.7 basis points). The FICO assessment
for 1996 was paid entirely by SAIF-insured institutions, but BIF-insured banks
will pay the same FICO assessment as SAIF-insured institutions beginning as of
the earlier of December 31, 1999, or the date as of which the last savings
association ceases to exist.
RECENT LEGISLATIVE AND REGULATORY ACTION
On April 19, 1995, the four federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community
Reinvestment Act (the "CRA"), which are intended to set distinct assessment
standards for financial institutions. The revised regulations contain three
evaluation tests: (i) a lending test which compares the institution's market
share of loans in low- and moderate- income areas to its market share of loans
in its entire service area and the percentage of a bank's outstanding loans to
low- and moderate- income areas or individuals; (ii) a services test which
evaluates the provisions of services that promote the availability of credit
to low- and moderate-income areas; and (iii) an investment test which will
evaluates an institution's record of investments in organizations designed to
foster community development, small- and minority-owned businesses and
affordable housing lending, including state and local government housing or
revenue bonds. The regulation is designed to reduce some paperwork
requirements of the current regulations and provide regulators, institutions
and community groups with a more objective and predictable manner with which
to evaluate the CRA performance of financial institutions. The rule became
effective on January 1, 1996, at which time evaluation under streamlined
procedures were scheduled to begin for institutions with assets of less than
$250 million that are owned by a holding company with total assets of less
than $1 billion. Until the regulators release guidelines for examiners that
interpret the rules, it is unclear what effect, if any, these regulations will
have on ABC and the Subsidiary Banks. Congress and various federal agencies
(including, in addition to the bank regulatory agencies, the Department of
Housing and Urban Development, the Federal Trade Commission and the Department
of Justice) (collectively, the "Federal Agencies") responsible for
implementing the nation's fair lending laws have been increasingly concerned
that prospective home buyers and other borrowers are experiencing
discrimination in their efforts to obtain loans. In recent years, the
Department of Justice has filed suit against financial institutions, which it
determined had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Nearly all of these suits
have been settled (some for substantial sums) without a full adjudication on
the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Opportunity Act and the Fair Housing Act. In the policy statement,
three methods of proving lending discrimination were identified:
40
<PAGE>
(i) overt evidence of discrimination, when a lender blatantly discriminates on
a prohibited basis; (ii) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person; and (iii) evidence of disparate impact, when
a lender applies a practice uniformly to all applicants, but the practice has
a discriminatory effect, even where such practices are neutral on their face
and are applied equally, unless the practice can be justified on the basis of
business necessity.
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory
Improvement Act"). The Regulatory Improvement Act contains funding for
community development projects through banks and community development
financial institutions and also numerous regulatory relief provisions designed
to eliminate certain duplicative regulations and paperwork requirements. On
September 29, 1994, President Clinton signed the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Federal Interstate Bill")
which amended federal law to permit bank holding companies to acquire existing
banks in any state effective September 29, 1995, and to permit any interstate
bank holding company to merge its various bank subsidiaries into a single bank
with interstate branches after May 31, 1997. States have the authority to
authorize interstate branching prior to June 1, 1997, or, alternatively, to
opt out of interstate branching prior to that date. The Georgia Financial
Institutions Code was amended in 1994 to permit the acquisition of a Georgia
bank or bank holding company by out-of-state bank holding companies beginning
July 1, 1995. On September 29, 1995, the interstate banking provisions of the
Georgia Financial Institutions Code were superseded by the Federal Interstate
Bill.
Other legislative proposals are pending before Congress, the effect of which
would reform the Glass-Steagall Act to allow banks and bank holding companies
to engage in additional types of non-banking activities as well as effect
regulatory relief for financial institutions. The regulatory relief provisions
contained in several bills would, if enacted, eliminate or reduce and simplify
disclosures and reporting requirements contained in current statutes and
regulations. The likelihood of enactment of any of the pending or proposed
legislation is unknown.
In February 1996, Georgia adopted the "Georgia Interstate Branching Act,"
which permits Georgia-based banks and bank holding companies owning or
acquiring banks outside of Georgia and all non-Georgia banks and bank holding
companies owning or acquiring banks in Georgia to merge any lawfully acquired
bank into an interstate branch network. The Georgia Interstate Branching Act
also allows banks to establish de novo branch banks on a limited basis between
July 1, 1996 and June 30, 1998. Beginning July 1, 1998, the number of de novo
bank branches which may be established will no longer be limited.
MONETARY POLICY
The earnings of ABC are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States government and its agencies.
The FRB has had, and will continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to mitigate recessionary and
inflationary pressures by regulating the national money supply. The techniques
used by the FRB include setting the reserve requirements of member banks and
establishing the discount rate on member bank borrowings. The FRB also
conducts open market transactions in United States government securities.
FUTURE REQUIREMENTS
Statutes and regulations are regularly introduced which contain wide-ranging
proposals for altering the structure, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or in what form any proposed statute or regulation will be adopted or
the extent to which the business of ABC or any of the Subsidiary Banks may be
affected by such statute or regulation.
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<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
Upon consummation of the Merger, Irwin shareholders will become ABC
shareholders whose rights will be governed by the GBCC and ABC's articles of
incorporation and bylaws.
The following is a summary of the material differences of the rights of
Irwin shareholders, on the one hand, and the ABC shareholders, on the other
hand. Because both Irwin and ABC are Georgia corporations, these differences
arise primarily from provisions of the articles of incorporation and bylaws of
each of Irwin and ABC.
The following summaries do not purport to be complete statements of the
rights of Irwin shareholders under Irwin's articles of incorporation and
bylaws compared with the rights of the ABC shareholders under ABC's articles
of incorporation and bylaws or a complete description of the specific
provisions referred to herein. The identification of specific differences is
not meant to indicate that other equally or more significant differences do
not exist. The summaries are qualified in their entirety by reference to the
GBCC and the governing corporate instruments of each of Irwin and ABC.
LIQUIDITY AND MARKETABILITY
ABC Common Stock. As of March 31, 1997, all of the 6,745,701 shares of ABC
Common Stock then outstanding were freely tradeable except for approximately
1,183,000 shares held by "affiliates" of ABC, as such term is defined in Rule
144 under the 1933 Act, which shares may only be sold pursuant to an effective
registration statement under the 1933 Act or in compliance with Rule 144 or
another applicable exemption from the registration requirements of the 1933
Act.
Irwin Common Stock. Irwin Shares are not registered with the Commission or
listed on any national securities exchange or quoted on any interdealer
quotation system. There is no established market for Irwin Shares, and none is
expected to develop.
REPORTING REQUIREMENTS
ABC Common Stock. ABC is a reporting company under the 1934 Act and files
annual and quarterly financial reports with the Commission.
Irwin Common Stock. Irwin is not subject to any financial reporting
regulations.
MANAGEMENT
ABC Board of Directors. The business and affairs of ABC are managed by or
under the direction of its Board of Directors. Each director is elected
annually by the ABC shareholders and may be removed and replaced, with or
without cause, by a majority vote of ABC shareholders at any meeting of such
holders. According to ABC's bylaws, ABC's Board of Directors shall consist of
ten members, provided that the number of directors may be increased or
decreased upon amendment to the bylaws by the Board of Directors. ABC's Board
of Directors currently consists of ten members.
Irwin Board of Directors. The business and affairs of Irwin are managed by
or under the direction of its Board of Directors. Each director is elected
annually by the Irwin shareholders and may be removed and replaced, with or
without cause, by a majority vote of Irwin's shareholders at any meeting of
such holders. According to Irwin's bylaws, Irwin's Board of Directors shall
consist of not less than three nor more than 25 members. The number of Irwin
directors may be fixed or changed from time to time, within the minimum and
maximum, by the shareholders by the affirmative vote of a majority of the
issued and outstanding Irwin Shares entitled to vote at any annual or special
meeting or by the Board of Directors. Irwin's Board of Directors currently
consists of six members.
42
<PAGE>
SPECIAL MEETINGS
ABC Common Stock. Special meetings of ABC's shareholders may be called at
any time by ABC's Chairman of the Board, Vice Chairman of the Board,
President, Secretary or a majority of the directors of ABC. Special meetings
of ABC's shareholders also shall be called upon the written request of the
holders of 50% or more of all shares of capital stock of ABC entitled to vote
in an election of directors.
Irwin Common Stock. Special meetings of Irwin's shareholders may be called
at any time by the President, Chairman of the Board or the Board of Directors.
Special meetings of Irwin's shareholders also shall be called upon the written
request of the holders of 25% or more of all shares of capital stock of Irwin
entitled to vote in an election of directors.
DESCRIPTION OF IRWIN BANKCORP, INC.
BUSINESS
General. Irwin is a bank holding company organized under the laws of the
State of Georgia and registered with the FRB pursuant to the BHCA. Irwin owns
all of the outstanding common stock of The Bank of Ocilla, a Georgia state
chartered bank that provides general banking services in Irwin and Ben Hill
Counties, Georgia. At March 31, 1997, Irwin, on a consolidated basis, had
total assets of $38,681,000, total loans of $15,765,000, total deposits of
$32,873,000 and total stockholders' equity of $5,348,000. Irwin's net income
for 1996 was $457,000, or $15.75 per share; its net income for the three
months ended March 31, 1997 was $126,000, or $4.31 per share.
The Bank of Ocilla serves its primary market area of Irwin County and Ben
Hill County, Georgia, from its headquarters located in Ocilla, Georgia. The
banking business in this market is highly competitive. The Bank of Ocilla
competes for both deposits and loan customers with many other financial
institutions with equal or greater resources than are available to The Bank of
Ocilla. Such institutions include other commercial banks, credit union
insurance companies, brokerage firms and other financial services companies.
The Bank of Ocilla operates a full service commercial banking business and
provides a wide range of banking services, including checking and savings
accounts; various types of certificates of deposit; agricultural, consumer,
commercial and real estate loans; safe deposit boxes; drive-in banking
facilities; and access to 24-hour teller machines through the Honor network. A
description of The Bank of Ocilla's primary banking activities is set forth
below.
Deposits. The Bank of Ocilla offers a wide range of commercial and consumer
deposit accounts, including checking accounts, money market checking accounts,
negotiable order of withdrawal (NOW) accounts, individual retirement accounts,
time certificates of deposit and regular savings accounts. The sources of
deposits typically are residents and businesses and their employees within The
Bank of Ocilla's market area. The Bank of Ocilla pays competitive interest
rates on time and savings deposits and has implemented a service charge fee
schedule competitive with other financial institutions in its market area. For
additional information concerning deposits, see "Irwin Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Lending Activities. The Bank of Ocilla's lending activities include
agricultural, real estate, consumer and commercial loans. The Bank of Ocilla's
agricultural loans are made for crop production expenses and to finance the
purchase of farm-related equipment. The Bank of Ocilla participates in the
FmHa Guaranteed Loan Program. The FmHa guarantees 90% of the principal and
interest on qualified crop production loans. The Bank of Ocilla's real estate
loan portfolio includes traditional first mortgage loans to individuals on
single-family homes, loans secured by farmland, and construction loans. The
Bank of Ocilla also makes consumer loans, consisting primarily of installment
loans, to individuals for personal, family and household purposes, including
loans for automobiles, home improvements and investments. The Bank of Ocilla's
commercial lending is directed principally toward businesses located within
its defined trade area with a demand for funds that falls within its legal
lending limits. The Bank of Ocilla also targets businesses that are existing
or are potential deposit customers.
43
<PAGE>
Lending decisions are based upon a determination of the borrower's ability
and willingness to repay the loan, which in turn are impacted, in the case of
an individual borrower, by factors such as the borrower's income, job
stability, length of time as a resident in the community, previous credit
history and collateral and, in the case of a commercial borrower, by factors
such as the borrower's cash flow, sales trend and inventory levels, collateral
and relevant economic conditions. In the case of agricultural loans, The Bank
of Ocilla typically looks to the borrower's cash flow as the principal source
of repayment and generally secures repayment by a security interest in crops
or farm-related equipment and, in some cases, an assignment of crop insurance
or a mortgage on real estate. The Bank is aware of the risks associated with
loans, such as fraud, bankruptcy, economic downturn, deterioration or non-
existent collateral and changes in interest rates. In addition, agricultural
loans carry additional risks, such as fluctuating commodity prices and the
risk of adverse weather conditions.
Investment Activities. After establishing necessary cash reserves and
funding loans, The Bank of Ocilla invests its remaining liquid assets in
investments allowed under banking laws and regulations. It invests primarily
in obligations of the United States or obligations guaranteed as to principal
and interest by the United States and other taxable securities and in certain
obligations of states and municipalities. Risks associated with these
investments include, but are not limited to, mismanagement in terms of
interest rate, maturity and concentration. For additional information
concerning investment activities, see the information set forth under "Irwin
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Asset/Liability Management. It is management's objective to manage The Bank
of Ocilla's assets and liabilities to provide a satisfactory, consistent level
of profitability within the framework of established cash, loan, investment,
borrowing and capital policies. Certain officers of the Bank are charged with
the responsibility for developing and monitoring policies and procedures that
are designed to ensure acceptable composition of the asset/liability mix. It
is management's overall philosophy to support asset growth primarily through
growth of core deposits, which includes deposits of all categories made by
individuals, partnerships, corporations and other entities. The Bank of
Ocilla's asset/liability mix is monitored on a timely basis with a report
reflecting interest-sensitive assets and liabilities being prepared and
presented to the asset/liability committee of it's Board of Directors on a
monthly basis. In addition, The Bank of Ocilla's liquidity is monitored on a
monthly basis by its Board of Directors. The objective of this policy is to
manage interest-sensitive assets and liabilities so as to minimize the impact
of substantial movements in interest rates on its earnings. See "Irwin
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
EMPLOYEES
As of March 31, 1997, Irwin and The Bank of Ocilla had a total of 17 full-
time equivalent and two part-time employees to whom they provide a variety of
benefits. Irwin has no salaried employees, although certain executive officers
hold parallel positions with The Bank of Ocilla. Both Irwin and The Bank of
Ocilla consider employee relations to be excellent, and neither is a party to
any collective bargaining agreement.
PROPERTIES
The principal offices of Irwin and The Bank of Ocilla are located at Irwin &
2nd Street, Ocilla, Georgia 31774-0165. The Bank of Ocilla owns these
facilities without encumbrance.
LITIGATION
Irwin and The Bank of Ocilla are not parties to, nor is any of their
property the subject of, any material pending legal proceedings, other than
ordinary routine litigation incidental to their business, and no such
proceedings are known to be contemplated by governmental authorities.
MANAGEMENT
The following table sets forth, as of March 31, 1997, certain information
regarding each director and executive officer of Irwin. All six directors also
serve as directors of The Bank of Ocilla. Irwin will cease to
44
<PAGE>
exist upon the Merger; accordingly, the directors and executive officers of
Irwin will no longer serve in such capacities following the effective date of
the Merger. The management currently in place at The Bank of Ocilla, however,
will manage the Branch after the Merger.
<TABLE>
<CAPTION>
POSITIONS WITH IRWIN
NAME AGE PRINCIPAL OCCUPATION AND THE BANK OF OCILLA
---- --- -------------------- ----------------------
<C> <C> <S> <C>
Murphey Rogers....... 75 Attorney Chairman of the Board,
The Bank of Ocilla; Director, Irwin
Dr. W.C. Sams, Jr.... 78 Physician (Retired) President and Director, Irwin
and The Bank of Ocilla
C. Larry Young....... 52 Executive Vice President Vice President and Director, Irwin;
and Chief Executive Executive Vice President,
Officer, The Bank of Chief Executive Officer and
Ocilla Director, The Bank of Ocilla
Wycliffe R. Griffin.. 66 Chairman of the Board, Vice President, The Bank of Ocilla;
Triangle Chemical Director, Irwin and The Bank of Ocilla
Company, Inc.
L. A. Pate........... 57 Agribusiness/Farmer Director, Irwin and The Bank of Ocilla
Daniel M. Paulk...... 61 Insurance Agent Director, Irwin and The Bank of Ocilla
</TABLE>
All of Irwin's directors hold office for a term of one year or until their
respective successors are duly elected and qualified. All of Irwin's officers
serve at the will of the Board of Directors and until their successors have
been elected and qualified or until their earlier death, resignation, removal,
retirement or disqualification. Except as described under the caption
"PROPOSED MERGER--Interests of Management in the Merger," there are no
arrangements or understandings between any of the directors, executive
officers or any other persons pursuant to which any of Irwin's directors or
executive officers have been selected for their respective positions. No
family relationships exist between any directors or executive officers.
45
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 31, 1997, the total number of
Irwin Shares beneficially owned by each director of Irwin, each beneficial
owner of five percent or more the outstanding Irwin Shares, and all directors
and executive officers of Irwin as a group. The number of Irwin Shares shown
as being beneficially owned by each director are those over which he has
either sole or shared voting or investment power. Unless otherwise indicated,
the persons listed below have sole voting and investment power with respect to
their shares. At March 31, 1997, Irwin had 29,230 shares of common stock
outstanding.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OWNED(1) PERCENT OF CLASS(2)
- ------------------------ --------------- -------------------
<S> <C> <C>
Matilda Willis Arwood..................... 2,610 8.71%
116 Southgate Drive
Moultrie, Georgia 31768-5886
Wycliffe R. Griffin....................... 1,553(2) 5.18%
808 West Second Street
Ocilla, Georgia 31774
L.A. Pate................................. 2,452(3) 8.18%
P.O. Box 480
Irwinville, Georgia 31760
Murphey Rogers............................ 2,798(4) 9.33%
P.O. Box 146
Ocilla, Georgia 31774
Dr. W.C. Sams............................. 3,090(5) 10.31%
P.O. Box 7
Ocilla, Georgia 31774
Marianne Nunn Tolleson.................... 2,192 7.31%
1904 Main Street
Perry, Georgia 31069
C. Larry Young............................ 1,594(6) 5.31%
P.O. Box 144
Ocilla, Georgia 31774
Daniel M. Paulk........................... 400 1.33%
P.O. Box 71
Ocilla, Georgia 31774
All Directors and Executive Officers as a
Group (6 persons)........................ 11,887 39.65%
</TABLE>
- --------
(1) The information contained in this column is based upon information
furnished to Irwin by the individuals identified above and shareholder
records of Irwin.
(2) Includes 4 shares owned by Mr. Griffin's wife.
(3) Includes 829 shares owned by Mr. Pate's wife.
(4) Includes 1,222 shares owned by Mr. Rogers' wife; 52 shares owned jointly
by Mr. Rogers' wife and son, with whom Mr. Rogers may be deemed to share
investment and voting power; and 42 shares owned jointly by Mr. Rogers and
his stepson, with whom Mr. Rogers shares investment and voting power.
(5) Includes 880 shares owned by Mr. Sams' wife.
(6) Includes 852 shares owned jointly by Mr. Young and his wife; 28 shares
owned jointly by Mr. Young and his father, Charles A. Young, with whom Mr.
Young shares voting and investment power; 16 shares owned jointly by Mr.
Young and his son, Ryan David Young, with whom Mr. Young shares investment
and voting power; 16 shares owned jointly by Mr. Young and his son, Todd
Larry Young, with whom Mr. Young shares investment and voting power; and
options to acquire an additional 682 shares.
46
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS RELATING TO IRWIN
General. The regulatory considerations described under the caption "CERTAIN
REGULATORY CONSIDERATIONS RELATING TO ABC" apply equally to Irwin and The Bank
of Ocilla.
Capital Requirements. At March 31, 1997, The Bank of Ocilla had a Tier 1
leverage ratio of 13.70%, a Tier 1 risk-based ratio of 30.46%, and a total
risk-based ratio of 31.71%. At March 31, 1997, Irwin and The Bank of Ocilla
had the requisite capital levels to qualify as well-capitalized.
IRWIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Irwin's principal asset is its ownership of The Bank of Ocilla. Accordingly,
Irwin's results of operations are primarily dependent upon the results of
operations of The Bank of Ocilla. The Bank of Ocilla conducts a commercial
banking business which consists of attracting deposits from the general public
and applying those funds to the origination of commercial, consumer and real
estate loans (including commercial loans collateralized by real estate). The
Bank of Ocilla's profitability depends primarily on net interest income, which
is the difference between interest income generated from interest-earning
assets (i.e., loans and investments) less the interest expense incurred on
interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net
interest income is affected by the relative amounts of interest-earning assets
and interest-bearing liabilities, and the interest rate paid and earned on
these balances. Net interest income is dependent upon the Bank's interest rate
spread, which is the difference between the average yield earned on its
interest-earning assets and the average rate paid on its interest-bearing
liabilities. When interest-earning assets approximate or exceed interest-
bearing liabilities, any positive interest rate spread will generate interest
income. The interest rate spread is impacted by interest rates, deposit flows
and loan demand. Additionally, and to a lesser extent, The Bank of Ocilla's
profitability is affected by such factors as the level of non-interest income
and expenses, the provision for loan losses and the effective tax rate. Non-
interest income consists primarily of loan and other fees and income from the
sale of loans and investment securities. Non-interest expenses consist of
compensation and benefits, occupancy-related expenses, deposit insurance
premiums paid to the FDIC and other operating expenses.
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Irwin's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the
control of Irwin, the ability to generate net interest income is dependent
upon Irwin's ability to obtain an adequate spread between the rate earned on
interest-earning assets and the rate paid on interest-bearing liabilities.
Thus, the key performance measure for net interest income is the interest
margin or net yield, which is taxable-equivalent net interest income divided
by average earning assets.
The primary component of consolidated earnings is net interest income, or
the difference between interest income on interest-earning assets and interest
paid on interest-bearing liabilities. The net interest margin is net interest
income expressed as a percentage of average interest-earning assets. Interest-
earning assets consist of loans, investment securities and Federal funds sold.
Interest-bearing liabilities consist of deposits, of which approximately 18%
are noninterest-bearing. A portion of interest income is earned on tax-exempt
investments, such as state and municipal bonds. In an effort to state this
tax-exempt income and its resultant yields on a basis comparable to all other
taxable investments, an adjustment is made to analyze this income on a
taxable-equivalent basis.
The net interest margin decreased slightly to 4.73% in 1996 as compared to
4.93% in 1995. This decrease in net interest margin resulted from a
disproportionate change in interest earned on earning assets and interest
47
<PAGE>
paid on interest-bearing liabilities. Average yield on earning assets
decreased 21 basis points to 8.07% in 1996 from 8.28% in 1995 while average
interest paid on interest-bearing liabilities increased one basis point to
4.48% in 1996 from 4.47% in 1995. Interest-earning assets increased
$1,419,000, or 4.16%, to $35,546,000 in 1996 from $34,127,000 in 1995 while
interest-bearing liabilities increased $993,000, or 3.89%, to $26,539,000 in
1996 from $25,546,000 in 1995. As a result, net interest income on a taxable-
equivalent basis decreased $3,000 to $1,681,000 in 1996 as compared to
$1,684,000 in 1995. Net interest income on a taxable-equivalent basis was
$1,684,000 in 1995 as compared to $1,667,000 in 1994, representing an increase
of $17,000, or 1.02%. Net interest margin increased slightly to 4.93% in 1995
from 4.88% in 1994.
Average interest-earning assets increased $1,419,000, or 4.16%, to
$35,546,000 in 1996 from $34,127,000 in 1995. Average loans increased
$105,000; average investments increased $860,000; and average Federal funds
sold increased $454,000. The increase in average interest-earning assets was
funded by an increase in average deposits of $1,184,000, or 3.81%, to
$32,274,000 in 1996 from $31,090,000 in 1995. By comparison, average interest-
earning assets decreased $36,000, or .11%, to $34,127,000 in 1995 from
$34,163,000 in 1994. During 1995, average deposits decreased $441,000, or
1.40%, to $31,090,000 from $31,531,000 in 1994. Approximately 18% of the
average deposits were noninterest-bearing deposits in both 1996 and 1995.
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has
determined to be adequate. The provision for loan losses charged to earnings
amounted to $25,000 in 1996 and $10,000 in 1995. The Bank of Ocilla has not
sustained any substantial loan losses in recent years, as evidenced by net
loan charge-offs of $31,000 in 1996 and net recoveries of $3,000 in 1995. At
December 31, 1996, the allowance for loan losses was 2.77% of total loans
outstanding as compared to an allowance for loan losses of 2.85% of total
loans outstanding at December 31, 1994. The determination of the allowance
rests upon management's judgment about factors affecting loan quality and
assumptions about the local and national economy. Management considers the
year-end allowance for loan losses adequate to cover potential losses in the
loan portfolio.
Average total assets increased $1,553,000, or 4.22%, to $38,354,000 in 1996
as compared to $36,801,000 in 1995. The increase in average total assets was
accompanied by an increase in average deposits of $1,184,000 or 3.81%. Average
total assets decreased $256,000 or .69% to $36,801,000 in 1995 as compared to
$37,057,000 in 1994. The decrease in total assets was accompanied by a
decrease in average deposits of $441,000 to $31,090,000 in 1995 as compared to
$31,531,000 in 1994.
Following is a condensed summary of the increase in net income in 1996 as
compared to 1995.
<TABLE>
<CAPTION>
INCREASE IN
1996 1995 NET INCOME
---------- ---------- -----------
<S> <C> <C> <C>
Net interest income........................ $1,621,000 $1,578,000 $ 43,000
Provision for loan losses.................. 25,000 10,000 (15,000)
Other income............................... 248,000 230,000 18,000
Other expense.............................. 1,214,000 1,206,000 (8,000)
---------- ---------- --------
Income before income taxes................. 630,000 592,000 38,000
Applicable income taxes.................... 173,000 141,000 (32,000)
---------- ---------- --------
Net income................................. $ 457,000 $ 451,000 $ 6,000
========== ========== ========
</TABLE>
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The net interest margin on a taxable-equivalent basis reflected very nominal
change for the three months ended March 31, 1997 as compared to the three
months ended March 31, 1996. Net interest margin for the three
48
<PAGE>
months ended March 31, 1997 was 4.69% as compared to 4.63% for the three
months ended March 31, 1996. Average yield on interest-earning assets was
7.94% for the three months ended March 31, 1997 as compared to 8.01% for the
three months ended March 31, 1996. Average interest paid on interest-bearing
liabilities was 4.33% for the three months ended March 31, 1997 as compared to
4.53% for the three months ended March 31, 1996. Average interest-earning
assets decreased $519,000 for the three months ended March 31, 1997 from the
same period in 1996, while interest-bearing liabilities decreased $181,000
during the same three months period. Net interest income on a taxable-
equivalent basis amounted to $420,000 for the three months ended March 31,
1997 as compared to $421,000 for the three months ended March 31, 1996.
The provision for loan losses amounted to $15,000 for each of the three
months ended March 31, 1997 and 1996. During the three months ended March 31,
1997, The Bank of Ocilla recorded net loan charge-offs of less than $1,000.
During the three months ended March 31, 1996, The Bank of Ocilla recorded net
recoveries on loans previously charged off of less than $1,000.
There were no significant changes in noninterest income and noninterest
expense for the three months ended March 31, 1997 as compared to the three
months ended March 31, 1996.
Total average assets decreased $814,000, or 2.08%, to $38,312,000 at March
31, 1997 as compared to $39,126,000 at March 31, 1996. Total average deposits
decreased $858,000 to $32,555,000 at March 31, 1997 from $33,413,000 at March
31, 1996.
49
<PAGE>
AVERAGE BALANCES AND NET INCOME ANALYSIS
The following tables set forth the amount of the Irwin's interest income or
interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest rate for total interest-earning
assets and total interest-bearing liabilities, net interest spread and net
yield on average interest-earning assets. Federally tax-exempt income is
presented on a taxable-equivalent basis assuming a 34% Federal tax rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995
--------------------------- ---------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
------- -------- --------- ------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning
assets:
Loans, net of unearned
interest.............. $15,295 $1,611 10.53% $15,190 $1,618 10.65%
Investment securities:
Taxable............... 15,280 903 5.91 13,512 726 5.37
Nontaxable............ 1,563 176 11.26 2,471 312 12.63
Federal funds sold..... 3,408 180 5.28 2,954 170 5.75
------- ------ ------- ------
Total interest-
earning assets...... 35,546 2,870 8.07 34,127 2,826 8.28
======= ====== ======= ======
Noninterest-earning
assets:
Cash................... 1,391 1,289
Allowance for loan
losses................ (418) (433)
Unrealized gain (loss)
on available for sale
securities............ 10 (19)
Other assets........... 1,825 1,837
------- -------
Total noninterest-
earning assets...... 2,808 2,674
------- -------
Total assets......... $38,354 $36,801
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing
liabilities:
Savings and interest-
bearing demand
deposits.............. $10,754 $ 312 2.90% $10,064 $ 309 3.07%
Time deposits.......... 15,785 877 5.56 15,482 833 5.38
Other short-term
borrowings............ -- -- -- -- -- --
Debt................... -- -- -- -- -- --
------- ------ ------- ------
Total interest-
bearing
liabilities......... 26,539 1,189 4.48 25,546 1,142 4.47
======= ====== ======= ======
Noninterest-bearing
liabilities and
stockholders' equity:
Demand deposits........ 5,735 5,544
Other liabilities...... 840 783
Stockholders' equity... 5,240 4,928
------- -------
Total noninterest-
bearing liabilities
and stockholders'
equity.............. 11,815 11,255
------- -------
Total liabilities and
stockholders'
equity.............. $38,354 $36,801
======= =======
Interest rate spread... 3.59% 3.81%
===== =====
Net interest income.... $1,681 $1,684
====== ======
Net interest margin.... 4.73% 4.93%
===== =====
</TABLE>
50
<PAGE>
RATE AND VOLUME ANALYSIS
The following table reflects the changes in net interest income resulting
from changes in interest rates and from asset and liability volume. Federally
tax-exempt interest is presented on a taxable-equivalent basis assuming a 34%
Federal tax rate. The change in interest attributable to rate has been
determined by applying the change in rate between years to average balances
outstanding in the later year. The change in interest due to volume has been
determined by applying the rate from the earlier year to the change in average
balances outstanding between years. Thus, changes that are not solely due to
volume have been consistently attributed to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 VS. 1995 1995 VS. 1994
--------------------------- ----------------------------
CHANGES DUE TO CHANGES DUE TO
INCREASE ---------------- INCREASE -----------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
---------- ------ -------- ---------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning
assets:
Interest and fees on
loans................. $ (7) $ (18) $ 11 $133 $ 183 $ (50)
Interest on
securities:
Taxable............... 177 82 95 73 68 5
Nontaxable............ (136) (21) (115) (68) (6) (62)
Interest on Federal
funds sold............ 10 (16) 26 86 50 36
----- ------ ------- ---- ------- -------
Total interest
income.............. 44 27 17 224 295 (71)
----- ------ ------- ---- ------- -------
Expense from interest-
bearing liabilities:
Interest on savings and
interest-bearing
demand deposits....... 3 (18) 21 21 28 (7)
Interest on time
deposits.............. 44 28 16 187 195 (8)
Interest on short-term
borrowings............ -- -- -- (1) -- (1)
Interest on debt....... -- -- -- -- -- --
----- ------ ------- ---- ------- -------
Total interest
expense............. 47 10 37 207 223 (16)
----- ------ ------- ---- ------- -------
Net interest income.. $ (3) $ 17 $ (20) $ 17 $ 72 $ (55)
===== ====== ======= ==== ======= =======
</TABLE>
NONINTEREST INCOME
Noninterest income increased $18,000 to $248,000 in 1996 from $230,000 in
1995. The most significant increase represents an increase in service charges
on deposit accounts of $15,000. The increase in service charges on deposit
accounts was due primarily to an increase in NSF charges on returned checks.
The following is a comparison of noninterest income for 1996 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1996 1995
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Service charges on deposit accounts........................ $ 168 $ 153
Net realized gains on securities transactions.............. -- 4
Other income............................................... 80 73
------ ------
$ 248 $ 230
====== ======
</TABLE>
51
<PAGE>
NONINTEREST EXPENSE
Salaries and employee benefits increased $7,000, or 1.09%, in 1996 over
1995. Deposit insurance premiums decreased $37,000, or 78.72%, and director
fees decreased $6,000, or 5.66%, in 1996 over 1995. All other noninterest
expense increased $44,000 for a total increase of $8,000 or 0.66% over the
corresponding amounts in 1995. The following is an analysis of noninterest
expense for 1996 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Salaries and employee benefits................... $ 649 $ 642
Occupancy and equipment expense.................. 125 122
Deposit insurance premiums....................... 10 47
Directors fees and benefits...................... 100 106
Other expense.................................... 330 289
----------- -----------
$ 1,214 $ 1,206
=========== ===========
</TABLE>
ASSET/LIABILITY MANAGEMENT
As part of Irwin's interest rate risk management policy, a committee
composed of the Chairman of the Board, the President, the Investment Officer,
and a vice-president (the "Irwin ALCO Committee") examines the extent to which
its assets and liabilities are "interest rate-sensitive" and monitors its
interest rate-sensitivity "gap". An asset or liability is considered to be
interest rate-sensitive if it will reprice or mature within the time period
analyzed, usually one year or less. The interest rate-sensitivity gap is the
difference between the interest-earning assets and interest-bearing
liabilities scheduled to mature or reprice within such time period. A gap is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate-sensitive liabilities. A gap is considered
negative when the amount of interest rate-sensitive liabilities exceeds the
interest rate-sensitive assets. During a period of rising interest rates, a
negative gap would tend to adversely affect net interest income, while a
positive gap would tend to result in an increase in net interest income.
During a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income, while a positive gap would tend to
adversely affect net interest income. If Irwin's assets and liabilities were
equally flexible and moved concurrently, the impact of any increase or
decrease in interest rates on net income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the Irwin ALCO Committee also evaluates how the repayment
of particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and cost associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on interest income. For example, although
certain assets and liabilities may have similar maturities or periods of
repricing, they may react in different degrees to changes in general market
interest rates. Interest rates on certain types of assets and liabilities
fluctuate in advance of changes in general market interest rates, while
interest rates on other types may lag behind changes in general market rates.
In addition, certain assets, such as adjustable rate mortgage loans, have
features (generally referred to as "interest rate caps") which limit changes
in interest rates on a short-term basis and over the life of the asset. In the
event of a change in interest rates, prepayment and early withdrawal levels
also could deviate significantly from those assumed in calculating the
interest-rate gap. The ability of many borrowers to service their debts also
may decrease in the event of an interest-rate increase.
The following table sets forth the distribution of the repricing of Irwin's
earning assets and interest-bearing liabilities as of December 31, 1996, the
interest rate sensitivity gap (i.e., interest rate sensitive assets less
interest rate sensitive liabilities), the cumulative interest rate gap ratio
(i.e., interest rate sensitive assets divided by interest rate sensitivity
liabilities) and the cumulative sensitivity gap ratio. The table also sets
forth the time periods in which earning assets and liabilities will mature or
may reprice in accordance with their contractual
52
<PAGE>
terms. However, the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive
pressures and the needs of The Bank of Ocilla's customers. In addition,
various assets and liabilities indicated as repricing within the same period
may in fact reprice at different times within such period and at different
rates.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
MATURING OR REPRICING WITHIN
-------------------------------------------
AFTER THREE AFTER ONE
WITHIN MONTHS YEAR AFTER
THREE WITHIN WITHIN FIVE
MONTHS ONE YEAR FIVE YEARS YEARS TOTAL
------ ----------- ---------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Federal funds sold............ $3,500 $ -- $ -- $ -- $3,500
Investment securities......... 852 2,709 13,112 455 17,128
Loans......................... 5,953 3,274 3,389 1,838 14,454
------ ------- ------ ------ ------
10,305 5,983 16,501 2,293 35,082
------ ------- ------ ------ ------
INTEREST-BEARING LIABILITIES:
Interest-bearing demand
deposits(1).................. -- 3,688 4,790 -- 8,478
Savings(1).................... -- -- 1,937 -- 1,937
Certificates less than
$100,000..................... 3,992 7,907 758 -- 12,657
Certificates, $100,000 and
over......................... 920 2,355 262 -- 3,537
------ ------- ------ ------ ------
4,912 13,950 7,747 -- 26,609
------ ------- ------ ------ ------
INTEREST RATE SENSITIVITY GAP.. $5,393 $(7,967) $8,754 $2,293 $8,473
====== ======= ====== ====== ======
CUMULATIVE INTEREST RATE
SENSITIVITY GAP............... $5,393 $(2,574) $9,100 $8,473
====== ======= ====== ======
INTEREST RATE SENSITIVITY GAP
RATIO......................... 2.10 0.43 2.13 N/A
====== ======= ====== ======
CUMULATIVE INTEREST RATE
SENSITIVITY GAP RATIO......... 2.10 0.86 1.23 1.32
====== ======= ====== ======
</TABLE>
- --------
(1) Irwin has found that NOW checking accounts and savings deposits are
generally not sensitive to changes in interest rates. Therefore, Irwin has
placed such liabilities in the "One to Five Years" category. It has also
found that, on average, money-market check deposits reprice between three
months and one year.
MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES
Irwin's loan portfolio, as of December 31, 1996, was made up primarily of
short-term fixed rate loans or variable rate loans. The average contractual
life on instalment loans is approximately three years, while mortgages are
generally variable over one- to five-year periods. Total loans as of December
31, 1996 are shown in the following table according to maturity
classifications: (i) one year or less; (ii) after one year through five years;
and (iii) after five years.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Maturity:
One year or less...................................... $ 9,227
After one year through five years..................... 3,389
After five years...................................... 1,838
-------
$14,454
=======
</TABLE>
The following table summarizes loans at December 31, 1996 with the due dates
after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Predetermined interest rates............................ $5,227
Floating or adjustable interest rates................... --
------
$5,227
======
</TABLE>
53
<PAGE>
Records were not available to present the above information in each category
listed in the first paragraph above and could not be reconstructed without
undue burden.
LOAN PORTFOLIO
Management believes that Irwin's loan portfolio is adequately diversified.
The loan portfolio contains no foreign or energy-related loans or significant
concentrations in any one industry, with the exception of residential real
estate mortgage loans, which constituted approximately 31% of Irwin's loan
portfolio as of December 31, 1996. As of December 31, 1996, Irwin had
outstanding loan commitments of $6.3 million. The amounts of loans outstanding
at the indicated dates is shown in the following table according to type of
loan.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, ---------------
1997 1996 1995
------------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial and industrial...................... $ 1,279 $ 1,489 $ 5,148
Agricultural................................... 2,227 1,293 1,114
Real estate--construction...................... 89 70 142
Real estate--mortgage, farmland................ 3,435 3,171 777
Real estate--mortgage, commercial.............. 841 854 673
Real estate--mortgage, residential............. 4,584 4,426 4,010
Consumer installment loans..................... 3,303 3,139 2,359
Other.......................................... 7 12 6
------- ------- -------
15,765 14,454 14,229
Less reserve for possible loan losses.......... 415 400 406
------- ------- -------
Total loans.................................. $15,350 $14,054 $13,823
======= ======= =======
</TABLE>
NONPERFORMING LOANS
A loan is placed on nonaccrual status when, in management's judgment, the
collection of the interest income from such loan appears doubtful. Interest
receivable that has been accrued in prior years and is subsequently determined
to have doubtful collectibility is charged to the allowance for possible loan
losses. Interest on loans that are classified as nonaccrual is recognized when
received. Past due loans are loans whose principal or interest is past due 90
days or more. In some cases, where borrowers are experiencing financial
difficulties, loans may be restructured to provide terms significantly
different from the original contractual terms.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, -------------
1997 1996 1995
------------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis........... $ -- $ -- $ --
Installment loans and term loans contractually past
due ninety days or more as to interest or principal
payments and still accruing........................ 22 1 --
Loans, the terms of which have been renegotiated to
price a reduction or deferral of interest or
principal because of deterioration in the financial
position of the borrower........................... -- -- --
Loans now current about which there are serious
doubts as to the ability of the borrower to comply
with present loan repayment terms.................. -- -- --
----- ------ ------
Total............................................. $ 22 $ 1 $ --
===== ====== ======
</TABLE>
As of March 31, 1997 and December 31, 1996, total nonperforming loans were
approximately .14% and .01%, respectively, of total loans outstanding at such
dates.
54
<PAGE>
In the opinion of management, any loans classified by regulatory authorities
as substandard or special mention that have not been disclosed above do not
(i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Any loans classified by regulatory authorities as a loss have been
charged off.
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges in
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are management's experience with loan losses, composition of the loan
portfolio, evaluation of possible future losses, current economic conditions
and other relevant factors. Irwin's allowance for loan losses was
approximately $400,000 at December 31, 1996, representing 2.77% of year end
total loans outstanding, compared with approximately $406,000 at December 31,
1995, which represented 2.85% of year end total loans outstanding.
The allowance for loan losses is reviewed monthly based on management's
evaluation of current risk characteristics of the loan portfolio, as well as
the impact of prevailing and expected economic business conditions. Management
considers the allowance for loan losses adequate to cover possible loan losses
on each outstanding loan with particular emphasis on any problem loans.
The following table presents an analysis of Irwin's loan loss experience for
the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, -----------------
1997 1996 1995
------------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average amount of loans outstanding........ $15,351 $15,295 $15,190
======= ======= =======
Balance of reserve for possible loan losses
at beginning of period.................... 400 406 393
------- ------- -------
Charge offs:
Commercial, financial and agricultural... -- (29) (8)
Real estate.............................. -- -- (5)
Consumer................................. (3) (6) (9)
Recoveries:
Commercial, financial and agricultural... 1 -- 19
Real estate.............................. -- -- 1
Consumer................................. 2 4 5
------- ------- -------
Net (charge-offs) recoveries........... -- (31) 3
Additions to reserve charged to operating
expenses.................................. 15 25 10
------- ------- -------
Balance of reserve for possible loan
losses.................................. $ 415 $ 400 $ 406
======= ======= =======
Ratio of net loan (charge-offs) recoveries
to average loan........................... N/A (.20)% .02%
======= ======= =======
</TABLE>
55
<PAGE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes the
allowance can be allocated only on an approximate basis. The allocation of the
allowances to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, -------------------------------------
1997 1996 1995
------------------ ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
industrial and
agricultural........... $ 95 22% $ 92 19% $ 93 44%
Real estate............. 83 57 80 59 81 39
Consumer................ 153 21 148 22 150 17
Unallocated............. 84 -- 80 -- 82 --
---- --- ---- --- ---- ---
$415 100% $400 100% $406 100%
==== === ==== === ==== ===
</TABLE>
INVESTMENT PORTFOLIO
Irwin manages a mix of asset and liability maturities in an effort to
control the effects of changes in the general level of interest rates on net
interest income. See "--Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on Irwin due to the rate variability and short-term maturities of its earning
assets. In particular, approximately 64% of Irwin's loan portfolio is
comprised of loans which mature or reprice within one year or less. Mortgage
loans, primarily with five- to fifteen-year maturities, are also made on a
variable rate basis with rates being adjusted every one to five years.
Additionally, 21% of the investment portfolio matures or reprices within one
year.
TYPES OF INVESTMENTS
The amortized cost and fair value of Irwin's investment securities are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
AMORTIZED COST GAINS LOSSES VALUE
-------------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1996:
U.S. Government and agency
securities................. $15,126 $ 19 $(39) $15,106
State and municipal
securities................. 1,611 69 -- 1,680
Mortgage-backed securities.. 164 1 (1) 164
Equity securities........... 225 -- (47) 178
------- ---- ---- -------
$17,126 $ 89 $(87) $17,128
======= ==== ==== =======
December 31, 1995:
U.S. Government and agency
securities................. $14,588 $ 91 $(15) $14,664
State and municipal
securities................. 1,988 146 -- 2,134
Mortgage-backed securities.. 200 2 -- 202
Equity securities........... 225 -- (35) 190
------- ---- ---- -------
$17,001 $239 $(50) $17,190
======= ==== ==== =======
</TABLE>
56
<PAGE>
The following table represents maturities and weighted average yields of
investment securities held by Irwin at December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------
AFTER ONE YEAR BUT AFTER FIVE YEARS BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS
---------------- ------------------- --------------------- -----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------- ---------- -------- ---------- --------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Other
U.S. Government
agencies(1)........... $ 3,179 5.80% $ 12,269 5.98% $ -- -- % $ -- -- %
Obligations of states
and other political
subdivisions(1)(2).... 232 10.72 781 11.15 613 8.21 54 8.21
</TABLE>
- --------
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the acquisition price of each security in that
range.
(2) Yields on securities of state and political subdivisions are stated on a
tax equivalent basis using a tax rate of 34%.
DEPOSITS
Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995
------------ ------------
AMOUNT RATE AMOUNT RATE
------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits............. $ 5,735 -- % $ 5,544 -- %
Interest-bearing demand and savings deposits.... 10,754 2.90 10,064 3.07
Time deposits................................... 15,785 5.56 15,482 5.38
------- -------
Total deposits.............................. $32,274 $31,090
======= =======
</TABLE>
Irwin has a large, stable base of time deposits, with little or no
dependence on volatile deposits of $100,000 or more. The time deposits are
principally certificates of deposit and individual retirement accounts
obtained for individual customers.
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1996 are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through 12 months and (iii) over 12 months.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less............................... $ 920
Over three through twelve months................... 2,355
Over twelve months................................. 262
------
Total.......................................... $3,537
======
</TABLE>
57
<PAGE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following table shows return on assets (net income divided by average
total assets), return on equity (net income divided by average shareholders'
equity), dividend payout ratio (dividends declared per share divided by net
income per share) and shareholders' equity to asset ratio (average
shareholders' equity divided by average total assets) for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Return on assets......................................... 1.19% 1.23%
Return on equity......................................... 8.72 9.15
Dividends payout ratio................................... 53.97 54.31
Equity to assets ratio................................... 13.66 13.39
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow requirements of
customers, who may be either depositors desiring to withdraw funds or
borrowers needing assurance that sufficient funds will be available to meet
their credit needs, and the ability of Irwin and The Bank of Ocilla to meet
those needs. Irwin and The Bank of Ocilla try to achieve and maintain
liquidity requirements primarily through management of short-term investments
(principally Federal funds sold) and monthly amortizing loans. Another source
of liquidity is the repayment of maturing single payment loans. In addition,
The Bank of Ocilla maintains relationships with correspondent banks which
could provide funds to The Bank of Ocilla on short notice, if needed.
The liquidity and capital resources of Irwin and The Bank of Ocilla are
monitored on a periodic basis by state and Federal regulatory authorities. At
December 31, 1996, The Bank of Ocilla's short-term investments were adequate
to cover any reasonably anticipated immediate need for funds. Irwin and The
Bank of Ocilla were aware of no events or trends likely to result in a
material change in their liquidity. At December 31, 1996, Irwin's and The Bank
of Ocilla's capital asset ratios were considered adequate based on guidelines
established by regulatory authorities. During 1996, Irwin increased its
capital by retaining net earnings of $209,000. After recording a decrease in
capital of $123,000 for unrealized losses on securities, net of taxes, and an
increase in capital of $26,000 due to the sale of treasury stock, total
capital increased during 1996 by $112,000. At December 31, 1996, total capital
of Irwin amounted to $5,296,000. At December 31, 1996, there were no
outstanding commitments for any major capital expenditures.
During the three months ended March 31, 1997, total capital increased
$52,000 to $5,348,000 at March 31, 1997. This increase in capital resulted
from net earnings for the three months of $126,000 by $74,000 in unrealized
losses on securities available for sale, net of taxes.
Irwin has entered into a definitive merger agreement with ABC, pending
approval by regulatory authorities and shareholders of Irwin. If approvals are
obtained, it is expected that the merger will be consummated on or before
September 30, 1997. Upon the consummation of the merger, The Bank of Ocilla
will be merged with and into Citizens Bank and will thereafter be operated as
a branch of Citizens Bank. Management believes that the merger will not
adversely impact the liquidity of The Bank of Ocilla.
In accordance with risk capital guidelines issued by the FRB, Irwin is
required to maintain a minimum standard of total capital to weighted risk
assets of 8%. Additionally, all member banks must maintain "core" or "Tier 1"
capital of at least 4% of total assets ("leverage ratio"). Member banks
operating at or near the 4% capital level are expected to have well-
diversified risks, including no undue interest rate risk exposure, excellent
control systems, good earnings, high asset quality, and well managed on- and
off-balance sheet activities; and, in general, be considered strong banking
organizations with a composite 1 rating under the CAMEL rating system of
banks. For all but the most highly rated banks meeting the above conditions,
the minimum leverage ratio is to be 4% plus an additional 100 to 200 basis
points.
58
<PAGE>
The following table summarizes the regulatory capital levels of Irwin at
December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------
ACTUAL REQUIRED EXCESS
-------------- -------------- --------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Leverage capital................ $5,269 13.62% $1,547 4.00% $3,722 9.62%
Risk-based capital:
Core capital.................. 5,269 30.55 690 4.00 4,579 26.55
Total capital................. 5,487 31.81 1,380 8.00 4,107 23.81
</TABLE>
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, The Bank of Ocilla has granted
commitments to extend credit to approved customers. Generally, these
commitments to extend credit have been granted on a temporary basis for
seasonal or inventory requirements and have been approved by The Bank of
Ocilla's Board of Directors. The Bank of Ocilla has also granted commitments
to approved customers for standby letters of credit. These commitments are
recorded in the financial statements when funds are disbursed or the financial
instruments become payable. The Bank uses the same credit policies for these
off-balance sheet commitments as they do for financial instruments that are
recorded in the consolidated financial statements. Commitments generally have
fixed expiration dates or other termination clauses and may require payment of
a fee. Because many of the commitment amounts expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements.
The following is a summary of the commitments to extend credit and standby
letters of credit outstanding at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit..................... $ 6,211 $ 5,608
Standby letters of credit........................ 105 99
----------- -----------
$ 6,316 $ 5,707
=========== ===========
</TABLE>
IMPACT OF INFLATION
The consolidated financial statements and related consolidated financial
data presented herein have been prepared in accordance with generally accepted
accounting principles and practices within the banking industry which require
the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact
on a financial institution's performance than the effects of general levels of
inflation.
IRWIN SHARES
The authorized capital stock of Irwin consists of 5,000,000 common shares,
$50.00 par value, of which 30,000 shares were issued with 770 shares held in
treasury and 29,230 shares outstanding at March 31, 1997. On March 31, 1997,
there were 142 holders of record of Irwin shares. For information concerning
the market value of such shares and dividends during the past three years, see
"MARKET VALUE OF SECURITIES AND DIVIDENDS--Irwin."
59
<PAGE>
OTHER MATTERS
The Special Meeting is called for the purposes set forth in the Notice and
Proxy Statement/Prospectus. The Irwin Board of Directors does not know of any
matters for action by shareholders at such meeting other than the matters
described in the Notice and Proxy Statement/Prospectus. The enclosed Proxy,
however, will confer discretionary authority with respect to matters which are
not known to the Irwin Board of Directors at this time and which may properly
come before the Special Meeting. It is the intention of the persons named in
the Proxy to vote in pursuance of the Proxy with respect to such matters in
accordance with their best judgment.
EXPERTS
The consolidated financial statements of ABC as of December 31, 1996 and
1995 and for the years ended December 31, 1996, 1995 and 1994 included in this
Proxy Statement/Prospectus have been audited by Mauldin & Jenkins LLC,
independent certified public accountants, to the extent indicated in their
report included herein, and are included herein in reliance upon such report
and upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Irwin as of December 31, 1996 and
for the year ended December 31, 1996 included in this Proxy
Statement/Prospectus have been audited by Mauldin & Jenkins LLC, independent
certified public accountants, to the extent indicated in their report included
herein, and are included herein in reliance upon such report and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Irwin for the year ended December
31, 1995 included in this Proxy Statement/Prospectus have been audited by
Meeks, Roberts, Ashley, Sumner & Sirmans, independent certified public
accountants, to the extent indicated in their report included herein, and are
included in reliance upon such report and upon the authority of said firm as
experts in accounting and auditing.
Representatives of Mauldin & Jenkins LLC are expected to be present at the
Special Meeting, will have the opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate
questions.
LEGAL OPINIONS
A legal opinion to the effect that the issuance of the shares of ABC Common
Stock offered hereby has been duly authorized by ABC and that such shares,
when issued in accordance with the Merger Agreement, will be duly issued and
outstanding and fully paid and non-assessable, has been rendered by Rogers &
Hardin LLP. Rogers & Hardin LLP has also rendered an opinion as to certain
federal income tax consequences of the Merger.
60
<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA:
Introductory Note.......................................................
ABC Bancorp and Subsidiaries Historical combined with Irwin Bankcorp,
Inc. .................................................................. PF-1
--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 BANCORP AND SUBSIDIARIES HISTORICAL FINANCIAL DATA:
ABC Bancorp and Subsidiaries Consolidated Financial Statements
(Unaudited)............................................................ F-1
--Consolidated Balance Sheets--March 31, 1997 and December 31, 1996... F-1
--Consolidated Statements of Income--Three Months Ended March 31, 1997
and 1996............................................................. F-2
--Consolidated Statements of Cash Flows--Three Months Ended March 31,
1997 and 1996........................................................ F-3
--Notes to ABC Bancorp and Subsidiaries Consolidated Financial
Statements........................................................... F-4
ABC Bancorp and Subsidiaries Consolidated Financial Report.............. F-5
--Independent Auditor's Report........................................ F-6
--Consolidated Balance Sheets--December 31, 1996 and 1995............. F-7
--Consolidated Statements of Income--Years ended December 31, 1996,
1995 and 1994........................................................ F-8
--Consolidated Statements of Stockholders' Equity--Years ended
December 31, 1996, 1995 and 1994................................... F-9
--Consolidated Statements of Cash Flows--Years ended December 31,
1996, 1995 and 1994................................................ F-10
--Notes to ABC Bancorp and Subsidiaries Consolidated Financial
Statements........................................................... F-12
IRWIN BANKCORP, INC. AND SUBSIDIARY HISTORICAL FINANCIAL DATA:
Irwin Bankcorp, Inc. and Subsidiary Consolidated Financial Statements
(Unaudited)............................................................ F-32
--Consolidated Balance Sheets--March 31, 1997 and December 31, 1996... F-32
--Consolidated Statements of Income--Three Months Ended March 31, 1997
and 1996............................................................. F-33
--Consolidated Statements of Cash Flows--Three Months Ended March 31,
1997 and 1996........................................................ F-34
--Notes to Irwin Bankcorp, Inc. and Subsidiary Consolidated Financial
Statements........................................................... F-35
Irwin Bankcorp, Inc. and Subsidiary Consolidated Financial Report....... F-36
--Independent Auditor's Report........................................ F-37
--Independent Auditor's Report (December 31, 1995 Financial
Statements).......................................................... F-38
--Consolidated Balance Sheet--December 31, 1996....................... F-39
--Consolidated Statements of Income--Years ended December 31, 1996 and
1995................................................................. F-40
--Consolidated Statements of Stockholders' Equity--Years ended
December 31, 1996 and 1995......................................... F-41
--Consolidated Statements of Cash Flows--Years ended December 31, 1996
and 1995............................................................. F-42
--Notes to Irwin Bankcorp, Inc. and Subsidiary Consolidated Financial
Statements........................................................... F-43
</TABLE>
61
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The Unaudited Pro Forma Condensed Consolidated Financial Data included
herein give effect to the Merger. Irwin's information is combined in this
Proxy Statement/Prospectus. Irwin 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. Irwin historical amounts were derived from
the consolidated financial statements of Irwin included herein.
The Unaudited Pro Forma Condensed Consolidated Financial Data do not purport
to present the financial position of ABC had the Merger 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 and Irwin, including the notes thereto,
included herein.
62
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH IRWIN BANKCORP
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1997
The following unaudited pro forma condensed balance sheet as of March 31,
1997 has been prepared to reflect the acquisition by ABC of 100% of Irwin
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 interests. These statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
PRO FORMA
ABC IRWIN ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTES A AND B) COMBINED
---------- ---------- --------------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....... $ 30,679 $ 1,511 $ -- $ 32,190
Federal funds sold............ 1,887 3,900 -- 5,787
Investment securities......... 119,899 16,382 -- 136,281
Loans, net.................... 439,083 15,350 -- 454,433
Premises and equipment........ 16,533 542 -- 17,075
Investment in Irwin........... -- -- 5,348 (1) --
-- -- (5,348)(2) --
Excess cost over fair value of
assets acquired.............. 7,072 -- -- 7,072
Other assets.................. 16,560 996 -- 17,556
-------- ------- ------- --------
$631,713 $38,681 $ -- $670,394
======== ======= ======= ========
LIABILITIES AND EQUITY
Deposits...................... $531,801 $32,873 $ -- $564,674
Other liabilities............. 9,733 460 -- 10,193
Other borrowings.............. 31,733 -- -- 31,733
-------- ------- ------- --------
Total liabilities........... 573,267 33,333 -- 606,600
-------- ------- ------- --------
EQUITY
Common stock.................. 7,018 -- 500 (1) 7,518
Capital surplus............... 28,067 -- 4,848 (1) 32,915
Retained earnings............. 25,396 -- -- 25,396
Unrealized gains on securities
available for sale, net of
taxes........................ (480) -- -- (480)
Treasury stock................ (1,555) -- -- (1,555)
Equity of Irwin............... -- 5,348 (5,348)(2) --
-------- ------- ------- --------
Total equity................ 58,446 5,348 -- 63,794
-------- ------- ------- --------
$631,713 $38,681 $ -- $670,394
======== ======= ======= ========
</TABLE>
PF-1
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH IRWIN BANKCORP
PRO FORMA CONDENSED STATEMENTS OF INCOME
The following unaudited pro forma condensed statements of income have been
prepared to reflect the acquisition by ABC of 100% of Irwin and 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
interests. These statements should be read in conjunction with the other
financial statements and notes thereto included elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
1997 1996
------------------------------- -------------------------------
PRO FORMA PRO FORMA
ABC IRWIN COMBINED ABC IRWIN COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $13,496 $697 $14,193 $10,097 $712 $10,809
Interest expense........ 5,865 291 6,156 4,474 307 4,781
------- ---- ------- ------- ---- -------
Net interest income... 7,631 406 8,037 5,623 405 6,028
Provision for loan
losses................. 584 15 599 248 15 263
------- ---- ------- ------- ---- -------
Net interest income
after provision for
loan losses.......... 7,047 391 7,438 5,375 390 5,765
Other income............ 1,736 66 1,802 1,333 78 1,411
Other expense........... 6,172 288 6,460 4,198 279 4,477
------- ---- ------- ------- ---- -------
Income from continuing
operations before
income taxes......... 2,611 169 2,780 2,510 189 2,699
Income taxes............ 879 43 922 835 32 867
------- ---- ------- ------- ---- -------
Income from continuing
operations........... $ 1,732 $126 $ 1,858 $ 1,675 $157 $ 1,832
======= ==== ======= ======= ==== =======
Income per share from
continuing
operations........... $ 0.26 $ 0.27
======= =======
</TABLE>
PF-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH IRWIN BANKCORP
PRO FORMA CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994
------------------------------- ------------------------------- -------------------------------
PRO FORMA PRO FORMA PRO FORMA
ABC IRWIN COMBINED ABC IRWIN COMBINED ABC IRWIN COMBINED
HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A) HISTORICAL HISTORICAL (NOTE A)
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income........ $47,776 $2,810 $50,586 $38,231 $2,720 $40,951 $30,548 $2,473 $33,021
Interest expense....... 21,135 1,189 22,324 16,225 1,142 17,367 11,782 935 12,717
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income... 26,641 1,621 28,262 22,006 1,578 23,584 18,766 1,538 20,304
Provision for loan
losses................ 1,894 25 1,919 1,231 10 1,241 955 33 988
------- ------ ------- ------- ------ ------- ------- ------ -------
Net interest income
after provision for
loan losses.......... 24,747 1,596 26,343 20,775 1,568 22,343 17,811 1,505 19,316
Other income........... 6,284 247 6,531 4,674 230 4,904 4,273 193 4,466
Other expense.......... 21,663 1,214 22,877 16,921 1,206 18,127 15,930 1,142 17,072
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations before
income taxes......... 9,368 629 9,997 8,528 592 9,120 6,154 556 6,710
Income taxes........... 2,667 172 2,839 2,611 141 2,752 1,837 108 1,945
------- ------ ------- ------- ------ ------- ------- ------ -------
Income from continuing
operations........... $ 6,701 $ 457 $ 7,158 $ 5,917 $ 451 $ 6,368 $ 4,317 $ 448 $ 4,765
======= ====== ======= ======= ====== ======= ======= ====== =======
Income per share from
continuing
operations............ $ 1.01 $ 0.95 $ 0.76
======= ======= =======
</TABLE>
PF-3
<PAGE>
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH IRWIN BANKCORP
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, 1997. 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) Issue of 500,000 shares of ABC common stock, $1 par value, in exchange
for 100% of the equity of Irwin.
(2) Elimination of investment in Irwin.
Statements of Income:
(3) Pro forma income per common share is based on the average number of
shares that would have been outstanding during the respective periods.
PF-4
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Cash and due from banks....................... $ 30,679 $ 40,894
Federal funds sold............................ 1,887 5,120
Securities available for sale, at fair value.. 87,700 86,148
Securities held to maturity, at cost.......... 32,199 31,990
Loans......................................... 446,201 438,390
Less allowance for loan losses................ 7,118 6,873
-------- --------
Loans, net................................ 439,083 431,517
-------- --------
Premises and equipment, net................... 16,533 15,640
Other assets.................................. 23,632 23,723
-------- --------
$631,713 $635,032
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing demand.................. $ 71,804 $ 81,448
Interest-bearing demand..................... 109,459 116,777
Savings..................................... 43,497 43,332
Time, $100,000 and over..................... 75,593 78,998
Other time.................................. 231,448 225,183
-------- --------
Total deposits............................ 531,801 545,738
Federal funds purchased and securities sold
under repurchase agreements.................. 6,983 997
Other borrowings.............................. 24,750 24,200
Other liabilities......................... 9,733 6,423
-------- --------
Total liabilities............................. 573,267 577,358
-------- --------
Stockholders' equity
Common stock, par value $1; 15,000,000
shares authorized; 7,017,684 shares
issued..................................... 7,018 7,018
Surplus..................................... 28,067 28,067
Retained earnings........................... 25,396 24,203
Unrealized (losses) on securities available
for sale, net of taxes..................... (480) (59)
-------- --------
60,001 59,229
Less cost of 272,353 shares acquired for the
treasury................................... (1,555) (1,555)
-------- --------
Total stockholders' equity................ 58,446 57,674
-------- --------
$631,713 $635,032
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-1
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Interest income
Interest and fees on loans........................... $ 11,623 $ 8,283
Interest on taxable securities....................... 1,509 1,144
Interest on nontaxable securities.................... 272 188
Interest on deposits in other banks.................. 47 3
Interest on Federal funds sold....................... 45 479
----------- -----------
13,496 10,097
----------- -----------
Interest expense
Interest on deposits................................. 5,489 4,378
Interest on securities sold under repurchase
agreements and other borrowings..................... 376 96
----------- -----------
5,865 4,474
----------- -----------
Net interest income................................ 7,631 5,623
Provision for loan losses.............................. 584 248
----------- -----------
Net interest income after provision for loan
losses............................................ 7,047 5,375
----------- -----------
Other income
Service charges on deposit accounts.................. 1,225 967
Other service charges, commissions and fees.......... 477 316
Other................................................ 34 50
----------- -----------
1,736 1,333
----------- -----------
Other expense
Salaries and employee benefits....................... 3,403 2,280
Equipment expense.................................... 531 321
Occupancy expense.................................... 387 305
Amortization of intangible assets.................... 168 79
Data processing fees................................. 92 148
Directors fees....................................... 145 90
FDIC premiums........................................ 62 28
Other operating expenses............................. 1,384 947
----------- -----------
6,172 4,198
----------- -----------
Income before income taxes......................... 2,611 2,510
Applicable income taxes................................ 879 835
----------- -----------
Net income......................................... $ 1,732 $ 1,675
=========== ===========
Income per common share................................ $ 0.26 $ 0.27
=========== ===========
Average shares outstanding............................. 6,745,331 6,242,491
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 1,732 $ 1,675
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 101 308
Provision for loan loses.......................... 584 248
Amortization of intangible assets................. 168 89
Other prepaids, deferrals and accruals, net....... 3,447 1,374
----------- -----------
Total adjustments............................... 4,300 2,019
----------- -----------
Net cash provided by operating activities....... 6,032 3,694
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities... 16,531 7,242
Purchase of investment securities................... (24,890) (15,904)
Proceeds from sales of securities available for
sale............................................... 5,964 661
Decrease in Federal funds sold...................... 3,233 25,130
Increase in loans................................... (8,150) (12,404)
Purchase of premises and equipment.................. (994) (498)
----------- -----------
Net cash provided by (used in) investing
activities..................................... (8,306) 4,227
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits............................ (13,937) (10,343)
Net increase (decrease) in repurchase agreements.... 5,986 (2,958)
Increase (decrease) in short-term borrowings........ 550 (1,000)
Proceeds from sale of stock of pooled subsidiary.... -- 13
Dividends paid...................................... (540) (338)
----------- -----------
Net cash used in financing activities........... (7,941) (14,626)
----------- -----------
Net decrease in cash and due from banks............. (10,215) (6,705)
Cash and due from banks at beginning of period...... 40,894 29,841
----------- -----------
Cash and due from banks at end of period............ $ 30,679 $ 23,136
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. METHOD OF PRESENTATION
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, 1996 and 1995 included
elsewhere in this Proxy Statement/Prospectus.
All material intercompany balances and transactions have been eliminated.
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, 1997 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2. STOCKHOLDERS' EQUITY
As of April 15, 1997, a 5-for-4 stock split effected in the form of a 25%
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>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
F-5
<PAGE>
INDEPENDENT AUDITORS' 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, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. 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 did not audit the financial statements of First National
Financial Corporation, which statements reflect total assets of $53.7 million
as of December 31, 1995 and total revenue of $4.6 million and $3.5 million for
the years ended December 31, 1995 and 1994, respectively. These statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for First National Financial
Corporation as of December 31, 1995 and for the years ended December 31, 1995
and 1994, is based solely on the report of the other auditors.
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, based upon our audits and the report of other auditors, 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, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Albany, Georgia
January 31, 1997, except for
Note 15 as to which the
date is February 27, 1997
F-6
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
------
Cash and due from banks.................................... $ 40,894 $ 29,841
Federal funds sold......................................... 5,120 51,855
Securities available for sale, at fair value (Note 3)...... 86,148 65,314
Securities held to maturity, at cost (fair value $32,238
and $19,408) (Note 3)..................................... 31,990 19,191
Loans (Note 4)............................................. 438,390 305,242
Less allowance for loan losses............................. 6,873 5,484
-------- --------
Loans, net............................................. 431,517 299,758
-------- --------
Premises and equipment, net (Note 5)....................... 15,640 10,524
Excess of cost over net assets of banks acquired........... 7,239 2,415
Other assets............................................... 16,484 12,241
-------- --------
$635,032 $491,139
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing demand............................... $ 81,448 $ 74,687
Interest-bearing demand.................................. 116,777 100,512
Savings.................................................. 43,332 29,614
Time, $100,000 and over.................................. 78,998 60,226
Other time............................................... 225,183 167,142
-------- --------
Total deposits......................................... 545,738 432,181
Federal funds purchased and securities sold under
agreements to repurchase.................................. 997 1,887
Other borrowings (Note 8).................................. 24,200 5,800
Other liabilities.......................................... 6,423 4,500
-------- --------
Total liabilities...................................... 577,358 444,368
-------- --------
Commitments and contingent liabilities (Note 10)...........
Stockholders' equity
Common stock, par value $1; 15,000,000 shares authorized,
5,614,443 and 5,067,209 shares issued, respectively..... 5,614 5,067
Capital surplus.......................................... 29,471 23,826
Retained earnings........................................ 24,203 19,184
Unrealized gains (losses) on securities available for
sale, net of taxes...................................... (59) 249
-------- --------
59,229 48,326
Less cost of 217,882 shares acquired for the treasury.... (1,555) (1,555)
-------- --------
Total stockholders' equity............................. 57,674 46,771
-------- --------
$635,032 $491,139
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income
Interest and fees on loans......................... $40,711 $31,929 $25,239
Interest on taxable securities..................... 5,192 4,093 3,543
Interest on nontaxable securities.................. 909 725 788
Interest on deposits in other banks................ 5 20 75
Interest on Federal funds sold..................... 959 1,464 903
------- ------- -------
47,776 38,231 30,548
------- ------- -------
Interest expense
Interest on deposits............................... 19,746 15,613 11,434
Interest on other borrowings....................... 1,389 612 348
------- ------- -------
21,135 16,225 11,782
------- ------- -------
Net interest income.............................. 26,641 22,006 18,766
Provision for loan losses (Note 4)................... 1,894 1,231 955
------- ------- -------
Net interest income after provision for loan
losses.......................................... 24,747 20,775 17,811
------- ------- -------
Other income
Service charges on deposit accounts................ 4,554 3,666 3,416
Other service charges, commissions and fees........ 500 422 336
Gain (loss) on sale of securities.................. (5) (3) 7
Other.............................................. 1,235 589 514
------- ------- -------
6,284 4,674 4,273
------- ------- -------
Other expenses
Salaries and employee benefits (Note 6)............ 10,705 8,558 7,816
Equipment expense.................................. 1,701 1,489 1,515
Occupancy expense.................................. 1,337 1,052 939
Merger and acquisition expense..................... 708 -- --
Amortization of intangible assets.................. 487 310 310
Data processing fees............................... 500 486 566
Directors fees..................................... 462 424 395
FDIC premiums...................................... 367 481 801
Stationary and supplies expense.................... 592 365 338
Other operating expenses........................... 4,804 3,756 3,250
------- ------- -------
21,663 16,921 15,930
------- ------- -------
Income before income taxes....................... 9,368 8,528 6,154
Applicable income taxes (Note 9)..................... 2,667 2,611 1,837
------- ------- -------
Net income....................................... $ 6,701 $ 5,917 $ 4,317
======= ======= =======
Income per common share.............................. $ 1.29 $ 1.22 $ 0.98
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON STOCK AVAILABLE TREASURY STOCK
-------------------- CAPITAL RETAINED FOR SALE, ----------------
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAXES SHARES COST TOTAL
--------- --------- ------- -------- -------------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993................... 3,414,751 $3,415 $17,134 $11,201 $ -- 183,412 $(1,680) $30,070
Net income............. -- -- -- 4,317 -- -- -- 4,317
Cash dividends
declared, $.29 per
share................. -- -- -- (884) -- -- -- (884)
Purchase and
simultaneous
retirement of the
common stock of pooled
subsidiary............ (4,167) (4) (24) -- -- -- -- (28)
Purchase of minority
interest in pooled
subsidiary............ -- -- (34) (82) -- -- -- (116)
Proceeds from sale of
stock, net of stock
offering expense...... 747,500 747 7,577 -- -- -- -- 8,324
Net change in
unrealized losses on
securities available
for sale, net of
taxes................. -- -- -- -- (601) -- -- (601)
--------- ------ ------- ------- ----- ------- ------- -------
BALANCE, DECEMBER 31,
1994................... 4,158,084 4,158 24,653 14,552 (601) 183,412 (1,680) 41,082
Net income............. -- -- -- 5,917 -- -- -- 5,917
Cash dividends
declared, $.35 per
share................. -- -- -- (1,176) -- -- -- (1,176)
Cash dividends paid by
pooled subsidiary..... -- -- -- (109) -- -- -- (109)
Exercise of options by
shareholders of pooled
subsidiary............ 10,038 10 75 -- -- -- -- 85
Four-for-three common
stock split........... 899,087 899 (899) -- -- 61,137 -- --
Purchase of fractional
shares................ -- -- (3) -- -- -- -- (3)
Stock issued under
stock option purchase
plan.................. -- -- -- -- -- (26,667) 125 125
Net change in
unrealized gains on
securities available
for sale, net of
taxes................. -- -- -- -- 850 -- -- 850
--------- ------ ------- ------- ----- ------- ------- -------
BALANCE, DECEMBER 31,
1995................... 5,067,209 5,067 23,826 19,184 249 217,882 (1,555) 46,771
Net income............. -- -- -- 6,701 -- -- -- 6,701
Cash dividends
declared, $.40 per
share................. -- -- -- (1,682) -- -- -- (1,682)
Adjustments to record
acquisition of a
purchased subsidiary.. 402,271 402 5,543 -- (196) -- -- 5,749
Exercise of options and
capital contributions
by shareholders of
pooled subsidiaries
prior to merger....... 144,963 145 109 -- -- -- -- 254
Purchase of fractional
shares................ -- -- (7) -- -- -- -- (7)
Net change in
unrealized gains
(losses) on securities
available for sale,
net of taxes.......... -- -- -- -- (112) -- -- (112)
--------- ------ ------- ------- ----- ------- ------- -------
BALANCE, DECEMBER 31,
1996................... 5,614,443 $5,614 $29,471 $24,203 $ (59) 217,882 $(1,555) $57,674
========= ====== ======= ======= ===== ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 6,701 $ 5,917 $ 4,317
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization................. 1,515 1,356 1,293
Amortization of intangible assets............. 487 310 310
Net (gains) losses on securities available for
sale......................................... 5 3 (7)
Provision for loan losses..................... 1,894 1,231 955
Provision for deferred taxes.................. (431) (223) 26
Write-downs of other real estate owned........ -- -- 53
Increase in interest receivable............... (577) (1,066) (1,061)
Increase (decrease) in interest payable....... (90) 440 211
Increase (decrease) in taxes payable.......... (531) 98 60
Other prepaids, deferrals and accruals, net... 1,444 (700) (920)
-------- -------- --------
Total adjustments........................... 3,716 1,449 920
-------- -------- --------
Net cash provided by operating activities... 10,417 7,366 5,237
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest-bearing deposits in banks.. -- 298 1,459
Purchases of securities available for sale...... (35,986) (32,756) (11,196)
Purchases of securities held to maturity........ (2,871) (2,653) (12,191)
Proceeds from maturities of securities available
for sale....................................... 22,052 7,741 1,250
Proceeds from sale of securities available for
sale........................................... 4,638 7,444 4,308
Proceeds from maturities of securities held to
maturity....................................... 1,894 17,146 13,195
(Increase) decrease in Federal funds sold....... 46,735 (23,863) 13,625
Increase in loans, net.......................... (53,712) (34,774) (39,474)
Net cash paid for purchased subsidiary.......... (3,947) -- --
Purchase of minority interest by pooled
subsidiary..................................... -- -- (575)
Purchase of premises and equipment.............. (3,715) (886) (2,525)
Proceeds from the sale of premises and
equipment...................................... 48 24 22
-------- -------- --------
Net cash used in investing activities....... (24,864) (62,279) (32,102)
-------- -------- --------
</TABLE>
F-10
<PAGE>
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits............................... $22,061 $57,052 $28,232
Decrease in Federal funds purchased and securities
sold under agreements to repurchase............... (2,690) (451) (842)
Proceeds from other borrowings..................... 12,600 4,600 1,500
Repayment of other borrowings...................... (5,200) (150) (5,782)
Dividends paid..................................... (1,518) (1,186) (645)
Dividends paid to minority interest of pooled
subsidiary........................................ -- -- (24)
Proceeds from stock offering, net.................. -- -- 8,324
Proceeds from sale of stock of pooled subsidiary... 254 85 --
Proceeds from exercise of stock options............ -- 125 --
Purchase of fractional shares...................... (7) (3) --
Purchase of treasury shares of pooled subsidiary... -- -- (28)
------- ------- -------
Net cash provided by financing activities...... 25,500 60,072 30,735
------- ------- -------
Net increase in cash and due from banks............ 25,500 60,072 30,735
Cash and due from banks at beginning of year....... 29,841 24,682 20,812
------- ------- -------
Cash and due from banks at end of year............. $40,894 $29,841 $24,682
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................... $21,225 $15,785 $11,571
Income taxes..................................... $ 3,629 $ 2,736 $ 1,751
NONCASH TRANSACTION
Net change in unrealized gains (losses) on
securities available for sale..................... $ (154) $ 812 $ (579)
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
ABC Bancorp, (the "Company") is a multi-bank holding company whose business
is presently conducted by its subsidiary banks (the "Banks"). Through the
Banks, the Company operates a full service banking business and offers a broad
range of retail and commercial banking services to its customers located in a
market area which includes South Georgia and Southeast Alabama. The Company
and the Banks are subject to the regulations of certain Federal and state
agencies and are periodically examined by those regulatory agencies.
Basis of Presentation
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 Company's consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation. Results of operations of
purchased banks are included from the dates of acquisition. Following the
purchase method of accounting, the assets and liabilities of purchased banks
are stated at estimated fair values at the date of acquisition.
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.
Securities
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held to maturity and reported at amortized cost.
All other debt securities are classified as available for sale and carried at
fair value with net unrealized gains and losses included in stockholders'
equity net of tax. Marketable equity securities are carried at fair value with
net unrealized gains and losses included in stockholders' equity. Other equity
securities without a readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
A decline in the fair value below cost of any security that is deemed other
than temporary is charged to earnings resulting in the establishment of a new
cost basis for the security.
F-12
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loans Held for Sale
Loans held for sale include mortgage and other loans and are carried at the
lower of aggregate cost or fair value.
Loans
Loans are carried at their 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.
Loan origination fees and certain direct costs of most loans are recognized
at the time the loan is recorded. Loan origination fees and costs incurred for
other loans are deferred and recognized as income over the life of the loan.
Because net origination loan fees and costs are not material, the results of
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 maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. 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.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When accrual of interest is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to collect
all principal and interest payments due in accordance with the terms of the
loan agreement. Individually identified impaired loans are measured based on
the present value of payments expected to be received, using the contractual
loan rate as the discount rate. Alternatively, measurement may be based on
observable market prices or, for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses. Changes to the valuation allowance are recorded
as a component of the provision for loan losses.
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:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements........................................... 15-40
Furniture and equipment.............................................. 5-7
</TABLE>
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
F-13
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 for banks acquired prior to 1996.
Excess acquisition cost of Southland Bank acquired in 1996 is being amortized
on the straight-line method over 15 years.
Income Taxes
Income tax expense consists of current and deferred taxes. Current income
tax provisions approximate taxes to be paid or refunded for the applicable
year. Deferred tax assets and liabilities are recognized on the temporary
differences between the bases of assets and liabilities as measured by tax
laws and their bases as reported in the financial statements. Deferred tax
expense or benefit is then recognized for the change in deferred tax assets or
liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards, and tax
credits will be realized. A valuation allowance is recorded for those deferred
tax items for which it is more likely than not that realization will not
occur.
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.
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-14
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. ACQUISITIONS
On June 21, 1996, the Company acquired all of the outstanding common stock
of Southland Bancorporation ("Southland") in exchange for 402,271 shares of
the Company's common stock and $5,880,000 in cash. The excess of purchase
price over net book value of assets acquired amounted to $5,310,000. The fair
value of assets acquired was deemed to approximate their recorded value;
therefore, the excess cost has been accounted for as goodwill and is being
amortized over a period of 15 years. Immediately following the merger,
Southland was liquidated and its wholly-owned subsidiary, Southland Bank,
became a wholly-owned subsidiary of the Company.
The acquisition has been accounted for as a purchase transaction and,
accordingly, the operations of Southland Bank have been included in the
consolidated financial statements of the Company only from June 21, 1996, the
date of acquisition. Had the acquisition of Southland Bank occurred on January
1, 1995, pro forma unaudited consolidated results of operations (after
restatement for the poolings of interest described below) for the years ended
December 31, 1996 and 1995 would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net interest income................................ $ 28,970 $ 25,941
Other income....................................... 6,851 6,256
Net income......................................... 6,891 6,352
Net income per share............................... 1.28 1.21
</TABLE>
On July 31, 1996, the Company acquired all of the outstanding common stock
of Central Bankshares, Inc. ("Central") in exchange for 524,300 shares of the
Company's common stock and a nominal amount of cash in lieu of fractional
shares. Immediately following the merger, Central was liquidated and its
wholly-owned subsidiary, Central Bank & Trust, became a wholly-owned
subsidiary of the Company. On August 31, 1996, the Company acquired all of the
outstanding common stock of First National Financial Corporation ("First
National") in exchange for 725,772 shares of the Company's common stock and a
nominal amount of cash in lieu of fractional shares. Immediately following the
merger, First National was liquidated and its wholly-owned subsidiary, First
National Bank of South Georgia, became a wholly-owned subsidiary of the
Company. On December 31, 1996, the Company acquired all of the outstanding
common stock of M & F Financial Corporation ("M & F") in exchange for 365,026
shares of the Company's common stock and a nominal amount of cash in lieu of
fractional shares. Immediately following the merger, M & F was liquidated and
its wholly-owned subsidiary, Merchants & Farmers Bank, became a wholly-owned
subsidiary of the Company.
F-15
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisitions of Central, First National and M & F have been accounted
for as poolings of interests and, accordingly, all prior financial statements
have been restated to include the accounts and operations of the pooled
companies. Net interest income and net income of the separate companies for
periods preceding the mergers are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net interest income:
ABC.............................................. $ 16,030 $ 13,500
Central.......................................... 2,182 2,005
First National................................... 2,152 1,724
M & F............................................ 1,642 1,537
----------- -----------
Combined......................................... $ 22,006 $ 18,766
=========== ===========
Net income:
ABC.............................................. $ 4,341 $ 3,100
Central.......................................... 499 457
First National................................... 612 316
M & F............................................ 465 444
----------- -----------
Combined......................................... $ 5,917 $ 4,317
=========== ===========
</TABLE>
F-16
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. INVESTMENTS IN SECURITIES
Under special provisions adopted by the Financial Accounting Standards Board
in October 1995, the Company transferred $21,181,000 from securities held to
maturity to securities available for sale on December 31, 1995, resulting in a
net unrealized gain of $131,000 which was included in stockholders' equity at
$87,000 net of related taxes of $44,000.
The amortized cost and approximate fair values of investments in securities
at December 31, 1996 and 1995 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, 1996:
U. S. Government and agency
securities...................... $69,618 $232 $(429) $69,421
Mortgage-backed securities....... 12,391 134 (52) 12,473
State and municipal securities... 3,918 58 -- 3,976
Other securities................. 300 -- (22) 278
------- ---- ----- -------
$86,227 $424 $(503) $86,148
======= ==== ===== =======
December 31, 1995:
U. S. Government and agency
securities...................... $53,363 $430 $(183) $53,610
Mortgage-backed securities....... 11,264 173 (15) 11,422
Other securities................. 300 -- (18) 282
------- ---- ----- -------
$64,927 $603 $(216) $65,314
======= ==== ===== =======
Securities Held to Maturity
December 31, 1996:
U. S. Government and agency
securities...................... $11,238 $-- $(200) $11,038
Mortgage-backed securities....... 4,326 27 (44) 4,309
State and municipal securities... 16,426 493 (28) 16,891
------- ---- ----- -------
$31,990 $520 $(272) $32,238
======= ==== ===== =======
December 31, 1995:
U. S. Government and agency
securities...................... $ 59 $ 1 $ -- $ 60
Mortgage-backed securities....... 4,704 10 (25) 4,689
State and municipal securities... 14,428 337 (106) 14,659
------- ---- ----- -------
$19,191 $348 $(131) $19,408
======= ==== ===== =======
</TABLE>
F-17
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and fair value of securities as of December 31, 1996 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 COST FAIR VALUE AMORTIZED COST FAIR VALUE
---------------- -------------- --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or
less................... $ 21,031 $ 21,053 $ 496 $ 499
Due from one year to
five years............. 40,634 40,588 11,861 11,850
Due from five to ten
years.................. 7,717 7,600 13,748 13,953
Due after ten years..... 4,154 4,156 1,559 1,627
Mortgage-backed
securities............. 12,391 12,473 4,326 4,309
Marketable equity
securities............. 300 278 -- --
-------------- -------------- ------------- -------------
$ 86,227 $ 86,148 $ 31,990 $ 32,238
============== ============== ============= =============
</TABLE>
Securities with a carrying value of $76,885,000 and $47,126,000 a December
31, 1996 and 1995, respectively, were pledged to secure public deposits and
for other purposes.
Gains and losses on sales of securities available for sale consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995 1994
------ ------ ------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Gross gains on sales of securities.................. $ 13 $ 24 $ 7
Gross losses on sales of securities................. (18) (27) --
------ ------ ------
Net realized gains (losses) on sales of securities
available for sale................................. $ (5) $ (3) $ 7
====== ====== ======
</TABLE>
NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial and financial.......................... $ 68,283 $ 45,892
Agricultural...................................... 34,232 21,704
Real estate--construction......................... 13,542 3,589
Real estate--mortgage, farmland................... 49,807 46,255
Real estate--mortgage, commercial................. 88,854 59,053
Real estate--mortgage, residential................ 117,022 71,345
Consumer instalment loans......................... 64,433 56,004
Other............................................. 2,217 1,400
----------- -----------
438,390 305,242
Allowance for loan losses......................... 6,873 5,484
----------- -----------
$ 431,517 $ 299,758
=========== ===========
</TABLE>
The total recorded investment in impaired loans was $5,130,000 and
$2,259,000 at December 31, 1996 and 1995, respectively. Included in these
loans were $2,408,000 and $1,006,000 that had related allowances for loan
F-18
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
losses of $609,000 and $163,000 at December 31, 1996 and 1995, respectively.
The average recorded investment in impaired loans for 1996 and 1995 was
$4,024,000 and $3,089,000, respectively. Interest income on impaired loans of
$159,000 and $161,000 was recognized for cash payments received for the years
ended 1996 and 1995, respectively.
The Company has granted loans to certain directors, executive officers, and
related entities of the Company and the Banks. 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.
Changes in related party loans for the years ended December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year..................... $ 12,815 $ 11,116
Advances..................................... 19,595 10,321
Repayments................................... (8,212) (8,865)
Transactions due to change(s) in related
parties..................................... 381 243
----------- -----------
Balance, end of year........................... $ 24,579 $ 12,815
=========== ===========
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995 1994
------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year..................... $ 5,484 $4,776 $ 4,514
Allowance for loan losses of acquired
subsidiary.................................. 1,211 -- --
Provision charged to operations.............. 1,894 1,231 955
Loans charged off............................ (2,256) (966) (1,267)
Recoveries................................... 540 443 574
------- ------ -------
Balance, end of year........................... $ 6,873 $5,484 $ 4,776
======= ====== =======
</TABLE>
NOTE 5. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land.............................................. $ 3,673 $ 2,247
Buildings......................................... 11,210 8,028
Equipment......................................... 13,084 8,698
Construction in progress.......................... 732 182
----------- -----------
28,699 19,155
Accumulated depreciation.......................... 13,059 8,631
----------- -----------
$ 15,640 $ 10,524
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994
was $1,404,000, $1,230,000 and $1,096,000, respectively.
F-19
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. EMPLOYEE BENEFIT PLANS
The Company and its 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
1996, 1995 and 1994 amounted to $879,000, $588,000 and $537,000, respectively.
NOTE 7. 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 $12,000,
$55,000 and $81,000 for 1996, 1995 and 1994, respectively, and is included in
other operating expenses.
NOTE 8. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Advances under revolving credit agreement with....... $ 5,000 $ --
SunTrust Bank with interest at the three month LIBOR
rate plus .9% (6.40% at December 31, 1996) due on
March 30, 1997; unsecured........................... 10,000 2,600
Advances from Federal Home Loan Bank with interest at
adjustable rates (ranging from 5.54% to 5.91% at
December 31, 1996) due at various dates from April
1, 1997 to March 21, 2002........................... 9,200 2,000
Advances from Federal Home Loan Bank with interest at
fixed rates (ranging from 5.70% to 6.48% at December
31, 1996) due at various dates from January 21, 1997
to March 6, 2005.................................... -- 1,200
----------- ----------
Note payable by pooled subsidiary with interest at
prime rate less 50 basis points, paid in full in
1996................................................ $ 24,200 $ 5,800
=========== ==========
</TABLE>
The advances from the Federal Home Loan Bank are collateralized by the
pledging of first mortgage loans and other specific loans. One subsidiary bank
has also pledged mortgage-backed securities having an aggregate market value
of approximately $2,466,000 at December 31, 1996.
Other borrowings at December 31, 1996 have maturities in future years as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
1997........................................................... $15,750
1998........................................................... 4,000
1999........................................................... 3,000
2002........................................................... 1,000
2005........................................................... 450
-------
$24,200
=======
</TABLE>
F-20
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. INCOME TAXES
The total income taxes in the consolidated statements of income are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current.......................................... $ 3,098 $ 2,834 $ 1,811
Deferred......................................... (431) (223) 26
------- ------- -------
$ 2,667 $ 2,611 $ 1,837
======= ======= =======
</TABLE>
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,
-----------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax provision at
statutory rate......... $3,185 34% $2,899 34% $2,092 34%
Increase (decrease)
resulting from:
Tax-exempt interest... (323) (4) (273) (3) (307) (5)
Amortization of excess
cost over assets
acquired............. 82 1 30 1 33 1
Changes in valuation
allowance for
deferred taxes....... (228) (2) (72) (1) (50) (1)
Other................. (49) (1) 27 -- 69 1
------ --- ------ --- ------ ---
Provision for income
taxes.................. $2,667 28% $2,611 31% $1,837 30%
====== === ====== === ====== ===
</TABLE>
Net deferred income tax assets of $1,365,000 and $489,000 at December 31,
1996 and 1995, respectively, are included in other assets. The components of
deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan loss reserves.............................. $ 1,542 $ 1,003
Deferred compensation........................... 197 173
Unrealized loss on securities available for
sale........................................... 19 --
Other real estate............................... -- 5
Other........................................... -- 34
Net operating loss tax carryforward............. 261 285
Less valuation allowance........................ -- (228)
----------- -----------
2,019 1,272
----------- -----------
DEFERRED TAX LIABILITIES:
Deprecation and amortization.................... 435 366
Amortization of intangible assets............... 219 250
Other........................................... -- 30
Unrealized gain on securities available for
sale........................................... -- 137
----------- -----------
654 783
----------- -----------
Net deferred tax assets........................... $ 1,365 $ 489
=========== ===========
</TABLE>
F-21
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. 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,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit...................... $ 58,693 $ 45,370
Credit card commitments........................... 3,077 2,883
Standby letters of credit......................... 1,331 1,444
----------- -----------
$ 63,101 $ 49,697
=========== ===========
</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.
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 for the Company, any liability
resulting from such proceedings would not have a material adverse effect on
the Company's financial statements.
NOTE 11. CONCENTRATIONS OF CREDIT
The Banks make agricultural, agribusiness, commercial, residential and
consumer loans to customers primarily in the counties of southwest Georgia and
southeast Alabama. 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.
F-22
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
The Company has a concentration of funds on deposit at its primary
correspondent bank at December 31, 1996, as follows:
<TABLE>
<S> <C>
Noninterest-bearing accounts................................. $17,458 ,000
============
</TABLE>
NOTE 12. REGULATORY MATTERS
The Banks are subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December 31, 1996,
approximately $5,589,000 of retained earnings were available for dividend
declaration without regulatory approval.
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Banks must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices. The Company
and Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Banks to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Management believes, as of December 31, 1996, the Company and
the Banks meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the regulatory
authorities categorized the Banks as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier
I leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Banks'
category.
F-23
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company and Banks' actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
-------------- ------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ ------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital (to Risk
Weighted Assets):
Consolidated................ $57,484 13.21% $34,812 8.00% $ 43,516 10.00%
American Banking Company.... $10,851 11.74% $ 7,394 8.00% $ 9,243 10.00%
The Bank of Quitman......... $ 3,778 13.15% $ 2,298 8.00% $ 2,873 10.00%
Bank of Thomas County....... $ 3,071 10.69% $ 2,298 8.00% $ 2,873 10.00%
The Citizens Bank of
Tifton..................... $ 6,468 13.53% $ 3,824 8.00% $ 4,780 10.00%
Cairo Banking Company....... $ 7,317 15.31% $ 3,823 8.00% $ 4,779 10.00%
Southland Bank.............. $10,125 11.11% $ 7,291 8.00% $ 9,113 10.00%
Central Bank and Trust...... $ 5,254 13.11% $ 3,206 8.00% $ 4,008 10.00%
First National Bank of South
Georgia.................... $ 5,625 18.74% $ 2,401 8.00% $ 3,002 10.00%
Merchants and Farmers Bank.. $ 4,503 15.59% $ 2,311 8.00% $ 2,889 10.00%
Tier I Capital (to Risk
Weighted Assets):
Consolidated................ $52,028 11.96% $17,401 4.00% $ 26,101 6.00%
American Banking Company.... $ 9,767 10.56% $ 3,700 4.00% $ 5,549 6.00%
The Bank of Quitman......... $ 3,418 11.90% $ 1,149 4.00% $ 1,723 6.00%
Bank of Thomas County....... $ 2,757 9.60% $ 1,149 4.00% $ 1,723 6.00%
The Citizens Bank of
Tifton..................... $ 5,868 12.27% $ 1,913 4.00% $ 2,869 6.00%
Cairo Banking Company....... $ 6,707 14.03% $ 1,912 4.00% $ 2,868 6.00%
Southland Bank.............. $ 8,985 9.86% $ 3,645 4.00% $ 5,468 6.00%
Central Bank and Trust...... $ 4,753 11.86% $ 1,603 4.00% $ 2,405 6.00%
First National Bank of South
Georgia.................... $ 5,249 17.49% $ 1,201 4.00% $ 1,801 6.00%
Merchants and Farmers Bank.. $ 4,195 14.52% $ 1,156 4.00% $ 1,733 6.00%
Tier I Capital (to Average
Assets):
Consolidated................ $52,028 9.11% $22,844 4.00% $ 28,555 5.00%
American Banking Company.... $ 9,767 8.30% $ 4,707 4.00% $ 5,884 5.00%
The Bank of Quitman......... $ 3,418 8.72% $ 1,568 4.00% $ 1,960 5.00%
Bank of Thomas County....... $ 2,757 7.62% $ 1,447 4.00% $ 1,809 5.00%
The Citizens Bank of
Tifton..................... $ 5,868 7.63% $ 3,076 4.00% $ 3,845 5.00%
Cairo Banking Company....... $ 6,707 8.95% $ 2,998 4.00% $ 3,747 5.00%
Southland Bank.............. $ 8,985 7.16% $ 5,020 4.00% $ 6,274 5.00%
Central Bank and Trust...... $ 4,753 8.54% $ 2,226 4.00% $ 2,783 5.00%
First National Bank of South
Georgia.................... $ 5,249 9.46% $ 2,219 4.00% $ 2,774 5.00%
Merchants and Farmers Bank.. $ 4,195 10.13% $ 1,656 4.00% $ 2,071 5.00%
</TABLE>
F-24
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
-------------- ------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ ------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1995
Total Capital (to Risk
Weighted Assets):
Consolidated................ $49,557 15.73% $25,198 8.00% $ 31,498 10.00%
American Banking Company.... $ 9,670 12.21% $ 6,336 8.00% $ 7,920 10.00%
The Bank of Quitman......... $ 3,430 13.22% $ 2,076 8.00% $ 2,595 10.00%
Bank of Thomas County....... $ 3,109 14.38% $ 1,730 8.00% $ 2,162 10.00%
The Citizens Bank of
Tifton..................... $ 6,497 14.23% $ 3,653 8.00% $ 4,566 10.00%
Cairo Banking Company....... $ 7,471 16.61% $ 3,598 8.00% $ 4,498 10.00%
Central Bank and Trust...... $ 4,510 13.12% $ 2,750 8.00% $ 3,438 10.00%
First National Bank of South
Georgia.................... $ 4,901 13.90% $ 2,821 8.00% $ 3,526 10.00%
Merchants and Farmers Bank.. $ 4,101 15.18% $ 2,161 8.00% $ 2,702 10.00%
Tier I Capital (to Risk
Weighted Assets):
Consolidated................ $45,644 14.49% $12,599 4.00% $ 18,899 6.00%
American Banking Company.... $ 8,679 10.96% $ 3,167 4.00% $ 4,751 6.00%
The Bank of Quitman......... $ 3,105 11.97% $ 1,038 4.00% $ 1,556 6.00%
Bank of Thomas County....... $ 2,838 13.13% $ 865 4.00% $ 1,297 6.00%
The Citizens Bank of
Tifton..................... $ 5,924 12.98% $ 1,826 4.00% $ 2,738 6.00%
Cairo Banking Company....... $ 6,893 15.33% $ 1,799 4.00% $ 2,698 6.00%
Central Bank and Trust...... $ 4,079 11.86% $ 1,375 4.00% $ 2,064 6.00%
First National Bank of South
Georgia.................... $ 4,467 12.66% $ 1,411 4.00% $ 2,117 6.00%
Merchants and Farmers Bank.. $ 3,801 14.07% $ 1,081 4.00% $ 1,621 6.00%
Tier I Capital (to Average
Assets):
Consolidated................ $45,644 9.87% $18,490 4.00% $ 23,112 5.00%
American Banking Company.... $ 8,679 8.51% $ 4,079 4.00% $ 5,099 5.00%
The Bank of Quitman......... $ 3,105 8.33% $ 1,491 4.00% $ 1,864 5.00%
Bank of Thomas County....... $ 2,838 9.17% $ 1,238 4.00% $ 1,547 5.00%
The Citizens Bank of
Tifton..................... $ 5,924 8.46% $ 2,801 4.00% $ 3,501 5.00%
Cairo Banking Company....... $ 6,893 9.41% $ 2,930 4.00% $ 3,663 5.00%
Central Bank and Trust...... $ 4,079 8.35% $ 1,954 4.00% $ 2,443 5.00%
First National Bank of South
Georgia.................... $ 4,467 8.67% $ 2,061 4.00% $ 2,576 5.00%
Merchants and Farmers Bank.. $ 3,801 9.01% $ 1,687 4.00% $ 2,109 5.00%
</TABLE>
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates 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. The use of
different methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1996 and
1995. Such amounts have not been revalued for purposes of these financial
statements since those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.
F-25
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value
approximate fair values.
LOANS:
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying collateral values.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for fixed-
rate certificates of deposit are estimated using discounted cash flow methods,
using interest rates currently being offered on certificates.
OTHER BORROWINGS:
The carrying amounts of the Company's other borrowings approximate their
fair value.
F-26
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments are
based on fees charged to enter into similar agreements. However, commitments
to extend credit and standby letters of credit do not represent a significant
value to the Company until such commitments are funded. The Company has
determined that these instruments do not have a distinguishable fair value and
no fair value has been assigned.
The carrying value and estimated fair value of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments....... $ 46,014 $ 46,014 $ 81,696 $ 81,696
======== ======== ======== ========
Investments in securities............. $118,138 $118,386 $ 84,505 $ 84,722
======== ======== ======== ========
Loans................................. $438,390 $424,241 $305,242 $295,888
Allowance for loan losses............. (6,873) -- (5,484) --
-------- -------- -------- --------
Loans, net.......................... $431,517 $424,241 $299,758 $295,888
======== ======== ======== ========
Financial liabilities:
Noninterest-bearing demand............ $ 81,448 $ 81,448 $ 74,687 $ 74,687
Interest-bearing demand............... 116,777 116,777 100,512 100,512
Savings............................... 43,332 43,332 29,614 29,614
Time deposits......................... 304,181 306,346 227,368 230,061
-------- -------- -------- --------
Total deposits...................... $545,738 $547,903 $432,181 $434,874
======== ======== ======== ========
Federal funds purchased and securities
sold under agreements to repurchase.... $ 997 $ 997 $ 1,887 $ 1,887
======== ======== ======== ========
Other borrowings........................ $ 24,200 $ 24,200 $ 5,800 $ 5,800
======== ======== ======== ========
</TABLE>
F-27
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
ASSETS
Cash........................................................... $ 1,866 $ 1,978
Interest-bearing deposits in banks............................. -- 2,060
Investment in subsidiaries..................................... 56,772 40,083
Other assets................................................... 5,160 4,484
------- -------
Total assets................................................. $63,798 $48,605
======= =======
LIABILITIES
Other borrowings............................................... $ 5,000 $ 1,200
Other liabilities.............................................. 1,124 634
------- -------
Total liabilities............................................ 6,124 1,834
------- -------
STOCKHOLDERS' EQUITY........................................... 57,674 46,771
------- -------
Total liabilities and stockholders' equity................... $63,798 $48,605
======= =======
</TABLE>
F-28
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries............................... $5,115 $2,172 $1,445
Interest.................................................. 44 145 115
Fee income................................................ 2,953 2,772 2,442
Other income.............................................. 111 25 94
------ ------ ------
Total income............................................ 8,223 5,114 4,096
------ ------ ------
EXPENSE
Interest.................................................. 230 114 191
Amortization and depreciation............................. 477 485 499
Merger and acquisition expense............................ 708 -- --
Other expense............................................. 4,406 2,995 2,704
------ ------ ------
Total expense........................................... 5,821 3,594 3,394
------ ------ ------
Income before income tax benefits and equity in
undistributed earnings of subsidiaries................. 2,402 1,520 702
INCOME TAX BENEFITS....................................... 889 117 109
------ ------ ------
Income before equity in undistributed earnings of
subsidiaries........................................... 3,291 1,637 811
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES.......... 3,410 4,280 3,506
------ ------ ------
Net income.............................................. $6,701 $5,917 $4,317
====== ====== ======
</TABLE>
F-29
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 6,701 $ 5,917 $ 4,317
------- ------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 117 175 189
Amortization of intangible assets................ 360 310 310
Undistributed earnings of subsidiaries........... (3,410) (4,280) (3,506)
(Increase) decrease in interest receivable....... 10 (9) (6)
Decrease in interest payable..................... (11) -- (5)
Increase (decrease) in taxes payable............. (169) (148) 5
Provision for deferred taxes..................... (38) 14 5
(Increase) decrease in due from subsidiaries..... (333) (56) 47
Other prepaids, deferrals and accruals, net...... (240) (87) 59
------- ------- -------
Total adjustments.............................. (3,714) (4,081) (2,902)
------- ------- -------
Net cash provided by operating activities...... 2,987 1,836 1,415
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in interest-bearing deposits in
banks............................................. 2,060 (560) (1,500)
Purchases of premises and equipment................ (482) (281) (243)
Proceeds from sale of premises..................... 10 17 --
Contribution of capital to subsidiary bank......... -- -- (1,500)
Cash paid for purchased subsidiary................. (6,216) -- --
Purchases of stock in pooled subsidiary............ -- -- (575)
------- ------- -------
Net cash used in investing activities.......... (4,628) (824) (3,818)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from other borrowings..................... $ 5,000 $ -- $ 1,500
Repayment of other borrowings...................... (2,200) (150) (5,782)
Proceeds from sale of stock, net of stock offering
expense........................................... -- -- 8,324
Proceeds from exercise of stock options............ -- 125 --
Proceeds from exercise of stock options of pooled
subsidiaries...................................... 254 85 --
Purchase of treasury stock......................... -- -- (29)
Purchase of fractional shares...................... (7) (3) --
Dividends paid..................................... (1,518) (1,186) (645)
------- ------- -------
Net cash provided by (used in) financing
activities.................................... 1,529 (1,129) 3,368
------- ------- -------
Net increase (decrease) in cash.................... (112) (117) 965
Cash at beginning of year.......................... 1,978 2,095 1,130
------- ------- -------
Cash at end of year................................ $ 1,866 $ 1,978 $ 2,095
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest............. $ 241 $ 114 $ 196
</TABLE>
F-30
<PAGE>
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15. PENDING ACQUISITION
On February 27, 1997, the Company entered into an agreement with NationsBank
Corporation to purchase the assets and assume the liabilities of the Douglas,
Georgia banking center of NationsBank. Total assets of approximately $33
million will be included in the transaction including loans totaling
approximately $11 million. Total deposits of approximately $33 million will be
assumed by the Company. The Company anticipates that approximately $4,000,000
in cash will be required to complete the acquisition. The acquisition is
subject to approval by the Company's Board of Directors and certain regulatory
authorities.
F-31
<PAGE>
IRWIN BANKCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
------
Cash and due from banks.............................. $ 1,510,524 $ 2,006,505
Federal funds sold................................... 3,900,000 3,500,000
Securities available for sale, at fair value......... 16,382,139 17,128,188
Loans................................................ 15,764,948 14,454,206
Less allowance for loan losses....................... 414,589 400,000
----------- -----------
Loans, net......................................... 15,350,359 14,054,206
----------- -----------
Premises and equipment, net.......................... 542,492 558,068
Other assets......................................... 995,194 895,186
----------- -----------
$38,680,708 $38,142,153
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing demand......................... $ 5,859,435 $ 5,558,181
Interest-bearing demand............................ 8,870,588 8,478,249
Savings............................................ 2,024,109 1,936,730
Time, $100,000 and over............................ 3,988,213 3,537,188
Other time......................................... 12,130,581 12,656,733
----------- -----------
Total deposits................................... 32,872,926 32,167,081
Other liabilities.................................... 459,755 679,313
----------- -----------
Total liabilities................................ 33,332,681 32,846,394
----------- -----------
Commitments and Contingent Liabilities
Stockholders' Equity
Common stock, par value $50; 5,000,000 shares
authorized;
30,000 shares issued.............................. 1,500,000 1,500,000
Surplus............................................ 625,000 625,000
Retained earnings.................................. 3,405,968 3,279,990
Unrealized gains (losses) on securities available
for sale, net of taxes............................ (72,137) 1,573
----------- -----------
5,458,831 5,406,563
Less cost of 770 shares acquired for the treasury.. 110,804 110,804
----------- -----------
Total stockholders' equity....................... 5,348,027 5,295,759
----------- -----------
$38,680,708 $38,142,153
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-32
<PAGE>
IRWIN BANKCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Interest income
Interest and fees on loans.................................. $395,851 $394,041
Interest on taxable securities.............................. 228,683 230,939
Interest on nontaxable securities........................... 27,595 30,660
Interest on deposits in other banks......................... -- 2,111
Interest on Federal funds sold.............................. 44,755 54,554
-------- --------
696,884 712,305
-------- --------
Interest expense
Interest on deposits........................................ 290,942 306,548
-------- --------
Net interest income....................................... 405,942 405,757
Provision for loan losses..................................... 15,000 15,000
-------- --------
Net interest income after provision for loan losses....... 390,942 390,757
-------- --------
Other income
Service charges on deposit accounts......................... 40,392 39,384
Other....................................................... 25,154 38,548
-------- --------
65,546 77,932
-------- --------
Other expense
Salaries and employee benefits.............................. 164,539 161,415
Equipment expense........................................... 21,306 21,879
Occupancy expense........................................... 10,740 11,143
Data processing fees........................................ 24,114 19,997
Directors fees.............................................. 8,400 8,400
FDIC premiums............................................... 2,591 2,638
Stationary and supplies..................................... 3,589 5,415
Auditing fees............................................... 10,856 9,719
Other operating expenses.................................... 41,572 38,429
-------- --------
287,707 279,035
-------- --------
Income before income taxes................................ 168,781 189,654
Applicable income taxes....................................... 42,803 32,251
-------- --------
Net income................................................ $125,978 $157,403
======== ========
Income per common share....................................... $ 4.31 $ 5.43
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-33
<PAGE>
IRWIN BANKCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 125,978 $ 157,403
----------- -----------
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation...................................... 15,576 16,152
Provision for loan loses.......................... 15,000 15,000
Other prepaids, deferrals and accruals, net....... (281,594) (222,505)
----------- -----------
Total adjustments............................... (251,018) (191,353)
----------- -----------
Net cash used in operating activities........... (125,040) (33,950)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for
sale............................................... 634,367 2,916,797
Purchase of securities available for sale........... -- (2,545,690)
Increase (decrease) in Federal funds sold........... (400,000) 1,500,000
Decrease in interest-bearing deposits in banks...... -- 100,000
Net increase in loans............................... (1,311,153) (1,020,686)
Purchase of premises and equipment.................. -- (1,331)
----------- -----------
Net cash provided by (used in) investing
activities..................................... (1,076,786) 949,090
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits................. 705,845 (1,199,658)
Repurchase of shares for the treasury............... -- (4,774)
----------- -----------
Net cash provided by (used in) financing
activities..................................... 705,845 (1,204,432)
----------- -----------
Net decrease in cash and due from banks............. (495,981) (289,292)
Cash and due from banks at beginning of period...... 2,006,505 2,198,993
----------- -----------
Cash and due from banks at end of period............ $ 1,510,524 $ 1,909,701
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-34
<PAGE>
IRWIN BANKCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. METHOD OF PRESENTATION
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 year ended December 31, 1996 included elsewhere in
this Proxy Statement/Prospectus.
All material intercompany balances and transactions have been eliminated.
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, 1997 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2. 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, the Bank of Ocilla will be merged
with and into The Citizens Bank of Tifton and will thereafter be operated as a
branch of The Citizens Bank of Tifton.
F-35
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
F-36
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Irwin Bankcorp, Inc. and Subsidiary
Ocilla, Georgia
We have audited the accompanying consolidated balance sheet of Irwin
Bankcorp, Inc. and Subsidiary as of December 31, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year 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 audit. The consolidated statements of
income, stockholders' equity and cash flows of Irwin Bankcorp, Inc. and
subsidiary for the year ended December 31, 1995 were audited by other auditors
whose report, dated December 18, 1996, expressed an unqualified opinion on
those statements.
We conducted our audit 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 audit provides 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 Irwin
Bankcorp, Inc. and Subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Albany, Georgia
June 23, 1997
F-37
<PAGE>
INDEPENDENT AUDITOR'S REPORT
December 18, 1996
Board of Directors
Irwin Bankcorp, Inc.
Ocilla, Georgia
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Irwin Bankcorp, Inc. and Subsidiary for
the year ending December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of its operations and its cash flows of
Irwin Bankcorp, Inc. and Subsidiary for the year ending December 31, 1995, in
conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ Meeks, Roberts, Ashley, Sumner &
Sirmans
Certified Public Accountants
F-38
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
------
Cash and due from banks............................................ $ 2,006,505
Federal funds sold................................................. 3,500,000
Securities available for sale, at fair value (Note 2).............. 17,128,188
Loans (Note 3)..................................................... 14,454,206
Less allowance for loan losses..................................... 400,000
-----------
Loans, net....................................................... 14,054,206
-----------
Premises and equipment, net (Note 4)............................... 558,068
Other assets....................................................... 895,186
-----------
$38,142,153
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing demand....................................... $ 5,558,181
Interest-bearing demand.......................................... 8,478,249
Savings.......................................................... 1,936,730
Time, $100,000 and over.......................................... 3,537,188
Other time....................................................... 12,656,733
-----------
Total deposits................................................. 32,167,081
Other liabilities.................................................. 679,313
-----------
32,846,394
-----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)
STOCKHOLDERS' EQUITY
Common stock, par value $50; 5,000,000 shares authorized, 30,000
shares issued................................................... 1,500,000
Surplus.......................................................... 625,000
Retained earnings................................................ 3,279,990
Unrealized gains on securities available for sale, net of taxes.. 1,573
-----------
5,406,563
Less cost of 770 shares acquired for the treasury................ 110,804
-----------
5,295,759
-----------
$38,142,153
===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-39
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans.............................. $1,610,946 $1,617,918
Interest on taxable securities.......................... 900,291 717,609
Interest on nontaxable securities....................... 116,197 205,629
Interest on deposits in other banks..................... 3,054 8,563
Interest on Federal funds sold.......................... 179,575 170,241
---------- ----------
2,810,063 2,719,960
---------- ----------
INTEREST EXPENSE, INTEREST ON DEPOSITS.................... 1,189,257 1,141,731
---------- ----------
Net interest income..................................... 1,620,806 1,578,229
PROVISION FOR LOAN LOSSES (NOTE 3)........................ 24,918 10,000
---------- ----------
Net interest income after provision for loan losses..... 1,595,888 1,568,229
---------- ----------
OTHER INCOME
Service charges on deposit accounts..................... 167,933 153,040
Gain on sale of securities.............................. -- 3,739
Other................................................... 79,759 73,018
---------- ----------
247,692 229,797
---------- ----------
OTHER EXPENSES
Salaries and employee benefits.......................... 648,762 641,592
Equipment expense....................................... 81,842 72,077
Occupancy expense....................................... 42,905 49,750
Data processing fees.................................... 85,537 65,016
Directors fees.......................................... 99,600 105,600
FDIC premiums........................................... 10,554 47,027
Stationary and supplies................................. 24,463 25,838
Auditing fees........................................... 42,288 36,635
Other operating expenses................................ 178,206 162,941
---------- ----------
1,214,157 1,206,476
---------- ----------
Income before income taxes............................ 629,423 591,550
APPLICABLE INCOME TAXES (NOTE 6).......................... 172,476 140,811
---------- ----------
Net income............................................ $ 456,947 $ 450,739
========== ==========
INCOME PER COMMON SHARE................................... $ 15.75 $ 15.65
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-40
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON AVAILABLE
STOCK CAPITAL RETAINED FOR SALE, TREASURY
PAR VALUE SURPLUS EARNINGS NET OF TAXES STOCK TOTAL
---------- -------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994................... $1,500,000 $625,000 $2,865,705 $(182,879) $(136,347) $4,671,479
Net income............ -- -- 450,739 -- -- 450,739
Cash dividends
declared, $8.50 per
share................ -- -- (245,265) -- -- (245,265)
Purchase of treasury
shares, 118 shares... -- -- -- -- (17,700) (17,700)
Sale of treasury
shares,
166 shares........... -- -- -- -- 17,207 17,207
Net change in
unrealized gains on
securities available
for sale, net of
taxes................ -- -- -- 307,539 -- 307,539
---------- -------- ---------- --------- --------- ----------
BALANCE, DECEMBER 31,
1995................... 1,500,000 625,000 3,071,179 124,660 (136,840) 5,183,999
Net income............ -- -- 456,947 -- -- 456,947
Cash dividends
declared, $8.50 per
share................ -- -- (248,136) -- -- (248,136)
Purchase of treasury
shares, 268 shares... -- -- -- -- (44,488) (44,488)
Sale of treasury
shares,
632 shares........... -- -- -- -- 70,524 70,524
Net change in
unrealized gains on
securities available
for sale, net of
taxes................ -- -- -- (123,087) -- (123,087)
---------- -------- ---------- --------- --------- ----------
BALANCE, DECEMBER 31,
1996................... $1,500,000 $625,000 $3,279,990 $ 1,573 $(110,804) $5,295,759
========== ======== ========== ========= ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-41
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 456,947 $ 450,739
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 61,152 53,042
Provision for loan losses......................... 24,918 10,000
Provision for deferred taxes...................... 49,413 29,927
Net gains on securities available for sale........ -- (3,739)
(Increase) decrease in interest receivable........ 64,389 (25,998)
Increase (decrease) in interest payable........... (23,361) 47,372
Increase in taxes payable......................... 3,123 1,792
Other prepaids, deferrals and accruals, net....... 54,311 (60,894)
----------- -----------
Net cash provided by operating activities....... 690,892 502,241
----------- -----------
INVESTING ACTIVITIES
Proceeds from maturities of securities available for
sale............................................... 9,012,234 5,873,871
Purchase of securities available for sale........... (9,137,057) (7,780,419)
Proceeds from sales of securities available for
sale............................................... -- 985,517
Increase in Federal funds sold...................... 1,500,000 --
(Increase) decrease in interest-bearing deposits in
banks.............................................. 199,000 (99,000)
Net (increase) decrease in loans.................... (256,287) 359,429
Purchase of premises and equipment.................. (12,978) (33,877)
----------- -----------
Net cash provided by (used in) investing
activities..................................... 1,304,912 (694,479)
----------- -----------
FINANCING ACTIVITIES
Net decrease in deposits............................ (1,968,559) (380,352)
Dividends paid...................................... (245,769) (208,931)
Proceeds from sale of treasury shares............... 70,524 17,207
Purchase of treasury shares......................... (44,488) (17,700)
----------- -----------
Net cash used in financing activities........... (2,188,292) (589,776)
----------- -----------
Net decrease in cash and due from banks............. (192,488) (782,014)
Cash and due from banks at beginning of period...... 2,198,993 2,981,007
----------- -----------
Cash and due from banks at end of period............ $ 2,006,505 $ 2,198,993
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest.......................................... $ 1,212,618 $ 1,094,359
Income taxes...................................... $ 119,940 $ 109,092
NONCASH TRANSACTION
Net change in unrealized gains (losses) on
securities available for sale...................... $ (186,497) $ 465,969
</TABLE>
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Irwin Bankcorp, Inc. (the Company) is a bank holding company whose business
is conducted by its wholly-owned subsidiary, The Bank of Ocilla (the Bank).
The Bank is a commercial bank located in Ocilla, Irwin County, Georgia and
provides a full range of banking services in its primary market area of Irwin
County and surrounding area.
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 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.
Cash and Due from Banks
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
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.
Securities
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held to maturity and reported at amortized cost.
All other debt securities are classified as available for sale and carried at
fair value with net unrealized gains and losses included in stockholders'
equity net of tax. Marketable equity securities are carried at fair value with
net unrealized gains and losses included in stockholders' equity. Other equity
securities without a readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
Loans
Loans are carried at their 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.
Loan origination fees and certain direct costs of most loans are recognized
at the time the loan is recorded. Loan origination fees and costs incurred for
other loans are deferred and recognized as income over the life of the loan.
Because net origination loan fees and costs are not material, the results of
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 maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on
F-43
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
an evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. 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.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When accrual of interest is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to collect
all principal and interest payments due in accordance with the terms of the
loan agreement. Individually identified impaired loans are measured based on
the present value of payments expected to be received, using the contractual
loan rate as the discount rate. Alternatively, measurement may be based on
observable market prices or, for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses. Changes to the valuation allowance are recorded
as a component of the provision for loan losses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent
gains or losses on sale and any subsequent adjustment to the value are
recorded as other expenses.
Income Taxes
Income tax expense consists of current and deferred taxes. Current income
tax provisions approximate taxes to be paid or refunded for the applicable
year. Deferred tax assets and liabilities are recognized on the temporary
differences between the bases of assets and liabilities as measured by tax
laws and their bases as reported in the financial statements. Deferred tax
expense or benefit is then recognized for the change in deferred tax assets or
liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards and tax
credits will be realized. A valuation allowance is recorded for those deferred
tax items for which it is more likely than not that realization will not
occur.
The Company and the Bank file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to income taxes (benefits)
of the consolidated group.
Stock-Based Compensation
The Corporation accounts for its fixed stock option plans in accordance with
the provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB Opinion 25"), and related
F-44
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
interpretations. As such, compensation expense is recorded only to the extent
that the market price of the underlying stock at the date of grant exceeds the
exercise price. In October 1995, Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), was issued.
SFAS 123 allows entities to continue to apply the provisions of APB Opinion 25
for recognizing stock-based compensation expense in the basic financial
statements. However, companies are encouraged to adopt a new accounting method
based on the estimated fair value of stock-based compensation. Companies that
do not follow the new fair value based method are required to provide expanded
disclosures in the footnotes. SFAS 123 is effective for the fiscal year ended
December 31, 1996. The Corporation elected to continue to apply the provisions
of APB Opinion 25 and, to the extent material, follow the disclosure
provisions of SFAS 123.
Earnings Per Common Share
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding.
NOTE 2. SECURITIES
The amortized cost and fair value of securities at December 31, 1996 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
U.S. Government and agency
securities................ $15,125,823 $19,155 $(38,541) $15,106,437
State and municipal
securities................ 1,610,982 69,284 (145) 1,680,121
Mortgage-backed
securities................ 164,009 685 (429) 164,265
Equity securities.......... 224,991 -- (47,626) 177,365
----------- ------- -------- -----------
$17,125,805 $89,124 $(86,741) $17,128,188
=========== ======= ======== ===========
</TABLE>
The amortized cost and fair value of securities as of December 31, 1996 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 prepaid with or without penalty. Therefore, these
securities and equity securities are not included in the maturity categories
in the following maturity summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
-------------------------------
AMORTIZED COST FAIR VALUE
---------------- --------------
<S> <C> <C>
Due in one year or less................... $ 3,231,237 $ 3,233,460
Due from one to five years................ 12,858,908 12,885,305
Due from five to ten years................ 595,807 613,458
Due after ten years....................... 50,853 54,335
Mortgage-backed securities................ 164,009 164,265
Equity securities......................... 224,991 177,365
-------------- --------------
$ 17,125,805 $ 17,128,188
============== ==============
</TABLE>
Securities with a carrying value of $3,061,231 at December 31, 1996 were
pledged to secure public deposits and for other purposes.
F-45
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Gains and losses on sales of securities available for sale consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
----- -------
<S> <C> <C>
Gross gains on sales of securities......................... $ -- $13,461
Gross losses on sales of securities........................ -- 9,722
----- -------
Net realized gains on sales of securities available for
sale...................................................... $ -- $ 3,739
===== =======
</TABLE>
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows at December 31, 1996:
<TABLE>
<S> <C>
Commercial and financial...................................... $ 1,489,021
Agricultural.................................................. 1,293,018
Real estate--construction..................................... 70,001
Real estate--mortgage, farmland............................... 3,171,045
Real estate--commercial....................................... 854,012
Real estate--residential...................................... 4,426,063
Consumer instalment loans..................................... 3,139,045
Other......................................................... 12,001
-----------
14,454,206
Allowance for loan losses..................................... 400,000
-----------
Loans, net.................................................... $14,054,206
===========
</TABLE>
Changes in the allowance for loan losses for the years ended December 31
were as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR............................. $406,135 $392,784
Provision for loan losses............................ 24,918 10,000
Loans charged off.................................... (35,471) (21,694)
Recoveries of loans previously charged off........... 4,418 25,045
-------- --------
BALANCE, END OF YEAR................................... $400,000 $406,135
======== ========
</TABLE>
The Company had no recorded investment in impaired loans at December 31,
1996. Accordingly, no interest income on impaired loans was recognized for the
year ended 1996.
The Company has granted loans to certain directors, executive officers, and
related entities of the Company and the Bank. 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.
Changes in related party loans for the year ended December 31, 1996 are as
follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR....................................... $338,024
Advances....................................................... 283,590
Repayments..................................................... 396,632
--------
BALANCE, END OF YEAR............................................. $224,982
========
</TABLE>
F-46
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows at December 31, 1996:
<TABLE>
<S> <C>
Land........................................................... $ 103,525
Buildings...................................................... 768,025
Equipment...................................................... 469,096
----------
1,340,646
Accumulated depreciation....................................... 782,578
----------
$ 558,068
==========
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1996 was
$61,152 and $53,042, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
The Bank of Ocilla adopted a profit sharing agreement for the employees of
the Bank effective January 1, 1987. The profit sharing plan covers
substantially all full-time employees of the Bank. The Bank plans to make
annual contributions subject to the approval of the Bank's Board of Directors.
Contributions to this plan charged to expense during 1996 and 1995 amounted to
$55,000 and $46,859, respectively.
NOTE 6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
<S> <C> <C>
Current................................................. $123,063 $110,884
Deferred................................................ 49,413 29,927
-------- --------
Provision for income taxes............................ $172,476 $140,811
======== ========
</TABLE>
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,
-----------------------------------
1996 1995
----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Income taxes at statutory rate......... $214,004 34% $201,127 34%
Tax-exempt interest.................. (35,841) (6) (62,762) (11)
Changes in valuation allowance for
deferred taxes...................... 223 -- 4,539 1
Other items, net..................... (5,910) (1) (2,093) --
-------- --- -------- ---
Provision for income taxes............. $172,476 27% $140,811 24%
======== === ======== ===
</TABLE>
F-47
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income taxes at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Loan loss reserves............................................. $ 98,764
Deferred compensation.......................................... 73,634
Alternative minimum tax credits................................ 142,379
Less valuation allowance....................................... (93,721)
--------
221,056
--------
Deferred tax liabilities:
Depreciation................................................... 36,204
Accretion...................................................... 32,320
Unrealized gain on securities available for sale............... 810
--------
69,334
--------
Net deferred tax assets.......................................... $151,722
========
</TABLE>
NOTE 7. DEFERRED COMPENSATION
The Bank of Ocilla has a deferred compensation plan covering its directors,
choosing to participate, with individual deferred compensation contracts. In
consideration of each participant's deferral of currently stated income, the
Bank of Ocilla agrees to pay deferred compensation to each participant based
on the amount of income deferred and the age of each participant. Insurance
coverage on each participant has been obtained with the Bank of Ocilla as sole
beneficiary. The insurance is not pledged against the deferral compensation
contracts but is used only as a means of funding the obligations generated by
the contracts.
The Bank of Ocilla's liability under the contracts is limited upon a
participant's termination from membership on the Board of Directors prior to
his death to the current net cash value of the insurance policy or, upon the
death of the participant, to the current net death benefit of the insurance
coverage. Therefore, the Bank's liability should not exceed the proceeds from
the insurance policy owned by the Bank on each participant.
These financial statements reflect a liability under the contracts equal to
the total of each year's increased net cash value on the insurance policies as
the projected total of net cash value increases equals the present guaranteed
liability. As of December 31, 1996, the net cash value of the insurance
totaled $216,572 and is reflected in other assets with an offsetting liability
of $216,572 included in other liabilities.
NOTE 8. STOCK OPTION PLAN
In April 1987, an incentive stock option plan was adopted by the Board of
Directors and formally approved at the annual stockholders' meeting. Options
granted under the plan are intended to qualify as incentive stock options
within the meaning of Section 422A(b) of the Internal Revenue Code. Under the
terms of the plan, options may be granted up to an aggregate of 3,000 treasury
shares. Recipients of the options are fully vested upon grant of the options.
Options to be granted under the plan may become exercisable at such time and
in such instalments as may be provided for in each individual stock option
agreement but for a term not to exceed 10 years. The option price shall be
equal to the purchase price of such treasury stock at the time the stock is
purchased by the Corporation but in no event shall the option price be less
than the fair market value of such shares on the date on which the option
covering such shares is granted. Exercise prices range from $113.50 to $166.00
per share at December 31, 1996.
F-48
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Corporation's incentive stock option plan as
of December 31, 1996 and 1995 and changes during the period/year is presented
below:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Fixed stock options
Outstanding at beginning of year........ 1,116 $120.96 1,182 $115.35
Granted............................... 268 166.00 118 150.00
Exercised............................. 632 111.59 166 103.65
Canceled.............................. -- -- 18 102.50
----- ------- ----- -------
Outstanding at end of year.............. 752 $139.93 1,116 $120.96
===== ======= ===== =======
Options exercisable at year end........... 752 $139.93 1,116 $120.96
===== ======= ===== =======
</TABLE>
There was no expense related to the compensation element of these stock
option plans for 1996 or 1995.
As discussed in Note 1, on January 1, 1996, the Corporation adopted SFAS 123
which requires entities to recognize as expense over the vesting period the
fair value of all stock-based awards measured at the date of grant.
Alternatively, SFAS 123 allows entities to continue to apply the provisions of
APB Opinion 25 and provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants made in 1995 and later
years as if the fair-value-based method defined in SFAS 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion 25.
The pro forma and fair value disclosures required by SFAS 123 are not provided
herein due to their immaterial effect resulting from the immaterial options
granted and outstanding.
NOTE 9. 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. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Commitments to extend credit.................................. $6,211,000
Standby letters of credit..................................... 105,000
----------
$6,316,000
==========
</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
F-49
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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,
crops, 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. 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 of the Company, any liability
resulting from such proceedings would not have a material effect on the
Company's financial statements.
NOTE 10. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer loans
to customers in Irwin County and surrounding counties. The ability of the
majority of the Company's customers to honor their contractual loan
obligations is dependent on the economy in the local area.
A substantial portion of these loans are secured by real estate in the
Company's primary market area. In addition, a substantial portion of the other
real estate owned is located in those same markets. Accordingly, the ultimate
collectibility of the loan portfolio and the recovery of the carrying amount
of other real estate owned are susceptible to changes in market conditions in
the Company's primary market area.
The Bank, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25% of statutory
capital, or approximately $687,500.
The Company has a concentration of funds on deposit at SunTrust at December
31,1996 as follows:
<TABLE>
<S> <C>
Noninterest-bearing demand..................................... $ 249,770
Interest-bearing demand........................................ 3,000,000
----------
$3,249,770
==========
</TABLE>
NOTE 11. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that
may be declared without prior regulatory approval. At December 31, 1996,
approximately $229,600 of retained earnings were available for dividend
declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory--and possibly
additional discretionary--actions by regulators that, if undertaken, could
have a direct material effect on the financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Bank must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The Company
and Bank capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
F-50
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Management believes, as of December 31, 1996, the Company and
the Bank meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FCIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented in
the following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
----------------- ---------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ------ ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital
(to Risk Weighted
Assets):
The Bank of Ocilla.... $5,487,341 31.81% $1,380,050 8.00% $1,725,062 10.00%
Tier I Capital
(to Risk Weighted
Assets):
The Bank of Ocilla.... $5,269,432 30.55% $ 690,025 4.00% $1,035,037 6.00%
Tier I Capital
(to Average Assets):
The Bank of Ocilla.... $5,269,432 13.62% $1,547,151 4.00% $1,933,938 5.00%
</TABLE>
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates 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. The use of
different methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1996. Such
amounts have not been revalued for purposes of these financial statements
since that date and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
Cash, Due From Banks, and Federal Funds Sold:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
Available For Sale Securities:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value
approximate fair values.
F-51
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loans:
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for fixed-
rate certificates of deposit are estimated using discounted cash flow methods,
using interest rates currently being offered on certificates.
Off-Balance Sheet Instruments:
Fair values of the Company's off-balance sheet financial instruments are
based on fees charged to enter into similar agreements. However, commitments
to extend credit and standby letters of credit do not represent a significant
value to the Company until such commitments are funded. The Company has
determined that these instruments do not have a distinguishable fair value and
no fair value has been assigned.
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Financial assets:
Cash and due from banks and short-term
investment................................... $ 5,506,505 $ 5,506,505
Investment in securities...................... 17,128,188 17,128,188
Loans......................................... 14,454,206 14,021,940
Allowance for loan losses..................... (400,000) --
----------- -----------
Loans, net.................................. $14,054,206 $14,021,940
=========== ===========
Financial liabilities:
Noninterest-bearing demand.................... $ 5,558,181 $ 5,558,181
Interest-bearing demand....................... 8,478,249 8,478,249
Savings....................................... 1,936,730 1,936,730
Time deposits................................. 16,193,921 16,104,105
----------- -----------
Total deposits.............................. $32,167,081 $32,077,265
=========== ===========
</TABLE>
F-52
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheet as of
December 31, 1996 and the statements of income, and cash flows as of and for
the years ended December 31, 1996 and 1995 of Irwin Bankcorp, Inc.
CONDENSED BALANCE SHEET
<TABLE>
<S> <C>
Assets
Cash......................................................... $ 214,749
Investment in subsidiary..................................... 5,271,005
----------
Total assets............................................... $5,485,754
==========
Liabilities, dividends payable................................. $ 189,995
----------
Stockholders' equity........................................... 5,295,759
----------
Total liabilities and stockholders' equity................. $5,485,754
==========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Income, dividends from subsidiary...................... $243,271 $250,870
-------- --------
Expense, other......................................... 2,265 2,265
-------- --------
Income before equity in undistributed income of
subsidiary.......................................... 241,006 248,605
Equity in undistributed income of subsidiary........... 215,941 202,134
-------- --------
Net income........................................... $456,947 $450,739
======== ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income....................................... $ 456,947 $ 450,739
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed income of subsidiaries........... (215,941) (202,134)
--------- ---------
Net cash provided by operating activities.... 241,006 248,605
--------- ---------
FINANCING ACTIVITIES
Dividends paid................................... (245,769) (208,931)
Proceeds from sale of shares from the treasury... 70,524 17,207
Repurchase of shares for the treasury............ (44,488) (17,700)
--------- ---------
Net cash used in financing activities........ (219,733) (209,424)
--------- ---------
Net increase in cash............................... 21,273 39,181
Cash at beginning of year.......................... 193,476 154,295
--------- ---------
Cash at end of year................................ $ 214,749 $ 193,476
========= =========
</TABLE>
F-53
<PAGE>
IRWIN BANKCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14. 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, the Bank of Ocilla will be merged
with and into The Citizens Bank of Tifton (a wholly-owned subsidiary of ABC
Bancorp) and will thereafter be operated as a branch of The Citizens Bank of
Tifton.
F-54
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
IRWIN BANKCORP, INC.
AS OF MAY 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Preamble................................................................. A-1
ARTICLE 1 TERMS OF MERGER............................................... A-1
1.1 Merger........................................................ A-1
1.2 Time and Place of Closing..................................... A-1
1.3 Effective Time................................................ A-1
ARTICLE 2 ARTICLES, BYLAWS, MANAGEMENT.................................. A-2
2.1 Articles of Incorporation..................................... A-2
2.2 Bylaws........................................................ A-2
2.3 Directors and Officers........................................ A-2
ARTICLE 3 MANNER OF CONVERTING AND EXCHANGING SHARES.................... A-2
3.1 Conversion of Shares.......................................... A-2
3.2 Exchange of Shares............................................ A-3
3.3 Anti-Dilution Provisions...................................... A-3
3.4 Shares Held by TARGET or PURCHASER............................ A-3
3.5 TARGET Bank................................................... A-4
3.6 Rights of Former TARGET Shareholders.......................... A-4
3.7 Options....................................................... A-4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TARGET...................... A-4
4.1 Organization, Standing and Power.............................. A-4
4.2 Authority; No Breach.......................................... A-5
4.3 Capital Stock................................................. A-5
4.4 TARGET Subsidiaries........................................... A-5
4.5 Financial Statements.......................................... A-6
4.6 Absence of Undisclosed Liabilities............................ A-6
4.7 Absence of Certain Changes or Events.......................... A-6
4.8 Tax Matters................................................... A-6
4.9 TARGET Allowance for Possible Loan Losses..................... A-7
4.10 Assets........................................................ A-7
4.11 Environmental Matters......................................... A-8
4.12 Compliance with Laws.......................................... A-8
4.13 Labor Relations............................................... A-9
4.14 Employee Benefit Plans........................................ A-9
4.15 Material Contracts............................................ A-10
4.16 Legal Proceedings............................................. A-11
4.17 Reports....................................................... A-11
4.18 Statements True and Correct................................... A-11
4.19 Accounting, Tax and Regulatory Matters........................ A-11
4.20 Charter Provisions............................................ A-12
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER................... A-12
5.1 Organization, Standing and Power.............................. A-12
5.2 Authority; No Breach.......................................... A-12
5.3 Capital Stock................................................. A-13
5.4 PURCHASER Subsidiaries........................................ A-13
5.5 Financial Statements.......................................... A-14
5.6 Absence of Undisclosed Liabilities............................ A-14
5.7 Absence of Certain Changes or Events.......................... A-14
5.8 Tax Matters................................................... A-14
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.9 PURCHASER Allowance for Possible Loan Losses............... A-15
5.10 Assets..................................................... A-15
5.11 Environmental Matters...................................... A-15
5.12 Compliance with Laws....................................... A-16
5.13 Labor Relations............................................ A-16
5.14 Employee Benefit Plans..................................... A-16
5.15 Legal Proceedings.......................................... A-18
5.16 Reports.................................................... A-18
5.17 Statements True and Correct................................ A-18
5.18 Accounting, Tax and Regulatory Matters..................... A-19
5.19 Charter Provisions......................................... A-19
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION................... A-19
6.1 Affirmative Covenants of TARGET............................ A-19
6.2 Negative Covenants of TARGET............................... A-19
6.3 Covenants of PURCHASER..................................... A-21
6.4 Adverse Changes in Condition............................... A-21
6.5 Reports.................................................... A-21
6.6 Pooling.................................................... A-21
ARTICLE 7 ADDITIONAL AGREEMENTS...................................... A-21
Registration Statement; Proxy Statement; Shareholder
7.1 Approval................................................... A-21
7.2 Listing.................................................... A-22
7.3 Applications............................................... A-22
7.4 Filings with State Offices................................. A-22
7.5 Agreement as to Efforts to Consummate...................... A-22
7.6 Investigation and Confidentiality.......................... A-22
7.7 Press Releases............................................. A-23
7.8 No Solicitation............................................ A-23
7.9 Tax Treatment.............................................. A-24
7.10 Agreement of Affiliates.................................... A-24
7.11 Employee Benefits and Contracts............................ A-24
7.12 Large Deposits............................................. A-25
7.13 Indemnification............................................ A-25
7.14 Irrevocable Proxies........................................ A-25
7.15 Employment Agreement....................................... A-25
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.......... A-25
8.1 Conditions to Obligations of Each Party.................... A-25
8.2 Conditions to Obligations of PURCHASER..................... A-26
8.3 Conditions to Obligations of TARGET........................ A-27
ARTICLE 9 TERMINATION................................................ A-28
9.1 Termination................................................ A-28
9.2 Effect of Termination...................................... A-29
ARTICLE 10 MISCELLANEOUS.............................................. A-29
10.1 Definitions................................................ A-29
10.2 Expenses................................................... A-34
10.3 Brokers and Finders........................................ A-34
10.4 Entire Agreement........................................... A-34
10.5 Amendments................................................. A-35
10.6 Waivers.................................................... A-35
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
10.7 Assignment..................................................... A-35
10.8 Notices........................................................ A-35
10.9 Governing Law.................................................. A-36
10.10 Counterparts................................................... A-36
10.11 Captions....................................................... A-36
10.12 Enforcement of Agreement....................................... A-36
10.13 Severability................................................... A-36
10.14 Survival....................................................... A-36
</TABLE>
A-iii
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. Form of agreement of affiliates of Irwin Bankcorp Inc. ((S) 7.10).
Matters as to which Martin, Snow, Grant & Napier will opine ((S)
2. 8.2(d)).
3. Matters as to which Rogers & Hardin will opine ((S) 8.3(d)).
4. Irrevocable Proxy ((S) 7.14).
Form of Employment Agreement between The Citizens Bank of Tifton and
5. C. Larry Young ((S) 8.2(f)).
</TABLE>
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered into
as of May 15, 1997, by and between IRWIN BANKCORP, INC. ("TARGET"), a
corporation organized and existing under the laws of the State of Georgia,
with its principal office located in Ocilla, Georgia, and ABC BANCORP
("PURCHASER"), a corporation organized and existing under the laws of the
State of Georgia, with its principal office located in Moultrie, Georgia.
PREAMBLE
Certain terms used in this Agreement are defined in Section 10.1 hereof.
The Boards of Directors of TARGET and PURCHASER are of the opinion that the
transactions described herein are in the best interests of TARGET and
PURCHASER and their respective shareholders. This Agreement provides for the
combination of TARGET with PURCHASER pursuant to the merger of TARGET with and
into PURCHASER, as a result of which the outstanding shares of the capital
stock of TARGET shall be converted into the right to receive shares of common
stock of PURCHASER (except as provided herein), and the shareholders of TARGET
shall become shareholders of PURCHASER (except as provided herein). The
transactions described in this Agreement are subject to the approvals of the
shareholders of TARGET, the Board of Governors of the Federal Reserve System,
the Georgia Department of Banking and Finance and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the Merger for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code.
Simultaneous with the Closing of the Merger, The Bank of Ocilla, a wholly-
owned Georgia state bank subsidiary of TARGET, will be merged with and into
The Citizens Bank of Tifton ("Citizens Bank"), a wholly-owned Georgia state
bank subsidiary of PURCHASER, and will thereafter be operated as a branch of
Citizens Bank.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, TARGET shall be merged with and into PURCHASER in accordance
with the provisions of Section 14-2-1101 of the GBCC and with the effect
provided in Section 14-2-1106 of the GBCC (the "Merger"). PURCHASER shall be
the Surviving Corporation resulting from the Merger. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of TARGET and PURCHASER.
1.2 Time and Place of Closing. The Closing shall take place at 10:00 a.m.
on the date that the Effective Time occurs or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree (the "Closing Date"). The place of Closing shall
be at the main office of The Bank of Ocilla, Ocilla, Georgia, or such other
place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Georgia
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers of each Party, the Parties
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shall use their reasonable efforts to cause the Effective Time to occur on (a)
the last business day of the month in which occurs the last to occur of (i)
the effective date (including expiration of any applicable waiting period) of
the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger and (ii) the date on which the
shareholders of TARGET approve this Agreement to the extent such approval is
required by applicable Law; or (b) such later date as may be mutually agreed
upon in writing by the chief executive officer or chief financial officer of
each Party.
ARTICLE 2
ARTICLES, BYLAWS, MANAGEMENT
2.1 Articles of Incorporation. The Articles of Incorporation of PURCHASER in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until otherwise amended or
repealed.
2.2 Bylaws. The Bylaws of PURCHASER in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Directors and Officers. The directors of PURCHASER in office immediately
prior to the Effective Time shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of PURCHASER in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of PURCHASER from and after
the Effective Time in accordance with the Bylaws of PURCHASER. The directors
and officers of TARGET Bank immediately prior to the Effective Time shall
serve as the initial directors and officers of TARGET Bank from and after the
Effective Time in accordance with the Bylaws of TARGET Bank.
ARTICLE 3
MANNER OF CONVERTING AND EXCHANGING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of PURCHASER and TARGET shall be converted
as follows:
(a) Each share of PURCHASER Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each Outstanding TARGET Share shall automatically be converted at the
Effective Time into the right to receive that number of shares of PURCHASER
Common Stock (plus cash in lieu of fractional shares pursuant to subsection
(d) below, if applicable) in an amount equal to (i) 500,000 (subject to
possible increase pursuant to Section 3.3 and 3.7 of this Agreement)
divided by (ii) the aggregate number of Outstanding TARGET Shares (the
"Exchange Ratio").
(c) In accordance with the provisions of this Section 3.1, each TARGET
shareholder who does not dissent shall receive the number of shares (or
such fraction of a share, subject to subsection (d) below) of PURCHASER
Common Stock that shall be equal to (i) the Exchange Ratio multiplied by
(ii) the aggregate number of Outstanding TARGET Shares such shareholder
holds as of the Effective Time (the "Merger Consideration").
(d) Notwithstanding any other provision of this Agreement, each holder of
shares of TARGET Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of PURCHASER
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part
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of a share of PURCHASER Common Stock multiplied by the Base Period Trading
Price. No such holder will be entitled to dividends, voting rights, or any
other rights as a shareholder in respect of any fractional shares.
(e) Each share of the TARGET Common Stock that is not an Outstanding
TARGET Share as of the Effective Time shall be cancelled without
consideration therefor.
(f) Outstanding TARGET Shares held by TARGET shareholders who, prior to
the Effective Time, have met the requirements of Article 13 of the GBCC
with respect to shareholders dissenting from the Merger shall not be
converted in the Merger. All such shares shall be cancelled and the holders
thereof shall thereafter have only such rights as are granted to dissenting
shareholders under Article 13 of the GBCC; provided, however, that if any
such shareholder fails to perfect his or her rights as a dissenting
shareholder with respect to his or her Outstanding TARGET Shares in
accordance with Article 13 of the GBCC, such shares held by such
shareholder shall, upon the happening of that event, be treated the same as
all other holders of TARGET Common Stock who have not dissented as to the
Merger.
3.2 Exchange of Shares. Prior to the Effective Time, PURCHASER shall
select a bank or trust company reasonably acceptable to TARGET to act as
exchange agent (the "Exchange Agent") to effectuate the delivery of the Merger
Consideration to holders of TARGET Common Stock. Promptly following the
Effective Time, the Exchange Agent shall send to each holder of Outstanding
TARGET Shares immediately prior to the Effective Time a form of letter of
transmittal (the "Letter of Transmittal") for use in exchanging certificates
previously evidencing shares of TARGET Common Stock ("Old Certificates"). The
Letter of Transmittal will contain instructions with respect to the surrender
of Old Certificates and the distribution of any cash and certificates
representing PURCHASER Common Stock, which certificates shall be deposited
with the Exchange Agent by PURCHASER as of the Effective Time. If any
certificates for shares of PURCHASER Common Stock are to be issued in a name
other than that for which an Old Certificate surrendered or exchanged is
issued, the Old Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall affix any requisite stock transfer tax stamps to the Old Certificate
surrendered or provide funds for their purchase or establish to the
satisfaction of he Exchange Agent that such taxes are not payable. Unless and
until Old Certificates or evidence that such certificates have been lost,
stolen or destroyed accompanied by such security or indemnity as shall be
requested by TARGET) are presented to the Exchange Agent, the holder thereof
shall not be entitled to the consideration to be paid in exchange therefor
pursuant to the Merger, to any dividends payable on any PURCHASER Common Stock
to which he or she is entitled, or to exercise any rights as a shareholder of
PURCHASER Common Stock. Subject to applicable law and to the extent that the
same has not yet been paid to a public official pursuant to applicable
abandoned property laws, upon surrender of his or her Old Certificates, the
holder thereof shall be paid the consideration to which he or she is entitled.
All such property, if held by the Exchange Agent for payment or delivery to
the holders of unsurrendered Old Certificates and unclaimed at the end of one
(1) year from the Effective Time, shall at such time be paid or redelivered by
the Exchange Agent to PURCHASER, and after such time any holder of an Old
Certificate who has not surrendered such certificate shall, subject to
applicable laws and to the extent that the same has not yet been paid to a
public official pursuant to applicable abandoned property laws, look as a
general creditor only to PURCHASER for payment or delivery of such property.
In no event will any holder of TARGET Common Stock exchanged in the Merger be
entitled to receive any interest on any amounts held by the Exchange Agent or
PURCHASER.
3.3 Anti-Dilution Provisions. In the event PURCHASER changes the number of
shares of PURCHASER Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend or similar recapitalization
with respect to such stock and the record date therefor (in the case of a
stock dividend) or the effective date therefor (in the case of a stock split
or similar recapitalization) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.4 Shares Held by TARGET or PURCHASER. Each of the shares of TARGET Common
Stock held by any TARGET Company or by any PURCHASER Company, in each case
other than in a fiduciary capacity
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or as a result of debts previously contracted, shall be canceled and retired
at the Effective Time and no consideration shall be issued in exchange
therefor.
3.5 TARGET Bank. After consummation of the Merger, TARGET Bank shall be
operated as a branch of Citizens Bank.
3.6 Rights of Former TARGET Shareholders. At the Effective Time, the stock
transfer books of TARGET shall be closed as to holders of TARGET Common Stock
immediately prior to the Effective Time and no transfer of TARGET Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered
for exchange in accordance with the provisions of Section 3.2 of this
Agreement, each Old Certificate (other than shares to be canceled pursuant to
Section 3.1(d) of this Agreement) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration
provided in Section 3.1 of this Agreement in exchange therefor. To the extent
permitted by Law, former shareholders of record of TARGET shall be entitled to
vote after the Effective Time at any meeting of shareholders of PURCHASER the
number of whole shares of PURCHASER Common Stock into which their respective
shares of TARGET Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing TARGET Common Stock for
certificates representing PURCHASER Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by PURCHASER on the PURCHASER Common Stock, the record date for which
is at or after the Effective Time, the declaration shall include dividends or
other distributions on all shares issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of PURCHASER
Common Stock as of any time subsequent to the Effective Time shall be
delivered to the holder of any certificate representing shares of TARGET
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 3.2 of this
Agreement. However, upon surrender of such TARGET Common Stock certificate,
both the PURCHASER Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered cash payments to be paid for fractional share interests (without
interest) shall be delivered and paid with respect to each share represented
by such certificate.
3.7 Options. Each warrant, stock option or other right, if any, to purchase
shares of TARGET Common Stock issued and outstanding immediately prior to the
Effective Time shall be cancelled (whether or not such warrant, option or
other right is then exercisable), and all rights in respect thereof shall
cease to exist, without any conversion thereof or payment of any consideration
therefor; provided, however, that C. Larry Young and Don R. Vickers, who hold
options exercisable for an aggregate of 752 shares of TARGET Common Stock at
an aggregate exercise price of $108,959, shall be permitted to exercise any or
all such options at any time prior to the Closing Date, in which event the
number of shares of PURCHASER Common Stock into which Outstanding TARGET
Shares will be converted pursuant to Section 3.1(b) of this Agreement shall be
increased by (i) the aggregate exercise price of all of said options that are
so exercised divided by (ii) 16.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TARGET
TARGET hereby represents and warrants to PURCHASER as follows:
4.1 Organization, Standing and Power. TARGET is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Georgia, and is duly registered as a bank holding company under the BHC
Act. TARGET has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. TARGET is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
the character of its assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
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4.2 Authority; No Breach
(a) TARGET has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of TARGET, subject to the
approval of this Agreement by the holders of two-thirds of the outstanding
TARGET Common Stock. Subject to such requisite shareholder approval, this
Agreement represents a legal, valid and binding obligation of TARGET,
enforceable against TARGET in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by TARGET, nor the
consummation by TARGET of the transactions contemplated hereby, nor compliance
by TARGET with any of the provisions hereof, will (i) conflict with or result
in a breach of any provision of TARGET's Articles of Incorporation or Bylaws,
or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any TARGET
Company under, any Contract or Permit of any TARGET Company, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, or, (iii) subject to receipt of the requisite approvals referred to in
Section 8.1(b) of this Agreement, violate any Law or Order applicable to any
TARGET Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, and other than Consents
required from Regulatory Authorities, and other than notices to or filings
with the IRS or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings or notifications
which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, no
notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by TARGET of the Merger and the other
transactions contemplated in this Agreement.
4.3 Capital Stock.
(a) The authorized capital stock of TARGET consists of 5,000,000 shares of
TARGET Common Stock, of which 29,230 shares are issued and outstanding as of
the date of this Agreement. All of the issued and outstanding shares of
capital stock of TARGET are duly and validly issued and outstanding and are
fully paid and nonassessable under the GBCC. None of the outstanding shares of
capital stock of TARGET has been issued in violation of any preemptive rights
of the current or past shareholders of TARGET.
(b) There are no shares of capital stock or other equity securities of
TARGET outstanding and, except as set forth in Section 3.7 of this Agreement,
no outstanding options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of TARGET or
contracts, commitments, understandings, or arrangements by which TARGET is or
may be bound to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its
capital stock.
4.4 TARGET Subsidiaries. TARGET has Previously Disclosed all of the TARGET
Subsidiaries as of the date of this Agreement. TARGET owns all of the issued
and outstanding shares of capital stock of TARGET Bank, and TARGET Bank owns
all of the issued and outstanding stock of each other TARGET Subsidiary. No
equity securities of any TARGET Subsidiary are or may become required to be
issued (other than to a TARGET Company) by reason of any options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and
there are no Contracts by which any TARGET Subsidiary is bound to issue
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(other than to a TARGET Company) additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
its capital stock or by which any TARGET Company is or may be bound to
transfer any shares of the capital stock of any TARGET Subsidiary (other than
to a TARGET Company). There are no Contracts relating to the rights of any
TARGET Company to vote or to dispose of any shares of the capital stock of any
TARGET Subsidiary. All of the shares of capital stock of each TARGET
Subsidiary held by a TARGET Company are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the TARGET Company free and clear
of any Lien. Each TARGET Subsidiary is either a bank or a corporation, and is
duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized,
and has the corporate power and authority necessary for it to own, lease and
operate its Assets and to carry on its business as now conducted. Each TARGET
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of
its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET. Each TARGET Subsidiary that is a depository
institution is an insured institution as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder.
4.5 Financial Statements. TARGET has Previously Disclosed, and delivered to
PURCHASER prior to the execution of this Agreement, copies of all TARGET
Financial Statements for periods ended prior to the date hereof and will
deliver to PURCHASER copies of all TARGET Financial Statements prepared
subsequent to the date hereof. The TARGET Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records
of the TARGET Companies, which are or will be, as the case may be, complete
and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (b) present or will
present, as the case may be, fairly the consolidated financial position of the
TARGET Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the TARGET
Companies for the periods indicated, in accordance with GAAP (subject to any
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
4.6 Absence of Undisclosed Liabilities. Except as Previously Disclosed, no
TARGET Company has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of TARGET as of March 31, 1997 included in the TARGET Financial
Statements or reflected in the notes thereto. Except as Previously Disclosed,
no TARGET Company has incurred or paid any Liability since March 31, 1997,
except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
4.7 Absence of Certain Changes or Events. Since March 31, 1997, (a) there
have been no events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, and (b) the TARGET Companies have not taken any action, or failed to
take any action, prior to the date of this Agreement, which action or failure,
if taken after the date of this Agreement, would represent or result in a
material breach or violation of any of the covenants and agreements of TARGET
provided in Article 7 of this Agreement.
4.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of the
TARGET Companies have been duly filed or requests for extensions have been
timely filed, granted and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year
end immediately preceding the Effective Time, except to the extent that all
such failures to file, taken together, are not reasonably likely to
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have a Material Adverse Effect on TARGET, and all returns filed are complete
and accurate to the Knowledge of TARGET. All Taxes shown on filed returns have
been paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on TARGET, except as reserved against in
the TARGET Financial Statements delivered prior to the date of this Agreement.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) None of the TARGET Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due that is
currently in effect, and no unpaid tax deficiency has been asserted in writing
against or with respect to any TARGET Company, which deficiency is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(c) Adequate provision for any Taxes due or to become due for any of the
TARGET Companies for the period or periods through and including the date of
the respective TARGET Financial Statements has been made and is reflected on
such TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been provided for in
accordance with GAAP.
(e) Each of the TARGET Companies is in compliance with, and its records
contain all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state and local Tax
Laws, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue Code, except for
such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(f) Effective January 1, 1993, TARGET adopted Financial Accounting Standards
Board Statement 109, "Accounting for Income Taxes."
4.9 TARGET Allowance for Possible Loan Losses. The allowance for possible
loan or credit losses (the "TARGET Allowance") shown on the consolidated
balance sheets of TARGET included in the most recent TARGET Financial
Statements dated prior to the date of this Agreement was, and the TARGET
Allowance shown on the consolidated balance sheets of TARGET included in the
TARGET Financial Statements as of dates subsequent to the execution of this
Agreement will be, maintained in accordance with, and are in the amounts
required by, GAAP and applicable regulatory requirements or guidelines as of
the dates thereof, except where the failure of such TARGET Allowance to be so
maintained is not reasonably likely to have a Material Adverse Effect on
TARGET.
4.10 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the TARGET Financial Statements, or where the failure to own good
and marketable title is not reasonably likely to have a Material Adverse
Effect on TARGET, the TARGET Companies have good and marketable title, free
and clear of all Liens, to all of their respective Assets. All material
tangible properties used in the businesses of the TARGET Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with TARGET'S past practices. All Assets which
are material to TARGET's business on a consolidated basis, held under leases
or subleases by any of the TARGET Companies are held under valid Contracts
enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the TARGET Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket
bonds in effect as to which any of the TARGET Companies is a named insured are
reasonably sufficient. The Assets of the
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TARGET Companies include all assets required to operate the business of the
TARGET Companies as presently conducted.
4.11 Environmental Matters.
(a) Each TARGET Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET.
(b) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or authority or other forum
in which any TARGET Company or any of its Participation Facilities has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material or oil, whether or not occurring at, on, under or involving a site
owned, leased or operated by any TARGET Company or any of its Participation
Facilities, except for such Litigation pending or, to the Knowledge of TARGET,
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or any TARGET Company in respect of such
Loan Property) has been or, with respect to threatened litigation, may be
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous Material or
oil, whether or not occurring at, on, under or involving a Loan Property,
except for such Litigation pending or, to the Knowledge of TARGET, threatened
that is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c) above, except such as
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(e) During the period of (i) any TARGET Company's ownership or operation of
any of their respective current properties, (ii) any TARGET Company's
participation in the management of any Participation Facility, or (iii) any
TARGET Company's holding of a security interest in a Loan Property, there have
been no releases of Hazardous Material or oil in, on, under or affecting any
such property, Participation Facility, or to the Knowledge of TARGET Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET.
(f) Prior to the period of (i) any TARGET Company's ownership or operation
of any of their respective current properties, (ii) any TARGET Company's
participation in the management of any Participation Facility, or (iii) any
TARGET Company's holding of a security interest in a Loan Property, to the
Knowledge of TARGET, there were no releases of Hazardous Material or oil in,
on, under or affecting any such property, Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET.
4.12 Compliance with Laws.
(a) TARGET is duly registered as a bank holding company under the BHC Act.
Each TARGET Company has in effect all Permits necessary for it to own, lease
or operate its Assets and to carry on its business as now conducted, except
for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, and
there has occurred no Default under any such Permit, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
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(b) Except as Previously Disclosed, no TARGET Company:
(i) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET; and
(ii) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (A) asserting that any TARGET Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, (B) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET, or (C) requiring any TARGET
Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
4.13 Labor Relations. No TARGET Company is the subject of any Litigation
asserting that it or any other TARGET Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other TARGET Company to bargain with
any labor organization as to wages or conditions of employment, nor is there
any strike or other labor dispute involving any TARGET Company, pending or, to
its Knowledge, threatened or, to its Knowledge, is there any activity
involving any TARGET Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
4.14 Employee Benefit Plans.
(a) TARGET has Previously Disclosed, and delivered or made available to
PURCHASER prior to the execution of this Agreement, copies in each case of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans," as that term is defined in Section 3(3)
of ERISA, currently adopted, maintained by, sponsored in whole or in part by,
or contributed to by any TARGET Company or Affiliate thereof for the benefit
of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "TARGET Benefit
Plans"). Any of the TARGET Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "TARGET ERISA Plan." Each TARGET ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j)) of the Internal Revenue Code) is
referred to herein as a "TARGET Pension Plan." No TARGET Pension Plan is or
has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
(b) All TARGET Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET. Each TARGET ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the IRS, and TARGET is not
aware of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of TARGET, no TARGET Company
has engaged in a transaction with respect to any TARGET Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof
would subject any TARGET Company to a tax or penalty imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
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(c) No TARGET ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A)
of ERISA, based on actuarial assumptions set forth for such plan's most recent
actuarial valuation. Since the date of the most recent actuarial valuation,
there has been (i) no material change in the financial position of any TARGET
Pension Plan, (ii) no change in the actuarial assumptions with respect to any
TARGET Pension Plan, and (iii) no increase in benefits under any TARGET
Pension Plan as a result of plan amendments or changes in applicable law,
which is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET or materially adversely affect the funding
status of any such plan. Neither any TARGET Pension Plan nor any "single-
employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently
or formerly maintained by any TARGET Company, or the single-employer plan of
any entity which is considered one employer with TARGET under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, which is reasonably likely to have a Material Adverse
Effect on TARGET. No TARGET Company has provided, or is required to provide,
security to a TARGET Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV or ERISA has been or is expected to be
incurred by any TARGET Company with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on TARGET. Except as Previously Disclosed, no TARGET Company has
incurred any withdrawal Liability with respect to a multi-employer plan under
Subtitle B of Title TV or ERISA (regardless of whether based on contributions
of an ERISA Affiliate), which Liability is reasonably likely to have a
Material Adverse Effect on TARGET. No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any TARGET
Pension Plan or by any ERISA Affiliate within the 12-month period ending on
the date hereof.
(e) No TARGET Company has any obligations for retiree health and life
benefits under any of the TARGET Benefit Plans, and there are no restrictions
on the rights of such TARGET Company to amend or terminate any such Plan
without incurring any Liability thereunder, which Liability is reasonably
likely to have a Material Adverse Effect on TARGET.
(f) Except as Previously Disclosed, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any TARGET Company from any TARGET Company under
any TARGET Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any TARGET Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any TARGET Company and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the TARGET Financial Statements to the
extent required by and in accordance with GAAP.
4.15 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the TARGET Financial Statements, none of the TARGET Companies,
nor any of their respective Assets, businesses or operations, is a party to,
or is bound or affected by, or receives benefits under, (a) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any calendar year, (b) any Contract
relating to the borrowing of money by any TARGET Company or the guarantee by
any TARGET Company of any such obligation (other than Contracts evidencing
deposit liabilities, purchases of federal funds, fully secured repurchase
agreements, trade payables, and Contracts relating to borrowings or
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guarantees made in the ordinary course of business), and (c) any Contracts
between or among TARGET Companies (together with all Contracts referred to in
Sections 4.10 and 4.14(a) of this Agreement, the "TARGET Contracts"). None of
the TARGET Companies is in Default under any TARGET Contract, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET. All of the indebtedness of any
TARGET Company for money borrowed is prepayable at any time by such TARGET
Company without penalty or premium.
4.16 Legal Proceedings. Except as Previously Disclosed, there is no
Litigation instituted or pending or, to the Knowledge of TARGET, threatened
(or unasserted but considered probable of assertion and which, if asserted,
would have at least a reasonable probability of an unfavorable outcome)
against any TARGET Company, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding
against any TARGET Company, that are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on TARGET.
4.17 Reports. Except as Previously Disclosed, since January 1, 1994, each
TARGET Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with all Regulatory Authorities. As of their respective dates, each of
such reports and documents, including, without limitation, the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of their respective dates, none of such reports
or documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.18 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any TARGET Company or any
Affiliate thereof to PURCHASER pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be supplied by any TARGET Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by PURCHASER with the SEC, will, when
the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied
or to be supplied by any TARGET Company or any Affiliate thereof for inclusion
in the Proxy Statement to be mailed to TARGET'S shareholders in connection
with the Shareholders' Meeting, and any other documents to be filed by any
TARGET Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of TARGET, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for
the Shareholders' Meeting. All documents that any TARGET Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
4.19 Accounting, Tax and Regulatory Matters. Except as Previously Disclosed,
no TARGET Company or any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (a) prevent
the transactions contemplated hereby, including the Merger, from qualifying as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 8.1 (b) of this Agreement or result in the
imposition of a condition or restriction of the referred to in the second
sentence of such Section. To the
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Knowledge of TARGET, there exists no fact, circumstance, or reason why the
requisite Consents referred to in Section 8.1(b) of this Agreement cannot be
received in a timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such Section
8.1(b).
4.20 Charter Provisions. Each TARGET Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any TARGET Company or restrict or
impair the ability of PURCHASER to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any TARGET Company that may be
acquired or controlled by it.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
PURCHASER hereby represents and warrants to TARGET as follows:
5.1 Organization, Standing and Power. PURCHASER is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Georgia, and is duly registered as a bank holding company under the BHC
Act. PURCHASER has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. PURCHASER is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
the character of its Assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
5.2 Authority; No Breach.
(a) PURCHASER has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of PURCHASER. This Agreement
represents a legal, valid and binding obligation of PURCHASER, enforceable
against PURCHASER in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by PURCHASER, nor
the consummation by PURCHASER of the transactions contemplated hereby, nor
compliance by PURCHASER with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of PURCHASER'S Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any PURCHASER Company under, any Contract or Permit of any PURCHASER
Company, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, or, (iii) subject to receipt of the requisite
approvals referred to in Section 8.1(b) of this Agreement, violate any Law or
Order applicable to any PURCHASER Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, and rules of the NASD, and
other than Consents required from Regulatory Authorities, and other than
notices to or filings with the IRS or the Pension Benefit Guaranty Corporation
with respect to any employee benefit plans, and other than Consents, filings
or notifications which, if not obtained or made, are not reasonably
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likely to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, no notice to, filing with, or Consent of any public body or
authority is necessary for the consummation by PURCHASER of the Merger and the
other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of PURCHASER consists of (i) 15,000,000
shares of PURCHASER Common Stock, of which 6,745,701 shares are issued and
outstanding as of the date of this Agreement, and (ii) 5,000,000 shares of
Preferred Stock, none of which are issued or outstanding as of the date of
this Agreement. All of the issued and outstanding shares of PURCHASER Common
Stock are, and all of the shares of PURCHASER Common Stock to be issued in
exchange for shares of TARGET Common Stock upon consummation of the Merger,
when issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the
GBCC. None of the outstanding shares of PURCHASER Common Stock has been, and
none of the shares of PURCHASER Common Stock to be issued in exchange for
shares of TARGET Common Stock upon consummation of the Merger will be, issued
in violation of any preemptive rights of the current or past shareholders of
PURCHASER. PURCHASER has reserved 595,833 shares of PURCHASER Common Stock for
issuance under the PURCHASER Stock Plans, pursuant to which options to
purchase not more than 64,583 shares of PURCHASER Common Stock are outstanding
as of the date of this Agreement.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
Previously Disclosed, there are no shares of capital stock or other equity
securities of PURCHASER outstanding and no outstanding options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of PURCHASER or contracts,
commitments, understandings, or arrangements by which PURCHASER is or may be
bound to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock.
5.4 PURCHASER Subsidiaries. PURCHASER has Previously Disclosed all of the
PURCHASER Subsidiaries as of the date of this Agreement. PURCHASER owns all of
the issued and outstanding shares of capital stock of each PURCHASER
Subsidiary. No equity securities of any PURCHASER Subsidiary are or may become
required to be issued (other than to a PURCHASER Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and
there are no Contracts by which any PURCHASER Subsidiary is bound to issue
(other than to a PURCHASER Company) additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
its capital stock or by which any PURCHASER Company is or may be bound to
transfer any shares of the capital stock of any PURCHASER Subsidiary (other
than to a PURCHASER Company). There are no Contracts relating to the rights of
any PURCHASER Company to vote or to dispose of any shares of the capital stock
of any PURCHASER Subsidiary. All of the shares of capital stock of each
PURCHASER Subsidiary held by a PURCHASER Company are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are owned by the
PURCHASER Company free and clear of any Lien. Each PURCHASER Subsidiary is
either a bank or a corporation, and is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease and operate its Assets and to carry
on its business as now conducted. Each PURCHASER Subsidiary is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character
of its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to
be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER. Each PURCHASER
Subsidiary that is a depository institution is an insured institution as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder.
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5.5 Financial Statements. PURCHASER has Previously Disclosed and delivered
to TARGET prior to the execution of this Agreement copies of all PURCHASER
Financial Statements for periods ended prior to the date hereof and will
deliver to TARGET copies of all PURCHASER Financial Statements prepared
subsequent to the date hereof. The PURCHASER Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records
of the PURCHASER Companies, which are or will be, as the case may be, complete
and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (b) present or will
present, as the case may be, fairly the consolidated financial position of the
PURCHASER Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the PURCHASER
Companies for the periods indicated, in accordance with GAAP (subject to
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
5.6 Absence of Undisclosed Liabilities. No PURCHASER Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of
PURCHASER as of March 31, 1997 included in the PURCHASER Financial Statements
or reflected in the notes thereto. No PURCHASER Company has incurred or paid
any Liability since March 31, 1997, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER.
5.7 Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in SEC Documents filed by PURCHASER prior to the date of this
Agreement, (a) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, and (b) the PURCHASER Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PURCHASER provided in Article 7 of this Agreement.
5.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of the
PURCHASER Companies have been timely filed or requests for extensions have
been timely filed, granted and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year
end immediately preceding the Effective Time, except to the extent that all
such failures to file, taken together, are not reasonably likely to have a
Material Adverse Effect on PURCHASER, and all returns filed are complete and
accurate to the Knowledge of PURCHASER. All Taxes shown on filed returns have
been paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except as reserved against
in the PURCHASER Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect, and no unpaid tax deficiency has been asserted in
writing against or with respect to any PURCHASER Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(c) Adequate provision for any Taxes due or to become due for any of the
PURCHASER Companies for the period or periods through and including the date
of the respective PURCHASER Financial Statements has been made and is
reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have been provided for in
accordance with GAAP.
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(e) Effective January 1, 1993, PURCHASER adopted Financial Accounting
Standards Board Statement 109, "Accounting for Income Taxes."
5.9 PURCHASER Allowance for Possible Loan Losses. The allowance for possible
loan or credit losses (the "PURCHASER Allowance") shown on the consolidated
balance sheets of PURCHASER included in the most recent PURCHASER Financial
Statements dated prior to the date of this Agreement was, and the PURCHASER
Allowance shown on the consolidated balance sheets of PURCHASER included in
the PURCHASER Financial Statements as of dates subsequent to the execution of
this Agreement will be, as of the dates thereof, adequate (within the meaning
of GAAP and applicable regulatory requirements or guidelines) to provide for
losses relating to or inherent in the loan and lease portfolios (including
accrued interest receivables) of the PURCHASER Companies and other extensions
of credit (including letters of credit and commitments to make loans or extend
credit) by the PURCHASER Companies as of the dates thereof except where the
failure of such PURCHASER Allowance to be so adequate is not reasonably likely
to have a Material Adverse Effect on PURCHASER.
5.10 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the PURCHASER Financial Statements, the PURCHASER Companies have
good and marketable title, free and clear of all Liens, to all of their
respective Assets. All material tangible properties used in the businesses of
the PURCHASER Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
PURCHASER'S past practices. All Assets which are material to PURCHASER'S
business on a consolidated basis, held under leases or subleases by any of the
PURCHASER Companies, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
policies of fire, theft, liability, and other insurance maintained with
respect to the Assets or businesses of the PURCHASER Companies provide
adequate coverage under current industry practices against loss or Liability,
and the fidelity and blanket bonds in effect as to which any of the PURCHASER
Companies is a named insured are reasonably sufficient. The Assets of the
PURCHASER Companies include all assets required to operate the business of the
PURCHASER Companies as presently conducted.
5.11 Environmental Matters.
(a) Each PURCHASER Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
(b) There is no Litigation pending or, to the Knowledge of PURCHASER,
threatened before any court, governmental agency or authority or other forum
in which any PURCHASER Company or any of its Participation Facilities has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material (as defined below) or oil, whether or not occurring at, on, under or
involving a site owned, leased or operated by any PURCHASER Company or any of
its Participation Facilities, except for such Litigation pending or, to the
Knowledge of Purchaser, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) There is no Litigation pending or, to the Knowledge of Purchaser,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or any PURCHASER Company in respect of such
Loan Property) has been or, with respect to threatened Litigation, may be
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor), with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous Material or
oil, whether or not occurring at, on, under or involving a Loan Property,
except for such Litigation pending or, to
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the Knowledge of Purchaser, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c) above, except such as
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's ownership or operation
of any of their respective current properties, (ii) any PURCHASER Company's
participation in the management of any Participation Facility, or (iii) any
PURCHASER Company's holding of a security interest in a Loan Property, there
have been no releases of Hazardous Material or oil in, on, under or affecting
such property, Participation Facility or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan
Property, to the Knowledge of PURCHASER, there were no releases of Hazardous
Material or oil in, on, under or affecting any such property, Participation
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
5.12 Compliance with Laws. PURCHASER is duly registered as a bank holding
company under the BHC Act. Each PURCHASER Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER. No
PURCHASER Company: (i) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER; or (ii) has received any
notification or communication from any agency or department of federal, state,
or local government or any Regulatory Authority or the staff thereof (A)
asserting that any PURCHASER Company is not in compliance with any of the Laws
or Orders which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, (B) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER, or
(C) requiring any PURCHASER Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.13 Labor Relations. No PURCHASER Company is the subject of any Litigation
asserting that it or any other PURCHASER Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other PURCHASER Company to bargain
with any labor organization as to wages or conditions of employment, nor is
there any strike or other labor dispute involving any PURCHASER Company,
pending or, to its Knowledge, threatened or, to its Knowledge, is there any
activity involving any PURCHASER Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) PURCHASER has Previously Disclosed and delivered or made available to
TARGET prior to the execution of this Agreement copies in each case of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all other
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written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including, without limitation,
"employee benefit plans," as that term is defined in Section 3(3) of ERISA,
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any PURCHASER Company or Affiliate thereof for the benefit
of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "PURCHASER
Benefit Plans"). Any of the PURCHASER Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "PURCHASER ERISA Plan." Each PURCHASER ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j)) of the
Internal Revenue Code) is referred to herein as a "PURCHASER Pension Plan." No
PURCHASER Pension Plan is or has been a multi-employer plan within the meaning
of Section 3(37) of ERISA.
(b) All PURCHASER Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws the breach
or violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER. Each PURCHASER ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the IRS, and PURCHASER
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of PURCHASER, no PURCHASER
Company has engaged in a transaction with respect to any PURCHASER Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof would subject any PURCHASER Company to a tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in
amounts which are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER.
(c) No PURCHASER ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A)
of ERISA, based on actuarial assumptions set forth for such plan's most recent
actuarial valuation. Since the date of the most recent actuarial valuation,
there has been (i) no material change in the financial position of any
PURCHASER Pension Plan, (ii) no change in the actuarial assumptions with
respect to any PURCHASER Pension Plan, and (iii) no increase in benefits under
any PURCHASER Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER or materially adversely
affect the funding status of any such plan. Neither any PURCHASER Pension Plan
nor any "single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any PURCHASER Company, or the
single-employer plan of any ERISA Affiliate has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, which is reasonably likely to have a Material Adverse
Effect on PURCHASER. No PURCHASER Company has provided, or is required to
provide, security to a PURCHASER Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or ERISA has been or is
expected to be incurred by any PURCHASER Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which Liability is reasonably likely to have a Material
Adverse Effect on PURCHASER. No PURCHASER Company has incurred any withdrawal
Liability with respect to a multi-employer plan under Subtitle B of Title IV
or ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Material Adverse Effect on
PURCHASER. No notice of a "reportable event" within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any PURCHASER Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as Previously Disclosed, (i) no PURCHASER Company has any
obligations for retiree health and life benefits under any of the PURCHASER
Benefit Plans and (ii) there are no restrictions on the rights of
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such PURCHASER Company to amend or terminate any such Plan without incurring
any Liability thereunder, which Liability is reasonably likely to have a
Material Adverse Effect on PURCHASER.
(f) Except as Previously Disclosed, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of any PURCHASER Company from any PURCHASER Company
under any PURCHASER Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any PURCHASER Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any PURCHASER Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the PURCHASER Financial
Statements to the extent required by and in accordance with GAAP.
5.15 Legal Proceedings. There is no Litigation instituted or pending or, to
the Knowledge of PURCHASER, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any PURCHASER Company, or
against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any PURCHASER
Company, that are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER.
5.16 Reports. Since January 1, 1994, each PURCHASER Company has timely filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (a) the SEC,
including, without limitation, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER). As
of their respective dates, each of such reports and documents, including,
without limitation, the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, none of such reports and documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
5.17 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any PURCHASER Company or any
Affiliate thereof to TARGET pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the information supplied or to be supplied
by any PURCHASER Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by PURCHASER with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any PURCHASER Company or any Affiliate thereof for inclusion in
the Proxy Statement to be mailed to TARGET's shareholders in connection with
the Shareholders' Meeting, and any other documents to be filed by any
PURCHASER Company or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Proxy Statement, when first mailed to the shareholders of TARGET, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the
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time of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that any PURCHASER Company
or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply
as to form in all material respects with the provisions of applicable Law.
5.18 Accounting, Tax and Regulatory Matters. No PURCHASER Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 8.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the second sentence of
such Section. To the Knowledge of PURCHASER, there exists no fact,
circumstance, or reason why the requisite Consents referred to in Section
8.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 8.1(b).
5.19 Charter Provisions. Each PURCHASER Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any PURCHASER Company or restrict or
impair the ability of any TARGET shareholder to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of PURCHASER Common Stock
that may be acquired or controlled by it.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative Covenants of TARGET. Unless the prior written consent of
PURCHASER shall have been obtained, and except as otherwise contemplated
herein, TARGET shall, and shall cause each of its Subsidiaries: (a) to operate
its business in the usual, regular, and ordinary course; (b) to preserve
intact its business organization and Assets and maintain its rights and
franchises; (c) to use its reasonable efforts to cause its representations and
warranties to be correct at all times; and (d) to take no action which would
(i) adversely affect the ability of any Party to obtain any Consents required
for the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the second sentence of Section 8.1(b)
of this Agreement or (ii) adversely affect in any material respect the ability
of either Party to perform its covenants and agreements under this Agreement.
6.2 Negative Covenants of TARGET. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, TARGET
covenants and agrees that it will not do or agree or commit to do, or permit
any of its Subsidiaries to do or agree or commit to do, any of the following
without the prior written consent of the chief executive officer or chief
financial officer of PURCHASER, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any TARGET Company; or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a TARGET Company to another TARGET
Company) (for the TARGET Companies on a consolidated basis) except in the
ordinary course of the business of TARGET Companies consistent with past
practices (which shall include, for TARGET Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
receipt of Federal Home Loan Bank advances, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any share of stock held by any TARGET
Company of any Lien or permit any such Lien to exist; or
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(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any TARGET Company, or declare or pay any dividend or
make any other distribution in respect of TARGET's capital stock, provided
that TARGET shall be permitted (i) to pay a cash dividend in an amount not
to exceed $50,000 if the Merger shall not have been consummated by
September 30, 1997, so long as the failure to consummate the Merger on or
before such date was not caused by any breach of this Agreement by TARGET,
and (ii) to pay a cash dividend if, as and to the extent that the
consolidated after-tax net income of TARGET and its Subsidiaries for
calendar year 1997 (which shall be computed in accordance with GAAP) is in
excess of the sum of (A) the amount of any dividend paid pursuant to clause
(i) of this subsection (c) and (B) $1,370.00 multiplied by the number of
full calendar days between January 1, 1997 and the day which is five (5)
calendar days prior to the Closing Date; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as Previously Disclosed, issue, sell,
pledge, encumber, authorize the issuance of, or enter into any Contract to
issue, sell, pledge, encumber, or authorize the issuance of or otherwise
permit to become outstanding, any additional shares of TARGET Common Stock
or any other capital stock of any TARGET Company, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any
such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any TARGET
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of TARGET Common Stock or sell,
lease, mortgage or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any TARGET Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another TARGET Company) or (ii)
any Asset having a book value in excess of $50,000 other than in the
ordinary course of business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over any Person, other than in
connection with (i) internal reorganizations or consolidations involving
existing Subsidiaries, (ii) foreclosures in the ordinary course of
business, or (iii) acquisitions of control by a depository institution
Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any TARGET Company (including such discretionary increases as
may be contemplated by existing employment agreements), except in
accordance with past practice Previously Disclosed or as required by Law;
pay any bonus except to employees in accordance with past practice
Previously Disclosed or the provisions of any applicable program or plan
adopted by its Board of Directors prior to the date of this Agreement;
enter into or amend any severance agreements with officers of any TARGET
Company; or pay any bonus to, or grant any increase in fees or other
increases in compensation or other benefits to, directors of any TARGET
Company; or
(h) enter into or amend any employment Contract between any TARGET
Company and any Person (unless such amendment is required by Law) that the
TARGET Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(i) adopt any new employee benefit plan of any TARGET Company or make any
material change in or to any existing employee benefit plans of any TARGET
Company other than any such change that is required by Law or that, in the
opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to
changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any TARGET Company for
money damages in excess of $50,000 or which involves material restrictions
upon the operations of any TARGET Company; or
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(l) except in the ordinary course of business, modify, amend or terminate
any material Contract or waive, release, compromise or assign any material
rights or claims.
6.3 Covenants of PURCHASER. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, PURCHASER
covenants and agrees that it shall continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment,
to enhance the long-term value of the PURCHASER Common Stock and the business
prospects of the PURCHASER Companies and, to the extent consistent therewith,
to use all reasonable efforts to preserve intact the PURCHASER Companies' core
businesses and goodwill with their respective employees and the communities
they serve.
6.4 Adverse Changes in Condition. Each Party agrees (a) to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) is reasonably likely to
cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and (b) to use its reasonable
efforts to prevent or promptly to remedy the same.
6.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies
of all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
6.6 Pooling. From and after the date of this Agreement, no Party, or any of
its Affiliates, shall knowingly take or fail to take any action, other than
actions which such Party is required to take or abstain from taking pursuant
to this Agreement, which action or failure to act could reasonably be expected
to jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes. From and after the date of this Agreement, each of the
Parties shall take all reasonable actions necessary to cause the Merger to be
characterized as a "pooling of interests" for accounting purposes.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as practicable after execution of this Agreement, PURCHASER shall file the
Registration Statement with the SEC, and shall use its best efforts to cause
the Registration Statement to become effective under the 1933 Act and take any
action required to be taken under applicable Securities Laws in connection
with the issuance of the shares of PURCHASER Common Stock upon consummation of
the Merger. TARGET shall furnish all information concerning it and the holders
of its capital stock as PURCHASER may reasonably request in connection with
such action. TARGET shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective
by the SEC, for the purpose of voting upon approval of the Merger and this
Agreement and such other related matters as it deems appropriate. In
connection with the Shareholders' Meeting, (a) PURCHASER shall prepare and
file on TARGET's behalf a Proxy Statement (which shall be
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included in the Registration Statement and which shall include an explanation
of the restrictions on resale with respect to the shares of PURCHASER Common
Stock received by the holders of TARGET Common Stock in the Merger) with the
SEC and mail it to its shareholders, (b) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (c) the Board of Directors of TARGET
shall recommend to its shareholders that they approve this Agreement, and (d)
the Board of Directors and officers of TARGET shall use their reasonable
efforts to obtain such shareholders' approval.
7.2 Listing. PURCHASER shall use its best efforts to list, prior to the
Effective Time, on the NASDAQ/NMS, the shares of PURCHASER Common Stock to be
issued to the holders of TARGET Common Stock pursuant to the Merger.
7.3 Applications. PURCHASER shall promptly prepare and file, and TARGET
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
7.4 Filings with State Offices. Upon the terms and subject to the conditions
of this Agreement, PURCHASER shall execute and file the Georgia Articles of
Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
7.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall
cooperate fully with the other Party hereto to that end (it being understood
that any amendments to the Registration Statement filed by PURCHASER in
connection with the PURCHASER Common Stock to be issued in the Merger or a
resolicitation of proxies as a consequence of an acquisition agreement by
PURCHASER or any of its Subsidiaries shall not violate this covenant),
including, without limitation, using its efforts to lift or rescind any Order
adversely affecting its ability to consummate the transactions contemplated
herein and to cause to be satisfied the conditions referred to in Article 9 of
this Agreement. Each Party shall use, and shall cause each of its Subsidiaries
to use, its best efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
7.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Except as may be required by applicable Law or legal process, and except
for such disclosure to those of its directors, officers, employees and
representatives as may be appropriate or required in connection with the
transactions contemplated hereby, each Party shall hold in confidence all
nonpublic information obtained from the other Party (including work papers and
other material derived therefrom) as a result of this Agreement or in
connection with the transactions contemplated hereby (whether so obtained
before or after the execution hereof) until such time as the Party providing
such information consents to its disclosure or such information becomes
otherwise publicly available. Promptly following any termination of this
Agreement, each of the Parties agrees to use its best efforts to cause its
respective directors, officers, employees and representatives to destroy or
return to the providing party all such nonpublic information (including work
papers and other material retrieved therefrom), including all copies thereof.
Each Party shall, and shall cause its advisers and agents to, maintain the
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confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and
financial position and shall not use such information for any purpose except
in furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof and all work papers containing
confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and
which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other
Party or which has had or is reasonably likely to have a Material Adverse
Effect on the other Party.
7.7 Press Releases. Prior to the Effective Time, TARGET and PURCHASER shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this
Section 7.7 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such
Party's disclosure obligations imposed by Law.
7.8 No Solicitation. (a) TARGET shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director of
employee of, or any investment banker, attorney or other advisor or
representative of, TARGET or any of its Subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that, subject to compliance with subsection (c) below and after receiving the
written opinion of independent outside legal counsel to the effect that the
failure to do so would constitute a breach by the TARGET Board of Directors of
its fiduciary duties to TARGET shareholders under applicable law, TARGET may,
in response to an unsolicited Takeover Proposal that (i) was not received in
violation of this Section 7.8, (ii) is not subject to financing and (iii) the
TARGET Board of Directors determines in good faith, after receipt of a written
opinion of a financial advisor of nationally recognized reputation to such
effect, would result in a transaction more favorable to TARGET shareholders
than the Merger, (A) furnish information with respect to TARGET to any Person
pursuant to a confidentiality agreement and (B) participate in negotiations
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the immediately
preceding sentence by any executive officer of TARGET or any of its
Subsidiaries or any investment banker, attorney or other advisor or
representative of TARGET or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of TARGET or any of its Subsidiaries or
otherwise, shall be deemed to be a breach of this Section 7.8 by TARGET. For
purposes of this Agreement, "Takeover Proposal" means an inquiry, proposal or
acquisition or purchase of a substantial amount of assets of TARGET or any of
its Subsidiaries (other than investors in the ordinary course of business) or
of over 15% of any class of equity securities of TARGET or any of its
Subsidiaries or any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 15% or more of any class of equity
securities of TARGET or any of its Subsidiaries, or any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving TARGET or any of its
Subsidiaries other than the transactions contemplated by this Agreement, or
any other transaction the consummation of which would reasonably be expected
to impede, interfere with, prevent or materially delay the Merger or which
would reasonably be expected to dilute materially the benefits to PURCHASER of
the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of TARGET nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to PURCHASER, the approval or recommendation of
such Board of Directors or any such committee of this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any
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agreement with respect to any Takeover Proposal. Notwithstanding the
foregoing, upon receipt of the written opinion of independent outside legal
counsel to the effect that failure to do so would constitute a breach of its
fiduciary duties to TARGET shareholders under applicable law, then, prior to
the Shareholders' Meeting, the TARGET Board of Directors may (subject to the
terms of this and the following sentences) approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of
this Agreement or the Merger) a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the second
business day following PURCHASER'S receipt of written notice (a "Notice of
Superior Proposal") advising PURCHASER that the TARGET Board of Directors has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the Person making such Superior
Proposal; provided that TARGET shall not enter into an agreement with respect
to a Superior Proposal unless TARGET shall have furnished PURCHASER with
written notice no later than 12:00 noon one (1) day in advance of any date
that it intends to enter into such agreement. For purposes of this Agreement,
a "Superior Proposal" means any bona fide proposal (not subject to financing)
to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the shares of TARGET Common Stock or
TARGET Bank then outstanding or all or substantially all of the assets of
TARGET or TARGET Bank and otherwise on terms that the TARGET Board of
Directors determines in its good faith judgment (after receipt of a written
opinion of a financial advisor of nationally recognized reputation to such
effect) to be more favorable to TARGET shareholders than the Merger.
(c) In addition to the obligations of TARGET set forth in subsection (b)
above, TARGET shall immediately advise PURCHASER orally and in writing of any
request for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the material terms
and conditions of such request, Takeover Proposal or inquiry, and the identity
of the person making any Takeover Proposal or inquiry. TARGET shall keep
PURCHASER fully informed of the status and details (including amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit TARGET from making
any disclosure to TARGET's shareholders if, the TARGET Board of Directors
determines in good faith, after receipt of the written advice of outside
counsel to such effect, that it is required to do so in order to discharge
properly its fiduciary duties to shareholders under applicable law; provided
that TARGET does not, except as permitted by subsection (b) above, withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or recommend, a Takeover
Proposal.
7.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not, to qualify for treatment as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code for federal income
tax purposes.
7.10 Agreement of Affiliates. TARGET has Previously Disclosed all Persons
whom it reasonably believes are "affiliates" of TARGET for purposes of Rule
145 under the 1933 Act. TARGET shall use its reasonable efforts to cause each
such Person to deliver to PURCHASER not later than thirty (30) days after the
date of this Agreement, a written agreement, substantially in the form of
Exhibit 1 hereto, providing that such Person will not sell, pledge, transfer,
or otherwise dispose of the shares of TARGET Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not
sell, pledge, transfer, or otherwise dispose of the shares of PURCHASER Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Regardless of whether each such affiliate has provided
the written agreement referred to in this Section, PURCHASER shall be entitled
to place restrictive legends upon certificates for shares of PURCHASER Common
Stock issued to affiliates of TARGET pursuant to this Agreement to enforce the
provisions of this Section.
7.11 Employee Benefits and Contracts. Following the Effective Time,
PURCHASER shall provide generally to officers and employees of the TARGET
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of PURCHASER Common
Stock), on
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terms and conditions which when taken as a whole are substantially similar to
those currently provided by the PURCHASER Companies to their similarly
situated officers and employees, provided that for a period of twelve (12)
months after the Effective Time, PURCHASER shall provide generally to officers
and employees of TARGET Companies severance benefits in accordance with the
policies of either (i) TARGET as Previously Disclosed, or (ii) PURCHASER,
whichever of (i) or (ii) will provide the greater benefit to the officer or
employee. For purposes of participation and vesting under such employee
benefit plans, the service of the employees of the TARGET Companies prior to
the Effective Time shall be treated as service with a PURCHASER Company
participating in such employee benefit plans. PURCHASER also shall honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts Previously Disclosed to PURCHASER between any TARGET
Company and any current or former director, officer, or employee thereof and
all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the TARGET Benefit Plans.
7.12 Large Deposits. Prior to the Closing, TARGET will provide PURCHASER
with a list of all certificates of deposit or checking, savings or other
deposits owned by persons who, to the Knowledge of the TARGET, had deposits
aggregating more than $100,000 and a list of all certificates of deposit or
checking, savings or other deposits owned by directors and officers of TARGET
and the Bank and their affiliates in an amount aggregating more than $100,000
as of the last day of the calendar month immediately prior to the Closing.
7.13 Indemnification. PURCHASER agrees that all rights to indemnification
and all limitations of liability existing in favor of the officers and
directors of TARGET and TARGET Bank ("Indemnified Parties") as provided in
their respective articles of incorporation and bylaws as of the date hereof
with respect to matters occurring prior to the Effective Time shall survive
the Merger and shall continue in full force and effect, without any amendment
thereto, for a period of not less than six (6) years from the Effective Time;
provided, however, that all rights to any indemnification in respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim.
7.14 Irrevocable Proxies. Concurrent with the execution hereof, TARGET shall
obtain and deliver to PURCHASER irrevocable proxies in substantially the form
of Exhibit 4 hereto from each member of TARGET'S Board of Directors and from
certain other affiliates of TARGET, which proxies represent not less than 55%
of the outstanding shares of TARGET Common Stock.
7.15 Employment Agreement. PURCHASER agrees to cause Citizens Bank to
execute and deliver to C. Larry Young at Closing an Employment Agreement
substantially in the form of Exhibit 5 hereto.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6
of this Agreement:
(a) Shareholder Approval. The shareholders of TARGET shall have approved
this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by
the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect, and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby
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shall be conditioned or restricted in a manner (including, without
limitation, requirements relating to the raising of additional capital or
the disposition of Assets) which, in the reasonable judgment of the Board
of Directors of either Party, would so materially adversely impact the
economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the Merger;
provided, however, that no such condition or restriction shall be deemed to
be materially adverse unless it materially differs from terms and
conditions customarily imposed by any Regulatory Authority in connection
with similar transactions.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 8.1(b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent)
or taken any other action which prohibits, materially restricts or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under all
Securities Laws relating to the issuance or trading of the shares of
PURCHASER Common Stock issuable pursuant to the Merger shall have been
received.
(f) NASD Listing. The shares of PURCHASER Common Stock issuable pursuant
to the Merger shall have been approved for listing on the NASDAQ/NMS.
(g) Tax Matters. TARGET shall have received a written opinion of counsel
from Rogers & Hardin, in form reasonably satisfactory to it, substantially
to the effect that for federal income tax purposes (a) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (b) the exchange in the Merger of TARGET Common
Stock for PURCHASER Common Stock will not give rise to gain or loss to the
shareholders of TARGET with respect to such exchange (except to the extent
of any cash received).
8.2 Conditions to Obligations of PURCHASER. The obligations of PURCHASER to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by PURCHASER pursuant to Section 10.6(a) of this
Agreement:
(a) Representations and Warranties. The representations and warranties of
TARGET set forth or referred to in this Agreement shall be true and correct
in all respects as of the date of this Agreement and as of the Effective
Time with the same effect as though all such representations and warranties
had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 4.3 of this Agreement,
which shall be true in all respects) the inaccuracies of which relate to
matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of TARGET to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. TARGET shall have delivered to PURCHASER (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions of its
obligations set forth in Sections 8.2(a) and 8.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
TARGET's Board of Directors and shareholders evidencing the
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taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as
PURCHASER and its counsel shall reasonably request.
(d) Net Income. The consolidated after-tax net income for calendar year
1997 of TARGET and its Subsidiaries (which shall be computed in accordance
with GAAP) shall not be less than an amount equal to $1,100.00 multiplied
by the number of full calendar days between January 1, 1997 and the day
which is five (5) calendar days prior to the Closing Date.
(e) Opinion of Counsel. TARGET shall have delivered to PURCHASER an
opinion of Martin, Snow, Grant & Napier, counsel to TARGET, dated as of the
Closing Date, covering those matters set forth in Exhibit 2 hereto, which
opinion may be rendered in accordance with the Interpretive Standards on
Legal Opinions to Third Parties in Corporate Transactions promulgated by
the Corporate and Banking Law Section of the State Bar of Georgia (January
1, 1992) (the "Interpretive Standards").
(f) Accountant's Letters. PURCHASER shall have received from Mauldin &
Jenkins letters dated not more than five (5) days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding TARGET, in form and substance reasonably
satisfactory to PURCHASER, which letters shall be based upon customary
specified procedures undertaken by such firm.
(g) Employment Agreement. C. Larry Young shall have executed and
delivered an Employment Agreement substantially in the form of Exhibit 5
hereto.
(h) Dissenting Shareholders. Holders of not more than 5% of the issued
and outstanding shares of TARGET Common Stock shall have perfected their
rights as dissenting shareholders pursuant to Article 13 of the GBCC.
8.3 Conditions to Obligations of TARGET. The obligations of TARGET to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by TARGET pursuant to Section 10.6(b) of this
Agreement:
(a) Representations and Warranties. The representations and warranties of
PURCHASER set forth or referred to in this Agreement shall be true and
correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement,
which shall be true in all respects) the inaccuracies of which relate to
matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of PURCHASER to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. PURCHASER shall have delivered to TARGET (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by PURCHASER's Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as TARGET
and its counsel shall reasonably request.
(d) Opinion of Counsel. PURCHASER shall have delivered to TARGET an
opinion of Rogers & Hardin, counsel to PURCHASER, dated as of the Closing
Date, covering those matters set forth in Exhibit 3 hereto, which opinion
may be rendered in accordance with the Interpretive Standards.
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ARTICLE 9
TERMINATION
9.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the shareholders of TARGET,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors of PURCHASER and the
Board of Directors of TARGET; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching party
the ability to refuse to consummate the Merger under the standard set forth
in Section 8.2(a) of this Agreement in the case of PURCHASER and Section
8.3(a) of this Agreement in the case of TARGET; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
(30) days after the giving of written notice to the breaching Party of such
breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event (i) any Consent of any Regulatory Authority required for consummation
of the Merger and the other transactions contemplated hereby has been
denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for appeal,
or (ii) if the shareholders of TARGET fail to approve this Agreement and
the transactions contemplated hereby as required by the GBCC at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon (assuming, for this purpose, that
PURCHASER votes the proxies granted to it pursuant to Section 7.14 hereof
in favor thereof); or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by December 31, 1997, provided the
failure to consummate the Merger on or before such date was not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 9.1 (e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event that any of the conditions precedent to the obligations of such Party
to consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 9.1(e) of this Agreement.
(g) By the Board of Directors of TARGET in connection with entering into
a definitive agreement in accordance with Section 7.8(b), provided that it
has complied with all provisions thereof, including the notice provisions
therein, and that it makes simultaneous payment of the Expenses and the
Termination Fee.
(h) By PURCHASER at any time prior to June 22, 1997, if PURCHASER
determines, in its sole good faith judgment, that the financial condition,
business or prospects of TARGET are unsatisfactory to PURCHASER based on
PURCHASER'S due diligence conducted prior to such date, provided that (i)
PURCHASER shall inform TARGET upon such termination as to the reasons for
PURCHASER'S determination and (ii) that this Section 9.1(h) shall not limit
in any way the due diligence investigation of TARGET which PURCHASER may
perform or otherwise affect any other rights which PURCHASER has after the
date hereof under the terms of this Agreement.
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9.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1 of this Agreement, this Agreement
shall become void and have no effect, except (i) as provided in Sections 10.2
and 10.14, and (ii) a termination pursuant to Section 9.1(b) or (c) of this
Agreement shall entitle the non-breaching Party to the sum of $300,000 to be
paid by the breaching Party, as and for liquidated damages, which shall be
sole remedy of either Party against the other under this Agreement pursuant to
O.C.G.A. (S)13-6-7. The Parties agree that the amount specified as liquidated
damages hereunder represents a good faith and reasonable estimate by the
Parties of the amount of damages that the non-breaching Party would expect to
incur in the event of a default under this Agreement and is not intended as a
penalty.
ARTICLE 10
MISCELLANEOUS
10.1 Definitions. Except as otherwise provided herein, the capitalized terms
set forth below (in their singular and plural forms as applicable) shall have
the following meanings:
"Affiliate" of a Person shall mean (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"Base Period Trading Price" shall mean the average of the daily closing
price of a share of PURCHASER Common Stock as reported on NASDAQ/NMS for the
twenty (20) consecutive trading days immediately preceding five (5)
consecutive calendar days immediately preceding the Effective Time.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Citizens Bank" shall have the meaning provided in the Preamble hereto.
"Closing" shall mean the closing of the transactions contemplated hereby, as
described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under any
Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach
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or violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of or the giving of
notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Effective Time" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered, interpreted
or enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection of the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning provided in Section 4.14(c) of this
Agreement.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.2 of this
Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of this
Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked, copies
of which are attached to this Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.
"Expenses" shall have the meaning provided in Section 10.2 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"Georgia Articles of Merger" shall mean the Articles of Merger to be
executed by PURCHASER and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.3 of this
Agreement.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et
seq., or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Interpretive Standards" shall have the meaning provided in Section 8.2(d)
of this Agreement.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the Knowledge after
reasonable due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, or any Senior or Executive
Vice President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
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"Letter of Transmittal" shall have the meaning provided in Section 3.2 of
this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges
to secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or Subsidiary holds a security
interest, and, where required by the context, includes the owner or operator
of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries taken as
a whole, or (b) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact" shall
not be deemed to include the impact of (x) changes in banking and similar Laws
of general applicability or interpretations thereof by courts or governmental
authorities, (y) changes in generally accepted accounting principles or
regulatory accounting principles generally applicable to banks and their
holding companies, and (z) the Merger and compliance with the provisions of
this Agreement on the operating performance of the Parties.
"Merger" shall mean the merger of TARGET with and into PURCHASER referred to
in Section 1.1 of this Agreement.
"Merger Consideration" shall have the meaning provided in Section 3.1(c) of
this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" shall mean the National Market System of the National
Association of Securities Dealers Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Old Certificates" shall have the meaning provided in Section 3.2 of this
Agreement.
"Order" shall mean any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall mean all shares of TARGET outstanding
immediately prior to the Effective Time, other than shares held in TARGET'S
treasury which shall be cancelled without consideration at the Effective Time.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, without limitation, any property or facility held in a joint
venture) and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility
or property.
"Party" shall mean either TARGET or PURCHASER, and "Parties" shall mean both
TARGET and PURCHASER.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its capital stock,
Assets, Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in
a representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing prior
to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable
detail the matters contained therein, provided that in the case of
Subsidiaries acquired after the date of this Agreement, such information may
be so delivered by the acquiring Party to the other Party prior to the date of
such acquisition, (b) disclosed prior to the date of this Agreement by
PURCHASER to TARGET in an SEC Document delivered to TARGET in which the
specific information has been identified by PURCHASER, or (c) disclosed in
writing during PURCHASER'S due diligence investigation pursuant to Section
9.1(h) by TARGET to PURCHASER in the manner described in Section 10.8 of this
Agreement and describing in reasonable detail the matters contained therein.
"Proxy Statement" shall mean the proxy statement used by TARGET to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement and shall include the prospectus of PURCHASER relating to shares of
PURCHASER Common Stock to be issued to the shareholders of TARGET.
"PURCHASER Allowance" shall have the meaning provided in Section 5.9 of this
Agreement.
"PURCHASER Benefit Plans" shall have the meaning set forth in Section 5.14
of this Agreement.
"PURCHASER Common Stock" shall mean the $1.00 par value common stock of
PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all PURCHASER
Subsidiaries.
"PURCHASER Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of PURCHASER as
of March 31, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1997, and for each of the three years ended December 31, 1996, 1995
and 1994, as filed by PURCHASER in SEC Documents and (ii) the consolidated
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statements of condition of PURCHASER (including related notes and schedules,
if any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1997.
"PURCHASER Stock Plans" shall mean the existing stock option and other
stock-based compensation plans.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Record Date" shall have the meaning provided in Section 3.1(e) of this
Agreement.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by PURCHASER under the 1933 Act
in connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, all state banking and
other regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"SEC Documents" shall mean all reports and registration statements filed, or
required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, state blue sky laws, and
the rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of TARGET
to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or postponement thereof.
"Subsidiaries" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through foreclosure or
any such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"Superior Proposal" shall have the meaning provided in Section 7.8(b) of
this Agreement.
"Surviving Corporation" shall mean PURCHASER as the surviving corporation
resulting from the Merger.
"Takeover Proposal" shall have the meaning provided in Section 7.8(a) of
this Agreement.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of this
Agreement.
"TARGET Bank" shall mean The Bank of Ocilla, a Georgia state-chartered bank
and a TARGET Subsidiary.
"TARGET Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"TARGET Common Stock" shall mean the $50.00 par value Common Stock of
TARGET.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
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"TARGET Financial Statements" shall mean (a) the consolidated balance sheets
(including related notes and schedules, if any) of TARGET as of March 31,
1997, and as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the three months ended March 31, 1997, and
for each of the three fiscal years ended December 31, 1996, 1995 and 1994, as
previously furnished by TARGET to Purchaser, and (b) the consolidated balance
sheets of TARGET (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) with respect to periods ended
subsequent to March 31, 1997.
"TARGET Stock Plans" shall mean the existing stock option and other stock-
based compensation plans of TARGET.
"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET, which shall
include the TARGET Subsidiaries described in Section 4.4 of this Agreement and
any Person acquired as a Subsidiary of TARGET in the future and owned by
TARGET at the Effective Time.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
"Termination Fee" shall have the meaning provided in Section 10.2 of this
Agreement.
10.2 Expenses.
(a) Except as otherwise provided in this Section 10.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel (the "Expenses"), except that each of the Parties
shall bear and pay one-half of the filing fees payable in connection with the
Registration Statement and the Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement.
(b) TARGET shall pay, or cause to be paid, in same day funds to PURCHASER
the sum of (i) all of PURCHASER'S Expenses plus (ii) $300,000 (the
"Termination Fee") upon demand if (A) TARGET terminates this Agreement
pursuant to Section 9.1(g), or (B) prior to the termination of this Agreement
(other than by TARGET pursuant to Section 9.1(c)), a Takeover Proposal shall
have been made and within one (1) year of such termination, TARGET enters into
an agreement with respect to, or approves or recommends or takes any action to
facilitate, such Takeover Proposal. If TARGET terminates this Agreement
pursuant to Section 9.1(d)(2) under circumstances where clause (B) of the
immediately preceding sentence is not applicable, TARGET shall pay, or cause
to be paid, in same day funds to PURCHASER all of PURCHASER'S Expenses but
shall not be obligated to pay any Termination Fee. The amount of Expenses so
payable shall be the reasonable Expenses actually incurred by PURCHASER, proof
of which shall be furnished to TARGET.
10.3 Brokers and Finders. Except as Previously Disclosed, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon its representing or being retained by or
allegedly representing or being retained by TARGET or PURCHASER, each of
TARGET and PURCHASER, as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
10.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality
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Agreements). Nothing in this Agreement expressed or implied, is intended to
confer upon any Person, other than the Parties or their respective successors,
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, other than as provided in Section 7.13 of this Agreement.
10.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties; provided, however,
that after any such approval by the holders of TARGET Common Stock, there
shall be made no amendment decreasing the consideration to be received by
TARGET shareholders without the further approval of such shareholders.
10.6 Waivers.
(a) Prior to or at the Effective Time, PURCHASER, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this
Agreement by TARGET, to waive or extend the time for the compliance or
fulfillment by TARGET of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
PURCHASER under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
PURCHASER, to waive or extend the time for the compliance or fulfillment by
PURCHASER of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of TARGET under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of TARGET.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the
immediately preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by the Parties and their respective
successors and assigns.
10.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid,
or by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
PURCHASER: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Telecopy Number: (912) 890-2235
Attention: President
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Copy to Counsel: Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox
TARGET: Irwin Bankcorp, Inc.
Irwin & 2nd Street
Ocilla, Georgia 31774-0165
Telecopy Number: (912) 468-5644
Attention: President
Copy to Counsel: Martin, Snow, Grant & Napier
240 Third Street
P.O. Box 1606
Macon, Georgia 31202-1606
Telecopy Number: (912) 743-4204
Attention: John T. McGoldrick, Jr.
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of
the United States may apply to the Merger.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
10.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
10.12 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
10.13 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.14 Survival. The respective representations, warranties, obligations,
covenants and agreements of the Parties shall not survive the Effective Time
or the termination and abandonment of this Agreement, except that (i) Articles
Two, Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13 of this Agreement
shall survive the Effective Time; and (ii) Sections 7.6(b), 7.8(b), 9.2, 10.2
and 10.14 shall survive the termination and abandonment of this Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
Attest: ABC Bancorp
/s/ Cindi Lewis By: /s/ Kenneth J. Hunnicutt
- ------------------------------------- ---------------------------------
Ass't. Secretary Its: C.E.O.
[Corporate Seal]
Attest: Irwin Bankcorp, Inc.
/s/ Ruby Nell Courson By: /s/ C. Larry Young
- ------------------------------------- ---------------------------------
Secretary Its: V.P.
[Corporate Seal]
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EXHIBIT 1
AFFILIATE AGREEMENT
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of Irwin Bankcorp, Inc. ("Target"), a
corporation organized under the laws of the State of Georgia and located in
Ocilla, Georgia, and will become a shareholder of ABC Bancorp ("Purchaser")
pursuant to the transactions described in the Agreement and Plan of Merger,
dated as of May 15, 1997 (the "Agreement"), by and between Target and
Purchaser. Under the terms of the Agreement, Target will be merged into and
with Purchaser (the "Merger"), and the shares of the $50.00 par value common
stock of Target ("Target Common Stock") will be converted into and exchanged
for shares of the $1.00 par value common stock of Purchaser ("Purchaser Common
Stock"). This Affiliate Agreement represents an agreement between the
undersigned and Purchaser regarding certain rights and obligations of the
undersigned in connection with the shares of Purchaser to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Purchaser hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Target the undersigned is an "affiliate" under Rule 145(c) as defined in Rule
405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at
the time of the Merger.
2. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) The Purchaser Common Stock received by the undersigned as a result of
the Merger will be taken for his or her own account and not for others,
directly or indirectly, in whole or in part.
(b) Purchaser has informed the undersigned that any distribution by the
undersigned of Purchaser Common Stock has not been registered under the
1933 Act and that shares of Purchaser Common Stock received pursuant to the
Merger can only be sold by the undersigned (i) following registration under
the 1933 Act, or (ii) in conformity with the volume and other requirements
of Rule 145(d) promulgated by the SEC as the same now exist or may
hereafter be amended, or (iii) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
understands that Purchaser is under no obligation to file a registration
statement with the SEC covering the disposition of the undersigned's shares
of Purchaser Common Stock.
3. Restrictions on Transfer.
(a) The undersigned understands and agrees that stop transfer instructions
with respect to the shares of Purchaser Common Stock received by the
undersigned pursuant to the Merger will be given to Purchaser's Transfer Agent
and that there will be placed on the certificates for such shares, or shares
issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (i) covered by an
effective registration statement under the Securities Act of 1933, as
amended, (ii) in accordance with (x) Rule 145(d) (in the case of shares
issued to an individual who is NOT an affiliate of Purchaser) or (y)
Rule 144 (in the case of shares issued to an individual who is an
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affiliate of Purchaser) of the Rules and Regulations of such Act, or
(iii) in accordance with a legal opinion satisfactory to counsel for
Purchaser that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
(b) Such legend will also be placed on any certificate representing
Purchaser securities issued subsequent to the original issuance of the
Purchaser Common Stock pursuant to the Merger as a result of any stock
dividend, stock split, or other recapitalization as long as the Purchaser
Common Stock issued to the undersigned pursuant to the Merger has not been
transferred in such manner to justify the removal of the legend therefrom. In
addition, if the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the Purchaser Common Stock received by the
undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), Purchaser, upon the request of the
undersigned, will cause the certificates representing the shares of Purchaser
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to the restrictions set forth in Rules
144 and 145(d) upon receipt by Purchaser of an opinion of its counsel to the
effect that such legend may be removed.
4. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer, or
otherwise dispose of the shares of Purchaser Common Stock received by the
undersigned in connection with the Merger, to the extent he or she believes
necessary, with his or her counsel or counsel for Target.
5. Filing of Reports by Purchaser. Purchaser agrees, for a period of three
years after the effective date of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), so that the public
information provisions of Rule 145(d) promulgated by the SEC as the same are
presently in effect will be available to the undersigned in the event the
undersigned desires to transfer any shares of Purchaser Common Stock issued to
the undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Purchaser Common Stock received by him or her
in connection with the Merger at any time during the restrictive period set
forth in Rule 145(d), the undersigned will provide the necessary
representation letter to the Transfer Agent for Purchaser Common Stock,
together with such additional information as the Transfer Agent may reasonably
request. If Purchaser's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Purchaser shall cause such
counsel, at Purchaser's expense, to provide such opinions as may be necessary
to Purchaser's Transfer Agent so that the undersigned may complete the
proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the foregoing
provisions also apply with respect to Target Common Stock held by, and
Purchaser Common Stock issued in connection with the Merger to, (a) the
undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a 10% beneficial interest or of which any
of the foregoing serves as trustee, executor or in any similar capacity, and
(d) any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of
any class of equity securities or of the equity interest. The undersigned
further recognizes that, in the event that the undersigned is a director or
executive officer of Purchaser or becomes a director or executive officer of
Purchaser upon consummation of the Merger, among other things, any sale of
Purchaser Common Stock by the undersigned within a period of less than six
months following the effective time of the Merger may subject the undersigned
to liability pursuant to Section 16(b) of the 1934 Act.
8. Miscellaneous. This Affiliate Agreement is the complete agreement between
Purchaser and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any parry hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
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This Affiliate Agreement is executed as of the day of , 1997.
Very truly yours,
-------------------------------------
Signature
-------------------------------------
Print Name
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Address
-------------------------------------
Telephone No.
AGREED TO AND ACCEPTED as of
, 1997
ABC Bancorp
By:
---------------------------------
Its:
------------------------------
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EXHIBIT 2
MATTERS AS TO WHICH
MARTIN, SNOW, GRANT & NAPIER WILL OPINE
1. Target is a corporation duly organized, existing and in good standing
under the laws of the State of Georgia with corporate power and authority (a)
to conduct its business as described in the Proxy Statement and (b) to own and
use its Assets.
2. Target Bank is a Georgia chartered state bank duly organized and validly
existing under the laws of the State of Georgia with all requisite power and
authority to conduct its business as described in the Proxy Statement, and to
own and use its Assets. The deposits of Target Bank are insured by the Federal
Deposit Insurance Corporation to the extent provided by law.
3. Target's authorized shares consist of 5,000,000 shares of Common Stock,
$50.00 par value, of which shares were outstanding as of . The
outstanding shares of Target Common Stock have been duly authorized and
validly issued, were not issued in violation of any statutory preemptive
rights of shareholders, and are fully paid and nonassessable. To our
Knowledge, except as Previously Disclosed, there are no options,
subscriptions, warrants, calls, rights or commitments obligating Target to
issue equity securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and outstanding shares
of the capital stock of Target Bank. To our knowledge, there are no options,
subscriptions, warrants, calls, rights or commitments obligating Target Bank
to issue equity securities or acquire its equity securities.
5. The execution and delivery by Target of the Agreement do not, and if
Target were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Target or the Articles of Incorporation or Bylaws
of Target Bank or, to our Knowledge, result in any breach of, or default or
acceleration under, any material Contract or Order to which Target or Target
Bank is a party or by which Target or Target Bank is bound.
6. Target has duly authorized the execution and delivery of the Agreement
and all performance by Target thereunder and has duly executed and delivered
the Agreement.
7. The Agreement is enforceable against Target.
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EXHIBIT 3
MATTERS AS TO WHICH
ROGERS & HARDIN WILL OPINE
1. Purchaser is a corporation duly organized, existing and in good standing
under the laws of the State of Georgia with corporate power and authority (a)
to conduct its business as described in the Proxy Statement and (b) to own and
use its Assets.
2. Purchaser's authorized shares consist of 15,000,000 shares of Common
Stock, $1.00 par value per share, of which shares were outstanding as of
, and 5,000,000 shares of Preferred Stock, none of which were
outstanding as of . The outstanding shares of Purchaser Common Stock
have been duly authorized and validly issued, were not issued in violation of
any statutory preemptive rights of shareholders, and are fully paid and
nonassessable. To our Knowledge, except as Previously Disclosed, there are no
options, subscriptions, warrants, calls, rights or commitments obligating
Purchaser to issue equity securities or acquire its equity securities. The
shares of Purchaser Common Stock to be issued to the shareholders of Target
upon consummation of the Merger have been registered under the Securities Act
of 1933, as amended, and when issued in accordance with the Agreement, will be
validly issued, fully paid and nonassessable.
3. The execution and delivery by Purchaser of the Agreement do not, and if
Purchaser were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Purchaser or, to our knowledge, result in any
breach of, or default or acceleration under, any material Contract or Order to
which Purchaser is a party or by which Purchaser is bound.
4. Purchaser has duly authorized the execution and delivery of the Agreement
and all performance by Purchaser thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Purchaser.
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EXHIBIT 4
IRREVOCABLE PROXY
This Irrevocable Proxy is given by the undersigned, ("Shareholder"),
in favor of ABC Bancorp, a Georgia corporation ("ABC"), as of the 15th day of
May, 1997.
WHEREAS, ABC and Irwin Bankcorp, Inc., a Georgia corporation ("Target"),
have entered into an Agreement and Plan of Merger dated as of May 15, 1997
(the "Merger Agreement") (capitalized terms used but not defined herein shall
have the same meaning assigned to such terms in the Merger Agreement),
pursuant to which ABC proposes to acquire the entire equity interest in Target
by means of a merger (the "Merger") of Target with and into ABC;
WHEREAS, Shareholder owns, as of the date hereof, shares of Target
Common Stock (the "Existing Shares", together with any shares of Target Common
Stock acquired after the date hereof and prior to the termination hereof,
hereinafter collectively referred to as the "Shares"); and
WHEREAS, ABC has entered into the Merger Agreement in reliance on
Shareholder's agreement to support the Merger, including the granting of
Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and the transactions
contemplated thereby and in accordance with the GBCC, Shareholder hereby
irrevocably makes, constitutes and appoints ABC to act as Shareholder's true
and lawful proxy and attorney-in-fact in the name and on behalf of
Shareholder, solely for the limited purpose set forth herein, with full power
to appoint a substitute or substitutes solely for the limited purpose set
forth herein. Shareholder further directs ABC, and ABC hereby agrees, to vote
all of the Shares which are entitled to vote at any meeting of the
shareholders of Target (whether annual or special and whether or not an
adjourned meeting), or by written consent in the place and stead of
Shareholder, in favor of the Merger and the Merger Agreement. ABC shall have
no right to vote the shares with respect to any other matter. By giving this
proxy, Shareholder hereby revokes any other proxy granted by Shareholder at
any time with respect to the Shares, and no subsequent proxies will be given
with respect thereto by Shareholder. THE PROXY GRANTED HEREBY IS COUPLED WITH
AN INTEREST AND IS IRREVOCABLE. The proxy granted hereby shall not be
terminated by any act of Shareholder or by operation of law, by lack of
appropriate power of authority, or by the occurrence of any other event or
events and shall be binding upon all beneficiaries, heirs at law, legatees,
distributees, successors, assigns and legal representatives of Shareholder.
Shareholder agrees to use all good faith efforts to cause any record owner of
the Shares of which Shareholder is the beneficial owner to grant to ABC a
proxy of the same effect as that contained herein. Shareholder shall perform
such further acts and execute such further documents as may be required to
vest in ABC the sole power to vote the Shares during the term of the proxy
granted herein. The proxy granted herein shall expire on the earlier of (i)
the date on which ABC and Shareholder mutually consent in writing to terminate
this Irrevocable Proxy, (ii) the date of the Closing, or (iii) the termination
of the Merger Agreement in accordance with the terms thereof. Notwithstanding
anything herein to the contrary, the proxy granted hereby and power herein
conferred upon ABC (or any substitute or substitutes) may not be exercised
prior to the receipt by ABC and Target of the Consents of the Regulatory
Authorities (as contemplated by the Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered this Irrevocable
Proxy as of the date first set forth above.
-------------------------------------
(Name)
- -------------------------------------
Witness
-------------------------------------
(Signature)
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EXHIBIT 5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of , 1997,
by and between THE CITIZENS BANK OF TIFTON, a Georgia state bank (the "Bank"),
and C. LARRY YOUNG, a resident of the State of Georgia (the "Executive").
WHEREAS, ABC Bancorp, a Georgia corporation ("ABC"), has acquired all of the
equity interest of The Bank of Ocilla by means of a merger (the "Merger")
pursuant to an Agreement and Plan of Merger between ABC and Irwin Bankcorp,
Inc. dated as of May 15, 1997 (the "Merger Agreement");
WHEREAS, simultaneous with the Merger, The Bank of Ocilla was merged with
and into the Bank and is now operated as a branch of the Bank (the "Ocilla
Branch");
WHEREAS, the Executive was the President and Chief Executive Officer of The
Bank of Ocilla and desires to become the President of the Ocilla Branch;
WHEREAS, the Bank desires that the Executive serve in such capacity; and
WHEREAS, the Bank and the Executive, in conjunction with and pursuant to the
terms of the Merger Agreement, desire to set forth in writing the terms and
conditions of the Executive's employment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Employment and Duties.
(a) The Bank hereby agrees to employ the Executive and the Executive agrees
serve as the President of the Ocilla Branch and to act in accordance with the
terms and conditions set forth herein. During the term of this Agreement, the
Executive agrees that he will serve the Bank faithfully and to the best of his
ability and that he will devote his full business time, attention and skills
to the operation of the business of the Ocilla Branch, subject to reasonable
absences for vacation and illness, and that he will perform such duties,
functions and responsibilities in connection with such position and consistent
with the foregoing as are from time to time delegated to the Executive by the
Board of Directors of the Bank (the "Board"); provided, however, that the
foregoing shall not be deemed to restrict the Executive from devoting a
reasonable amount of time and attention to the management of his personal
affairs and investments, so long as such activities do not interfere with the
responsible performance of the Executive's duties hereunder. The Executive
shall provide the Board with periodic reports on, and keep it informed on a
current basis concerning, the business and affairs of the Ocilla Branch.
(b) The Bank shall provide the Executive with a private office, secretarial
and administrative assistance, office equipment, supplies and other facilities
and services suitable to the Executive's position to be located at Irwin & 2nd
Street, Ocilla, Georgia, or at a comparable location within Irwin County,
Georgia.
2. Term. The term ("Term") of this Agreement shall commence on the date
hereof and shall continue until the second anniversary of the date hereof
unless earlier terminated pursuant to Section 4 hereof.
3. Compensation. In consideration of the services to be rendered by the
Executive to the Bank hereunder, the Bank hereby agrees to pay or otherwise
provide the Executive the following compensation and benefits, it being
understood that the Bank shall have the right to deduct therefrom all taxes
which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security
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payments, income tax withholding and other required deductions now in effect
or which may become effective by law any time during the Term):
(a) Salary. The Executive shall receive an annual salary of ("Salary") of
$68,000.00 to be paid in equal installments in accordance with the Bank's
salary payment practices in effect from time to time for executives of the
Bank. The Bank may consider and declare from time to time increases in the
Salary.
(b) Compensation Pursuant to Plans. During the Term, the Executive shall be
included as a participant in all present and future employee benefit,
retirement and compensation plans generally available to employees of the
Bank, consistent with his Salary and his position with the Bank.
(c) Expenses. The Executive shall be entitled to receive reimbursement for
all reasonable expenses incurred by him in connection with the fulfillment of
his duties hereunder, upon receipt of appropriate vouchers therefor, provided
that the Executive has complied with all reasonable policies and procedures
relating to the reimbursement of such expenses as shall, from time to time, be
established by the Bank.
(d) Vacation and Perquisites. For so long as the Executive is employed by
the Bank hereunder, the Executive shall be entitled to such paid vacation and
such perquisites, including, without limitation, the use of an automobile and
a local country club membership, as are provided to other executive officers
of ABC's banking subsidiaries.
4. Termination.
(a) This Agreement shall terminate on the earliest to occur of the second
anniversary of the date hereof or the occurrence of any of the following
events: (i) the mutual agreement of the Bank and the Executive; (ii) the death
or Disability (as hereinafter defined) of the Executive or Executive's
voluntary retirement; or (iii) immediately upon the Bank giving written notice
to the Executive of termination for Cause (as defined herein).
(b) The Bank may terminate the Executive's employment under this Agreement
at any time for Cause. The termination shall be evidenced by written notice to
the Executive, which shall specify the cause for termination. "Cause" shall
exist if: (i) the Executive is convicted of (from which no appeal may be
taken), or pleads guilty to, any act of fraud, misappropriation or
embezzlement, or any felony; (ii) in the reasonable determination of the
Board, the Executive has engaged in conduct or activity materially damaging to
the business of the Bank (it being understood, however, that unintentional
physical damage to any property of the Bank by the Executive shall not be a
ground for such a determination by the Board); or (iii) the Executive has
failed, without reasonable cause, to devote his full business time and best
efforts to the business of the Bank as provided in Section 1(a) hereof and,
after written notice from the Bank of such failure, the Executive at any time
thereafter again so fails.
(c) The Executive may terminate his employment under this Agreement at any
time for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of duties or responsibilities which are
materially inconsistent with the responsibilities of an executive officer
holding the office of the Executive; (ii) a material breach by the Bank of any
of the material provisions of this Agreement; or (iii) the Bank's requiring
the Executive to be based at any place outside a fifty mile radius from
Ocilla, Georgia, except for reasonably required travel on the Bank's business.
(d) In the event that the Executive's employment hereunder is terminated by
reason of Disability or by the Bank other than for Cause, the Executive shall
be entitled to continue to receive his Salary from the Bank at the rate in
effect at the time of such termination until the second anniversary of the
date hereof. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties hereunder on a full-time
basis for 120 consecutive business days (or such shorter period as will
suffice for the Executive to qualify for full disability benefits under the
applicable disability insurance policy or policies of the Bank) as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Bank or its insurers and
reasonably acceptable to the Executive or the Executive's legal
representative.
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<PAGE>
5. Representations and Warranties.
(a) The Executive represents and warrants to the Bank that: (i) he has the
full power and authority to execute, deliver and perform this Agreement and
that he has taken all actions necessary to secure all approvals required in
connection herewith and therewith; (ii) this Agreement has been duly
authorized, executed and delivered by him and constitutes his valid and
binding agreement, enforceable against him in accordance with its terms; and
(iii) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not, with the
passage of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of or entitle any party to
accelerate any obligation under or pursuant to, any material mortgage, lien,
leases, agreement, instrument, order, arbitration award, judgment or decree to
which he is a party or by which he or any of his assets are bound.
(b) The Bank hereby represents and warrants to the Executive that: (i) this
Agreement has been duly authorized, executed and delivered by it and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power and authority to
execute, deliver and perform this Agreement and has taken all necessary action
to secure all approvals required in connection herewith; and (iii) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not, with the passage of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of or entitle any party to accelerate any obligation under or
pursuant to, its charter or bylaws or any material mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree to which
it is a party or by which it or any of its assets are bound.
6. Restrictive Covenants. Acknowledging that (i) he has intimate knowledge
of the business of the Ocilla Branch which, if exploited by him in
contravention of this Agreement, would seriously adversely and irreparably
affect the value of the Ocilla Branch to the Bank and the ability of ABC to
continue to operate the Ocilla Branch following the consummation of the
Merger; (ii) the provisions of this Section 6 are reasonable and necessary to
protect the legitimate interests of ABC and the Bank; (iii) the provisions of
this Section 6 are reasonable and necessary to protect the goodwill of the
Bank acquired by ABC pursuant to the Merger Agreement; (iv) any violation of
this Section 6 will result in irreparable injury to ABC and the Bank and that
damages at law would not be reasonable or adequate compensation to ABC and the
Bank for a violation of this Section 6; and (v) in the course of his
employment with the Bank, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, he will
obtain private and confidential information and proprietary data relating to
ABC, the Bank, the Ocilla Branch and other affiliates of ABC, including,
without limitation, financial information, product information and other data
that are valuable assets and property rights of the Bank and ABC and its
affiliates (collectively referred to as "Confidential Information"), the
Executive hereby agrees as follows:
(a) The Executive shall not, during the Term of this Agreement or any
time after the termination of this Agreement, either directly or
indirectly, disclose or use any Confidential Information acquired during
his employment with the Bank, unless (i) the Confidential Information has
been made public through no action or fault of the Executive, or (ii) its
disclosure is requested or compelled by applicable law or regulatory
agency. The Executive further agrees that upon termination of this
Agreement, or at such other time as the Bank requests, the Executive will
return to the Bank all documents, papers and records constituting
Confidential Information, and all copies of same in the Executive's
possession and control.
(b) For a period of one (1) year after termination of the Executive's
employment hereunder pursuant to Section 4(b), or by reason of Disability
or by the Executive without Good Reason, the Executive shall not directly
or indirectly provide banking or bank-related services to, or solicit the
banking or bank-related business of, any customer of the Bank at the time
of such provision of services or solicitation which the Executive served
either alone or with others while employed by the Bank in any city, town,
borough, township, village or other place in which the Executive performed
services for the Bank while employed by
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<PAGE>
it, or assist any actual or potential competitor of the Bank to provide
banking or bank-related services to or solicit any such customer's banking
or bank-related business in any such place.
(c) While the Executive is employed by the Bank and for a period of one
(1) year after termination of the Executive's employment hereunder pursuant
to Section 4(b) by reason of Disability or by the Executive without Good
Reason, the Executive shall not, directly or indirectly, as principal,
agent, or trustee, or through the agency of any corporation, partnership,
trade association, agent or agency, engage in any banking or bank-related
business or venture which competes with the business of the Bank as
conducted during the Executive's employment by the Bank within Irwin
County, Georgia and the contiguous counties thereto.
(d) In addition to all other remedies provided at law or at equity, the
Bank may petition and obtain from a court of law or equity both temporary
and permanent injunctive relief without the necessity of proving actual
damages and without posting bond or other security to prevent a breach by
the Executive of any covenant contained in this Section 6, as well as to an
equitable accounting of all earnings and profits and other benefits arising
out of any such violations.
7. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and deemed to have been given when
delivered in person or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail, registered or certified, return
receipt requested, postage prepaid, simultaneously dispatched) to the
addresses specified below.
If to the Executive: C. Larry Young
The Bank of Ocilla
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
If to the Bank: The Bank of Ocilla
c/o ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Facsimile: (912) 890-2235
Attn: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
8. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto relating to the subject matter hereof, and supersedes all
prior agreements and understandings, whether oral or written, with respect to
the same. No modification, alteration, amendment or recision of or supplement
to this Agreement shall be valid or effective unless the same is in writing
and signed by both parties hereto.
9. Governing Law. This Agreement and the rights and duties of the parties
hereunder shall be governed by, construed under and enforced in accordance
with the laws of the State of Georgia.
10. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns. The rights, duties and obligations under
this Agreement are assignable by the Bank to a successor of all or
substantially all of the business or assets of the Bank. The rights, duties
and obligations of the Executive under this Agreement shall not be assignable.
11. Survival. The respective obligations of the parties under Section 6
hereof shall survive the termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
The Citizens Bank of Tifton
By:
---------------------------------
Its:
(SEAL)
----------------------------
C. Larry Young
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<PAGE>
APPENDIX B
TEXT OF ARTICLE 13 OF THE
GEORGIA BUSINESS CORPORATION CODE
PART 1.
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through 14-2-
1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger, or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale
or exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of shares;
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(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders.
PART 2.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
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(b) If corporate action creating dissenters' rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his shares under this
article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 no more than 60 days after the date the
notice required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance with
the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
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14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any,
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment
for his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-
2-1325 is less than the fair value of his shares or that the interest due
is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
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(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due.
PART 3.
JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided
by law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of Title 9, known as the
"Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
B-5
<PAGE>
(c) If the court finds that the services of attorneys for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefitted.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
B-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Georgia Business Corporation Code (the "Georgia Code") provides that
the Articles of Incorporation may include a provision eliminating or limiting
the personal liability of a director, other than: (i) for any appropriation, in
violation of the director's duties, of any business opportunity of the
corporation; (ii) for acts or omissions which involve intentional misconduct or
unlawful violation of laws; (iii) for certain unlawful distributions; and (iv)
for any transaction from which the director received an improper personal
benefit. The Georgia Code further provides that a corporation may indemnify a
director if the director acted in a manner he believed in good faith to be in or
not opposed to the best interest of the corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may not indemnify a director, however, in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation, or in connection with any other
proceeding in which the director was adjudged liable on the basis that personal
benefit was improperly received by the director. The Georgia Code provides for
mandatory indemnification of a director unless otherwise limited by a
corporation's Articles of Incorporation, to the extent of reasonable expenses
incurred by the director in connection with a proceeding.
A further limitation on indemnification imposed by the Georgia Code is that
in the case of indemnification in connection with a proceeding by or in the
right of the corporation, indemnification is limited to reasonable expenses
incurred in connection with the proceeding.
Article XI of ABC's Amended Articles of Incorporation (the "Articles")
provides that no director shall be personally liable to ABC or its shareholders
for monetary damages for any breach of the duty of care or other duty as a
director, except that such liability shall not be eliminated: (i) for any
appropriation, in violation of a director's duties, of any business opportunity
of the corporation; (ii) for acts or omissions which involve intentional
misconduct or a knowing violation of law; (iii) for certain unlawful
distributions; or (iv) for any transaction from which the director derived an
improper personal benefit.
The Georgia Code permits a corporation to indemnify a director if the
director seeking indemnification acted in a manner he believed in good faith to
be in or not opposed to the best interest of such corporation and, in the case
of any criminal proceeding, that he had no reasonable cause to believe his
conduct was unlawful.
Item 21. Exhibits and Financial Statement Schedules
a. Exhibits and Exhibit Index
4.1 Articles of Incorporation of ABC, as amended (incorporated by
reference to Exhibit 2.1 to ABC's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630) filed August 14, 1987).
4.2 Amendment to Amended Articles of Incorporation dated May 26, 1995
(incorporated by reference to Exhibit 3.1.1 to ABC's Form 10-K filed
March 28, 1996).
<PAGE>
4.3 Amendment to Amended Articles of Incorporation (filed as Exhibit 4.3
to ABC's Registration on Form S-4 (Registration No. 333-08301), filed
with the Commission on July 17, 1996 and incorporated herein by
reference).
4.4 Bylaws of ABC, as amended (incorporated by reference to Exhibit 2.2 to
ABC's Regulation A Offering Statement on Form 1-A (File No. 24A-2630)
filed August 14, 1987).
5.1 Opinion of Rogers & Hardin regarding legality of securities being
registered (including their consent).
8.1 Opinion of Rogers & Hardin regarding certain tax matters (including
their consent).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to ABC's
Regulation A Offering Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and incorporated herein by
reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to ABC's Regulation A Offering Statement on Form 1-A
(File No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to ABC's Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to ABC's Annual Report on Form 10-KSB (File Number 2-
71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference).
10.7 1992 Incentive Stock Option Plan and Option Agreement for Kenneth J.
Hunnicutt (filed as Exhibit 10.7 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1993 and
incorporated herein by reference.)
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to ABC's Annual Report on
Form 10-KSB (File Number 0-016181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
2
<PAGE>
10.9 Executive Consulting Agreement with Eugene M. Vereen dated September
20, 1994 (filed as Exhibit 10.9 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1995 and
incorporated herein by reference).
10.10 Agreement and Plan of Merger by and between ABC and Southland
Bancorporation dated as of December 18, 1995 (filed as Exhibit 10.10
to ABC's Annual Report on Form 10-K (File No. 0-16181), filed with the
Commission on March 28, 1996 and incorporated herein by reference),
and Amendment No. 1 thereto dated as of April 16, 1996 (filed as part
of Appendix A to Amendment No. 1 to ABC's Registration on Form S-4
(Registration No. 333-2387), filed with the Commission on May 21, 1996
and incorporated herein by reference).
10.11 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 incorporated herein by
reference), and Amendment No. 1 thereto dated as of April 26, 1996
(contained in Appendix A to this Registration Statement).
10.12 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
and incorporated herein by reference).
10.13 Agreement and Plan of Merger by and between ABC and M & F Financial
Corporation dated as of September 12, 1996 (contained in Appendix A to
this Registration Statement).
10.14 Executive Employment Agreement with Sidney J. Wooten, III dated August
26, 1996 (filed as Exhibit 10.14 to ABC's Annual Report on Form 10-K
(File Number 0-16181), filed with the Commission on March 28, 1997 and
incorporated herein by reference).
10.15 Agreement and Plan of Merger by and between ABC and Irwin Bankcorp,
Inc. dated as of May 15, 1997 (contained as Appendix A to this
Registration Statement).
21.1 Schedule of subsidiaries of ABC Bancorp (incorporated by reference to
Exhibit 21.1 to ABC's Annual Report on Form 10-K (File No. 0-16181),
filed with the Commission on March 28, 1997).
23.1 Consent of Mauldin & Jenkins LLC.
23.2 Consent of Mauldin & Jenkins LLC.
23.3 Consent of Meeks, Roberts, Ashley, Sumner & Sirmans.
23.4 Consent of Rogers & Hardin (contained in Exhibits 5.1 and 8.1 hereto).
24.1 Powers of attorney (included in the Signature page hereto)
99.1 Letter of Transmittal and Instructions.
3
<PAGE>
99.2 Form of Exchange Agreement by and among SunTrust Bank, Atlanta, ABC
Bancorp and Irwin Bankcorp, Inc.
99.3 Form of proxy card.
b. Financial Statement Schedules.
No financial statement schedules are required to be filed with this
Registration Statement.
c. Reports, Opinions or Appraisals.
None.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
4
<PAGE>
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(d) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against the public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Moultrie, State of Georgia, on July 23, 1997.
ABC BANCORP
By: /s/ Kenneth J. Hunnicutt
--------------------------------------
Kenneth J. Hunnicutt, President
and Chief Executive Officer
In accordance with requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
capacities and on the dates indicated.
Each person whose signature appears below hereby authorizes
Kenneth J. Hunnicutt and W. Edwin Lane, Jr., and each of them, to file one
or more amendments (including post-effective amendments) to the
Registration Statement, with all exhibits thereto, which amendments may
make such changes as any of such persons deems appropriate, and each
person, individually and in each capacity stated below, hereby appoints
each of such persons as attorney-in-fact and agent, with full power of
substitution and resubstitution, to execute in his name and on his behalf
any such amendments to the Registration Statement, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes, may lawfully do or come to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature and Title Date
<S> <C> <C>
/s/ Kenneth J. Hunnicutt President, Chief Executive Officer and June 19, 1997
- ------------------------- Director (Principal Executive Officer)
Kenneth J. Hunnicutt
Executive Vice President and Chief Financial
Officer (Principal Financial Officer and
/s/ W. Edwin Lane, Jr. Principal Accounting Officer) June 19, 1997
- -------------------------
W. Edwin Lane, Jr.
/s/ Johnny W. Floyd Director , 1997
- ------------------------- -------------
Johnny W. Floyd
/s/ J. Raymond Fulp Director , 1997
- ------------------------- -------------
J. Raymond Fulp
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Daniel B. Jeter Director , 1997
- --------------------------- -----------
Daniel B. Jeter
/s/ Willard E. Lasseter Chairman of the Board and Director , 1997
- --------------------------- -----------
Williard E. Lasseter
/s/ Bobby B. Lindsey Director , 1997
- --------------------------- -----------
Bobby B. Lindsey
Director , 1997
- --------------------------- -----------
Hal L. Lynch
/s/ John M. Mobley Director , 1997
- --------------------------- -----------
John M. Mobley
/s/ Eugene M. Vereen, Jr. Director , 1997
- --------------------------- -----------
Eugene M. Vereen, Jr.
/s/ Doyle Weltzbarker Vice Chairman and Director , 1997
- --------------------------- -----------
Doyle Weltzbarker
/s/ Sidney J. Wooten, III Executive Vice President, , 1997
- --------------------------- Chief Operating Officer and -----------
Sidney J. Wooten, III Director
/s/ Henry C. Wortman Director , 1997
- --------------------------- -----------
Henry C. Wortman
</TABLE>
7
<PAGE>
EXHIBIT INDEX
4.1 Articles of Incorporation of ABC, as amended (incorporated by
reference to Exhibit 2.1 to ABC's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630) filed August 14, 1987).
4.2 Amendment to Amended Articles of Incorporation dated May 26, 1995
(incorporated by reference to Exhibit 3.1.1 to ABC's Form 10-K filed
March 28, 1996).
4.3 Bylaws of ABC, as amended (incorporated by reference to Exhibit 2.2 to
ABC's Regulation A Offering Statement on Form 1-A (File No. 24A-2630)
filed August 14, 1987).
5.1 Opinion of Rogers & Hardin regarding legality of securities being
registered (including their consent).
8.1 Opinion of Rogers & Hardin regarding certain tax matters (including
their consent).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to ABC's
Regulation A Offering Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and incorporated herein by
reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to ABC's Regulation A Offering Statement on Form 1-A
(File No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to ABC's Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to ABC's Annual Report on Form 10-KSB (File Number 2-
71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference).
10.7 1992 Incentive Stock Option Plan and Option Agreement for Kenneth J.
Hunnicutt (filed as Exhibit 10.7 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1993 and
incorporated herein by reference.)
<PAGE>
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to ABC's Annual Report on
Form 10-KSB (File Number 0-016181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
10.9 Executive Consulting Agreement with Eugene M. Vereen dated September
20, 1994 (filed as Exhibit 10.9 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1995 and
incorporated herein by reference).
10.10 Agreement and Plan of Merger by and between ABC and Southland
Bancorporation dated as of December 18, 1995 (filed as Exhibit 10.10
to ABC's Annual Report on Form 10-K (File No. 0-16181), filed with the
Commission on March 28, 1996 and incorporated herein by reference).
10.11 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 incorporated herein by
reference), and Amendment No. 1 thereto dated as of April 26, 1996
(contained in Appendix A to this Registration Statement).
10.12 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
and incorporated herein by reference).
21.1 Schedule of subsidiaries of ABC Bancorp (incorporated by reference to
Exhibit 22.1 to the ABC's Annual Report on Form 10-K (File No. 1-
16181), filed with the Commission on March 28, 1997).
23.1 Consent of Mauldin & Jenkins LLC.
23.2 Consent of Mauldin & Jenkins LLC.
23.3 Consent of Meeks, Roberts, Ashley, Sumner & Sirmans.
23.4 Consent of Rogers & Hardin (contained in Exhibits 5.1 and 8.1 hereto).
24.1 Powers of attorney (included in the Signature page hereto)
99.1 Letter of Transmittal and Instructions.
99.2 Form of Exchange Agreement by and among SunTrust Bank, Atlanta, ABC
Bancorp and Central Bankshares, Inc.
99.3 Form of proxy card.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF ROGERS & HARDIN LLP APPEARS HERE]
July 29, 1997
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31776
Ladies and Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-4 (the "Registration Statement") to be filed with the
Securities and Exchange Commission by ABC Bancorp ("ABC") with respect to the
offer and sale by ABC of shares of common stock, $1.00 par value per share, of
ABC (the "Shares") to be issued to the shareholders of Irwin Bankcorp, Inc.
("Irwin") upon the consummation of the merger of Irwin with and into ABC, all as
further described in the Registration Statement.
We have examined such records and documents and have made such
investigation of law as we have deemed necessary under the circumstances.
Based on that examination and investigation, it is our opinion that, when
issued and sold in the manner described in the Registration Statement (including
all exhibits thereto) and in compliance with the Securities Act of 1933, as
amended, and applicable state securities or "Blue Sky" laws, (i) the Shares will
be duly authorized and validly issued; and (ii) the Shares will be fully paid
and non-assessable.
We understand that this opinion will be filed as Exhibit 5.1 to the
Registration Statement and that this opinion will be referred to in the Proxy
Statement/Prospectus that will be a part of the Registration Statement. We
hereby consent to such use of and reference to this opinion.
Very truly yours,
/s/ Rogers & Hardin
ROGERS & HARDIN
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF ROGERS & HARDIN LLP APPEARS HERE]
July 29, 1997
Irwin Bankcorp, Inc.
Irwin & 2nd Street
Ocilla, Georgia 31774-0165
Re: Federal Income Tax Consequences of the Proposed Merger
of Irwin Bankcorp, Inc. with and into ABC Bancorp
------------------------------------------------------
Gentlemen:
We have acted as counsel for ABC Bancorp ("ABC") in connection with the
proposed merger (the "Merger") of Irwin Bankcorp, Inc. ("Irwin") with and into
ABC, pursuant to the Agreement and Plan of Merger (the "Merger Agreement") dated
as of May 15, 1997, by and between ABC and Irwin. In our capacity as counsel
for ABC and as provided in the Merger Agreement, we have been requested to
render our opinion regarding certain of the federal income tax consequences of
the Merger.
We understand that this opinion will be filed as an exhibit to the
Registration Statement on Form S-4 (the "Registration Statement") that will be
filed by ABC and Irwin with the Securities and Exchange Commission relating to
the securities that will be issued by ABC pursuant to the Merger Agreement and
that this opinion will be referred to in the Proxy Statement/Prospectus that
will be a part of the Registration Statement. We hereby consent to such use of
and reference to this opinion.
All terms used herein without definition shall have the respective meanings
specified in the Merger Agreement and, unless otherwise indicated, all section
references herein are to the Internal Revenue Code of 1986, as amended.
INFORMATION RELIED UPON
-----------------------
In rendering this opinion, we have examined such documents as we have
deemed appropriate, including the Merger Agreement and the Registration
Statement. In the course of such examination, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that all such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate. We have also obtained
such additional information and representations as we have deemed relevant and
necessary through consultations
<PAGE>
ABC Bancorp
Irwin Bankcorp, Inc.
July 29, 1997
Page 2
- --------------------
with various representatives of ABC and Irwin. In addition, we have obtained
written certificates from the managements of ABC and Irwin to verify certain
relevant facts that have been represented to us or that we have assumed in
rendering this opinion. With your consent, we have assumed that the
representations made in such certificates are true on the date hereof and will
be true at the Effective Time.
OPINION
-------
Based upon the foregoing, it is our opinion that:
(1) The Merger will constitute a "reorganization" within the meaning of
Section 368(a)(1)(A), and ABC and Irwin will each be "a party to a
reorganization" within the meaning of Section 368(b).
(2) An Irwin shareholder will not recognize gain on his or her exchange of
shares of Irwin common stock in the Merger in excess of the amount of cash, if
any, received by him or her in the Merger.
The opinion expressed herein is based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, such opinion is based solely on the documents that we have
examined, the additional information that we have obtained and the
representations that have been made to us and cannot be relied upon if any of
the facts contained in such documents or in such additional information is, or
later becomes, inaccurate or if any of the representations made to us is, or
later becomes, inaccurate. Finally, our opinion is limited to the tax matters
specifically addressed herein, and we have not been asked to address, nor have
we addressed, any other tax consequences of the Merger.
Very truly yours,
\s\ Rogers & Hardin
ROGERS & HARDIN
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated January 24, 1996 and
August 31, 1996 relating to the consolidated financial statements of ABC Bancorp
included in the Registration Statement on Form S-4 and to the reference of our
Firm under the caption "Experts" in the Prospectus/Proxy Statement.
/s/ Mauldin & Jenkins, LLC
MAULDIN & JENKINS
Albany, Georgia
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated June 23, 1997 relating to
the consolidated financial statements of Irwin Bankcorp, Inc. included in the
Registration Statement on Form S-4 and to the reference of our Firm under the
caption "Experts" in the Prospectus/Proxy Statement.
/s/ Mauldin & Jenkins, LLC
MAULDIN & JENKINS
Albany, Georgia
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated December 18, 1996 relating
to the consolidated financial statements of Irwin Bankcorp, Inc. included in the
Registration Statement on Form S-4 and to the reference of our Firm under the
caption "Experts" in the Prospectus/Proxy Statement.
/s/ Meeks, Roberts, Ashley, Sumner & Sirmans
MEEKS, ROBERTS, ASHLEY, SUMNER & SIRMANS
Certified Public Accountants
June 25, 1997
Ocilla, Georgia
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Accompany Certificates Representing
Shares of Common Stock
of
IRWIN BANKCORP, INC.
Surrendered in connection with the Merger of
Irwin Bankcorp, Inc. with and into ABC Bancorp
To: SunTrust Bank
Exchange Agent
Attention: Corporate Trust Department
By Mail: By Hand:
P.O. Box 4625 58 Edgewood Avenue, NE
Atlanta, Georgia 30302 Room 225A
Atlanta, Georgia 30303
DO NOT SEND CERTIFICATES OR THIS LETTER OF TRANSMITTAL
TO IRWIN BANKCORP, INC. OR ABC BANCORP
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
In connection with the merger (the "Merger") of Irwin Bankcorp, Inc., a
Georgia corporation (the "Company"), with and into ABC Bancorp, a Georgia
corporation ("ABC"), the undersigned registered holder(s) of the stock
certificate(s) (the "Certificates") formerly representing shares of common
stock, $50.00 par value per share, of the Company ("Company Common Stock"), or
the transferee or assignee of such registered holder(s), hereby surrenders the
Certificates in exchange for certificates representing shares of common stock,
$1.00 par value per share, of ABC (the "ABC Common Stock") pursuant to the terms
of the Merger Agreement. (Unless otherwise provided herein, all capitalized
terms used herein are defined in the Instructions).
<PAGE>
COMPANY SHARES TO WHICH THIS
LETTER OF TRANSMITTAL RELATES
Important: Shareholders must list below the Company Shares to which this Letter
of Transmittal relates.
Certificate No. Shares Represented by Each Certificate
--------------- --------------------------------------
--------------- --------------------------------------
--------------- --------------------------------------
--------------- --------------------------------------
--------------- --------------------------------------
--------------- --------------------------------------
Total Shares:
________________________________________________________________________________
(Name(s) of Registered Holder(s) -- Please Print)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Tax Identification or Social Security Numbers)
YOU MUST ENCLOSE CERTIFICATES FOR YOUR COMPANY SHARES WITH THIS LETTER OF
TRANSMITTAL (DULY ENDORSED IN BLANK OR OTHERWISE IF REQUIRED --SEE INSTRUCTIONS
3 AND 4) IN A FORM ACCEPTABLE FOR TRANSFER ON THE BOOKS OF THE COMPANY.
2
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(See Instruction 4)
To be completed ONLY if the certificate(s) for ABC Common Stock to be
issued are to be registered in the name of someone other than the registered
-----
holder(s) of the Company Shares.
Certificate(s) for ABC Common Stock to be made issued to:*
Name:
--------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(Including Zip Code)
-----------------------------------------------------
(Tax Identification or Social Security Number)**
*Only one recipient may be designated. Please attach additional sheets if
necessary.
**Section 6109 of the Internal Revenue Code of 1986, as amended (the "Code"),
requires recipients of dividends, interest and other payments to furnish
identifying numbers to the persons making such payments, who must report such
payments to the Internal Revenue Service. Recipients of such payments must
provide identification numbers whether or not they are required to file a tax
return or are covered by social security. The Code provides a penalty for
failure to provide such a number when required to do so.
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 6)
To be completed ONLY if the certificate(s) for ABC Common Stock to be
issued are to be registered in the name of the registered holder(s) of the
Company Shares but are to be sent to another person or to an address other than
the person or address to which this Letter of Transmittal was mailed.
Certificate(s) for ABC Common Stock to be delivered to:*
Name:
-----------------------------------------------------
(Please Print)
Address:
--------------------------------------------------
--------------------------------------------------
(Including Zip Code)
*Please attach additional sheets if necessary.
3
<PAGE>
ACKNOWLEDGMENTS, REPRESENTATIONS, WARRANTIES AND
AUTHORIZATIONS OF THE UNDERSIGNED
1. I, the undersigned, hereby acknowledge receipt of the Proxy Statement
and agree that all actions, instructions and orders in this Letter of
Transmittal are subject to the terms and conditions of the Merger Agreement, the
Proxy Statement and the Instructions applicable to this Letter of Transmittal.
I also represent and warrant that I have full authority to give the
representations, certifications and instructions contained in this Letter of
Transmittal and to surrender the Company Shares pursuant to the Merger, and I
will, upon receipt, execute any additional documents necessary or desirable to
complete the exchange of Company Shares for shares of ABC Common Stock. My
signature below authorizes the Exchange Agent to follow and to rely upon all
representations, certifications and instructions contained in this Letter of
Transmittal. This Letter of Transmittal shall survive my death or incapacity
and shall be binding upon my heirs, personal representatives and assigns.
2. I hereby authorize and instruct the Exchange Agent to deliver the
certificates covered hereby, and to receive on my behalf, in exchange for the
Company Shares represented by such certificates, any certificate(s) for ABC
Common Stock issuable to me.
3. I acknowledge that for each share of Company Common Stock I own I will
receive consideration payable in shares of ABC Common Stock according to the
terms of the Merger Agreement.
4. Unless otherwise indicated above, please issue certificate(s)
representing the ABC Common Stock to which the undersigned is entitled in the
name, and mail them to the address, indicated below. The undersigned agrees to
pay transfer taxes, if any, due where ABC Common Stock is issued to a name
different from that in which the Company Shares surrendered are registered. The
undersigned certifies that any tax identification or social security number
provided herein is true, correct and complete.
5. I understand that the definitive terms pursuant to which the Merger
will be effected, including the amount and form of consideration to be received
by holders of Company Shares, the effect of this Letter of Transmittal, and
certain conditions to the consummation of the transaction, are summarized in the
Proxy Statement, and all of such definitive terms and conditions are set forth
in full in the Merger Agreement, which is appended to the Proxy Statement.
6. I understand and agree that the acceptance and delivery of any Letter
of Transmittal or certificates representing Company Shares will not of itself
create any right to receive the consideration elected above and that such right
will arise only if the Merger is approved by the Company shareholders and is
consummated and only to the extent provided in the Merger Agreement.
4
<PAGE>
SHAREHOLDERS MUST SIGN BELOW
FOR THIS LETTER OF TRANSMITTAL
TO BE VALID
(See Instruction 2)
Please sign exactly as your name(s) appear(s) on your certificate(s). If
the Company Shares with respect to which this Letter of Transmittal applies are
registered in the name of two or more owners, all such owners must sign
personally. Executors, administrators, trustees and persons signing for
corporations or partnerships should so indicate. By signing this form persons
signing as executors, administrators or trustees and persons signing for
corporations or partnerships represent and warrant that they have requisite
legal authority to sign in the capacity indicated. Certificate(s) for ABC
Common Stock will be issued only in the name of the person(s) submitting this
Letter of Transmittal and will be mailed unless the Special Delivery or Special
Payment Instructions are completed. If any of your certificate(s) is registered
in your name or if you are signing in a representative capacity, see
Instructions 4 and 5, respectively.
Name of Owner (Please Print):
---------------------------------------------------
Address:
------------------------------------------------------------------------
Signature: Date:
--------------------------------- -----------------------------
Name of Owner (Please Print):
---------------------------------------------------
Address:
------------------------------------------------------------------------
Signature: Date:
---------------------------------- -----------------------------
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(See Instructions 3 and 4)
Signature(s)
Guaranteed:
----------------------------------------------------------
(Name of Firm Providing Signature Guarantee; Please Print)
(Authorized Signature)
-----------------------------------------------
Note: In the event that the certificates representing the ABC Common Stock are
to be issued in the name of the registered holder as inscribed on the
surrendered Company Share certificates, the surrendered certificate need
not be endorsed, and no guarantee of the signature on the Letter of
Transmittal is required.
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON NEXT PAGE)
5
<PAGE>
IMPORTANT TAX INFORMATION
PLEASE COMPLETE AND SIGN IF YOU ARE AN INDIVIDUAL
SUBJECT TO THESE REPORTING REQUIREMENTS
Under federal income tax law, a holder of Company Shares must provide ABC
with such holder's correct taxpayer identification number on Substitute Form W-9
set forth below. If such holder is an individual, the taxpayer identification
number is his or her Social Security number. If the Exchange Agent is not
provided with the correct taxpayer identification number, the holder of
surrendered Company Shares may be subject to a $50 penalty imposed by the
Internal Revenue Service.
Certain holders of Company Shares (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, that holder of Company Shares must submit a
statement (Form W-8), signed under penalties of perjury, attesting to that
individual's exempt status. Such Form W-8 can be obtained form ABC.
If backup withholding applies, ABC is required to withhold 31% of any
payments made to the holder of previously outstanding Company Shares. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
Purpose of Substitute Form W-9.
To prevent backup withholding on payments that are made to a holder of
Company Shares with respect to Company Shares surrendered, the holder of Company
Shares is required to notify ABC of his or her correct taxpayer identification
number by completing the form below certifying that the taxpayer identification
number provided on Substitute Form W-9 is correct (or that such holder of
Company Shares is awaiting a taxpayer identification number).
What Number to Give the Exchange Agent.
The holder of Company Shares is required to give ABC the Social Security
Number or Employer Identification Number of the record owner of the Company
Shares. If the Company Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report.
SUBSTITUTE FORM W-9
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PAYEE'S NAME:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Part 1-PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number
AT RIGHT AND CERTIFY BY SIGNING AND OR
DATING BELOW ---------------------------------
Employer Identification Number
-------------------------------------------------------------------------------------------
Department of the Treasury Part 2 - Check the box if you are not subject to backup withholding under the provisions
Internal Revenue Service of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue Service has notified you that you are
no longer subject to withholding. [ ]
-------------------------------------------------------------------------------------------
Payer's Request for Taxpayer CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
Identification Number (TIN) INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. Part 3
SIGNATURE DATE Awaiting Tin [_]
---------------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 20% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
- -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
For this type of account: Give the SOCIAL SECURITY For this type of account: Give the EMPLOYER
number of -- IDENTIFICATION number of --
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Sole proprietorship account The owner/4/
2. Two or more individuals The actual owner of the account 9. A valid trust, estate or Legal entity (Do not furnish
(joint account) or, if combined funds, any one pension trust the identifying number of
of the individuals/1/ personal representative or
trustee unless the legal
entity itself is not
designated in the account
title)./5/
3. Husband and wife The actual owner of the account 10. Corporate account The corporation
(joint account) or, if joint funds, either
person/1/
4. Custodian account of a The minor/2/ 11. Religious, charitable or The organization
minor (Uniform Gift to educational organization
Minors Act) account
5. Adult and minor (joint The adult or, if the minor is 12. Partnership account held The partnership
account) the only contributor, the in the name of the business
minor/1/
6. Account in the name of The ward, minor or incompetent 13. Association, club or other The organization
guardian or committee for person/3/ tax-exempt organization
a designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee/1/
savings trust account 14. A broker or registered The broker or nominee
(grantor is also nominee
trustee)
b. So-called trust The actual owner/1/ 15. Account with the The public entity
account that is not a Department of Agriculture
legal or valid trust in the name of a public
under State law entity (such as a State or
local government, school
district or prison) that
receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------
/1/List first and circle the name of the person whose number you furnish.
/2/Circle the minor's name and furnish the minor's social security number.
/3/Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
/4/Show the name of the owner.
/5/List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES, FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4987(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under section 6041, 6041A(a), 6045
and 6050A.
Privacy Act Notice -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number --If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information --Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
INSTRUCTIONS
FOR THE
LETTER OF TRANSMITTAL
IN CONNECTION WITH THE MERGER OF
IRWIN BANKCORP, INC.
WITH AND INTO
ABC BANCORP
TO IRWIN BANKCORP, INC. SHAREHOLDERS:
Irwin Bankcorp, Inc. (the "Company") has mailed a Proxy
Statement/Prospectus dated July 31, 1997 (the "Proxy Statement"), to each
Company shareholder. The Proxy Statement describes the proposed merger (the
"Merger") of the Company with and into ABC Bancorp ("ABC") to be voted upon by
the Company shareholders at the Special Meeting to be held August 29, 1997. The
Merger, if approved by the Company shareholders at the Special Meeting, is
expected to be consummated as soon as practicable following the Special Meeting.
In accordance with the terms of the Agreement and Plan of Merger dated as of May
15, 1997, between the Company and ABC (the "Merger Agreement"), upon the
completion of all conditions under the Merger Agreement and the filing of
appropriate articles of merger in the office of the Georgia Secretary of State
(the "Effective Time"), each share of the common stock of the Company
outstanding immediately prior to the consummation of the Merger (the "Company
Shares"), other than shares held by shareholders who dissent from the Merger,
will be converted into the right to receive that number of whole shares of the
common stock, $1.00 par value per share, of ABC ("ABC Common Stock") having a
value equal to (i) 500,000, divided by (ii) the aggregate number of then-
outstanding Irwin Shares (the "Exchange Ratio"). The Exchange Ratio is subject
to adjustment (i) in the event of certain changes in the number of outstanding
shares of ABC Common Stock or (ii) upon the exercise, prior to the Effective
Time, of certain options to purchase Irwin Shares. Cash will be paid in lieu of
issuing fractional shares of ABC Common Stock.
Questions and requests for information, additional copies of the Letter of
Transmittal or assistance relating to the Letter of Transmittal should be
directed to Tom Donaldson at the Exchange Agent (telephone: (800) 568-3476).
<PAGE>
INSTRUCTIONS
1. Deadline for Letter of Transmittal. To be effective, the Letter of
----------------------------------
Transmittal (or a facsimile thereof) properly executed, and accompanied by the
certificates representing the Company Shares covered thereby, must be received
by the Exchange Agent, at one of its two addresses set forth on the first page
of the Letter of Transmittal. Company shareholders are requested to send in
their Letters of Transmittal and certificates for Company Shares no later than
September 19, 1997. Any Company shareholder who does not vote in favor of and
objects to the Merger in strict compliance with Article 13 of the Georgia
Business Corporation Code ("GBCC") in order to exercise his or her right of
dissent should not complete the Letter of Transmittal. Such dissenting Company
shareholder should comply with the provisions of Article 13 of the GBCC, a copy
of which is attached to the Proxy Statement as Appendix B.
2. Signatures. The Letter of Transmittal must be signed by or on behalf of
----------
the registered holder(s) of the certificate(s) transmitted. If the Company
Shares covered by the Letter of Transmittal are registered in the names of two
or more owners, all such owners must sign. The signature(s) on the Letter of
Transmittal should correspond exactly to the name(s) written on the face of the
certificate(s) transmitted unless the Company Shares covered by the Letter of
Transmittal have been assigned by the registered holder, in which event the
Letter of Transmittal should be signed in exactly the same form as the name of
the last assignee appears in the transfers attached to or endorsed on the
certificate(s). See Instructions 4(a) and 4(b).
If the Letter of Transmittal is signed by an agent, attorney,
administrator, executor, guardian, trustee, or any person in any other fiduciary
or representative capacity, or by an officer of a corporation on behalf of the
corporation, the person signing must give such person's full title in such
capacity. In addition, see Instruction 5.
3. Issuance of Check and New Certificates in Same Name. IF ANY CHECK OR
---------------------------------------------------
CERTIFICATE REPRESENTING ABC COMMON STOCK IS TO BE MADE PAYABLE TO OR ISSUED IN
THE NAME OF THE REGISTERED HOLDER AS INSCRIBED ON THE SURRENDERED COMPANY SHARE
CERTIFICATE(S), THE SURRENDERED CERTIFICATE(S) NEED NOT BE ENDORSED AND NO
GUARANTEE OF THE SIGNATURE ON THE LETTER OF TRANSMITTAL IS REQUIRED. For
corrections in name or changes in name not involving changes in ownership, see
Instruction 4(d).
4. Issuance of Check or New Certificate in Different Names. If any check
-------------------------------------------------------
is to be made payable in the name of a person other than the registered holder
-----
of the surrendered certificate(s) or if any certificate representing ABC Common
Stock is to be issued in the name of someone other than the registered holder of
-----
the surrendered certificate(s), you must follow the guidelines listed below:
(a) Endorsement and Guarantee. The certificate(s) surrendered must
-------------------------
be properly endorsed (or accompanied by appropriate stock powers properly
executed by the registered holder of such certificate(s)) to the person who is
to receive the ABC Common Stock. The signature of the registered holder to the
endorsement or stock powers must correspond with the name as written upon the
face of the certificate(s) in every particular and must be guaranteed by a
commercial bank or trust
2
<PAGE>
company in the United States or by a member firm of any national securities
exchange or of the National Association of Securities Dealers, Inc.
(b) Transferee's Signature. The Letter of Transmittal must be signed
----------------------
by the transferee or assignee or by his agent and should not be signed by the
transferor or assignor. The signature of such transferee or assignee must be
guaranteed by a commercial bank or trust company or by a member firm of any
national securities exchange or of the National Association of Securities
Dealers, Inc.
(c) Transfer Taxes. In the event that any transfer or other taxes
--------------
become payable by reason of the issuance of ABC Common Stock or a check in any
name other than that of the registered holder, the Letter of Transmittal must be
accompanied by a check in payment of any transfer or other taxes required by
reason of such issuance in such different name or proper evidence that such tax
has been paid or is not payable.
(d) Correction of or Change in Name. For a correction of name or for
-------------------------------
a change in name which does not involve a change in ownership, proceed as
follows: for a change in name by marriage, etc., the surrendered certificate(s)
should be endorsed, e.g., "Mary Doe, now by marriage Mrs. Mary Jones," with the
signature guaranteed by a commercial bank or trust company or by a member firm
of any national securities exchange or of the National Association of Securities
Dealers, Inc. For a correction in name, the surrendered certificate(s) should
be endorsed, e.g., "James E. Brown, incorrectly inscribed as J. E. Brown," with
the signature guaranteed as aforesaid.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO ANY POSSIBLE TAX CONSEQUENCES
RESULTING FROM THE ISSUANCE OF ANY CHECK OR ANY CERTIFICATE REPRESENTING ABC
COMMON STOCK IN A NAME DIFFERENT FROM THAT OF THE REGISTERED HOLDER OF THE
SURRENDERED CERTIFICATE(S).
5. Supporting Evidence. In case the Letter of Transmittal, certificate
-------------------
endorsement or stock power is executed by an agent, attorney, administrator,
executor, guardian, trustee, or any other person acting in a fiduciary or
representative capacity, or by an officer of a corporation on behalf of the
corporation, there must be submitted with the Letter of Transmittal, surrendered
certificate(s), and/or stock powers documentary evidence of appointment and
authority to act in such capacity (including court orders and corporate
resolutions where necessary), as well as evidence of the authority of the person
making such execution to assign, sell or transfer shares. Such documentary
evidence of authority must be in form satisfactory to the Exchange Agent and the
Company.
6. Special Instructions for Deliveries by the Exchange Agent. Unless
---------------------------------------------------------
instructions to the contrary are given in the Special Delivery Instructions Box
or Special Payment Instructions Box, any check or certificate representing ABC
Common Stock to be distributed upon the surrender of Company Shares will be
mailed to the address set forth above the owner's signature.
7. Inadequate Space. If there is insufficient space to complete any box
----------------
or sign the Letter of Transmittal, please attach additional sheets.
3
<PAGE>
8. Indication of Certificate Numbers. The Letter of Transmittal must
---------------------------------
indicate the certificate number(s) of the certificate(s) representing the
Company Shares covered thereby. If the space provided on the Letter of
Transmittal is inadequate, such information should be listed separately on
additional sheets and attached to the Letter of Transmittal.
9. Method of Delivery. The method of delivery of all documents is at the
------------------
option and risk of the holder of Company Shares, but, if delivery is by mail,
registered mail, with return receipt requested, properly insured is recommended.
It is suggested that you mail as early as possible.
10. Payment Will Be Made by ABC Certificate. Normally, a single
---------------------------------------
certificate representing ABC Common Stock will be issued; however, if for tax
purposes or otherwise you wish to have the stock certificates issued in
particular denominations, explicit written instructions to the Exchange Agent
should be provided.
11. Lost Certificates. If any of your certificates representing Company
-----------------
Shares has been lost, stolen or destroyed, you should notify Ms. Ruby Nell
Courson (telephone: (912) 468-9411) for instructions as to how to proceed. The
Letter of Transmittal and related documents cannot be processed until the lost,
stolen or destroyed certificate has been replaced. Replacement takes a minimum
of 7 days.
12. Signature on Substitute Form W-9. Each shareholder is required to
--------------------------------
provide ABC with a correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9, which is in the Letter of Transmittal, and to indicate that such
holder is not subject to backup withholding by checking the box in Part 2 of the
form. Failure to provide the information on the form may subject the
shareholder to 31% backup withholding on the cash consideration paid. The box
on the form may be checked if the holder of Company Shares has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future. If the box is checked and ABC is not provided with a TIN within 60
days, ABC will withhold 31% of the consideration paid thereafter until the TIN
is provided to ABC.
13. Failure to Consummate the Merger. If the Merger Agreement is
--------------------------------
terminated, certificates submitted to the Exchange Agent will be returned as
soon as practicable to the persons submitting them.
14. Voting Rights and Dividends. Holders of Company Shares shall continue
---------------------------
to have the same voting rights to which they were previously entitled, and the
right to receive all dividends paid on Company Shares deposited by them with the
Exchange Agent, until such time as the Merger becomes effective.
15. Construction. All questions with respect to the Letter of Transmittal
------------
will be determined by the Company, which determination shall be final and
binding. With the consent of the Company, the Exchange Agent may (but is not
required to) waive any material defects or variances in the manner in which the
Letter of Transmittal has been completed and submitted so long as the intent of
the holder of Company Shares submitting the Letter of Transmittal is reasonably
clear.
4
<PAGE>
16. Miscellaneous. Neither the Company nor the Exchange Agent shall be
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under any duty to give notification of defects in the Letter of Transmittal, and
they shall not incur any liability for failure to give such notice. All Letters
of Transmittal shall be construed in accordance with the terms and conditions of
the Merger Agreement.
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<PAGE>
EXHIBIT 99.2
EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGENT AGREEMENT (the "Agreement") dated as of July 28, 1997
is by and among SUNTRUST BANK, ATLANTA, a state banking corporation duly
organized and existing under and by virtue of the laws of the State of Georgia
("Bank"), ABC BANCORP, a Georgia corporation ("Acquiror"), and IRWIN BANKCORP,
INC., a Georgia corporation ("Irwin").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Acquiror and Irwin are parties to an Agreement and Plan of Merger
dated as of May 15, 1996 (the "Merger Agreement"). Following the satisfaction
or waiver of certain conditions set forth in the Merger Agreement, Irwin will be
merged with and into the Acquiror (the "Merger"), which will be the surviving
corporation of the Merger. A true and correct copy of the Merger Agreement,
together with specimen stock certificates representing shares of Irwin Common
Stock, $50.00 par value per share ("Irwin Shares"), have been delivered to the
Bank prior to the execution of this Agreement;
WHEREAS, the Merger Agreement provides that, upon consummation of the
Merger and proper presentment of the stock certificates representing Irwin
Shares, each Irwin Share outstanding immediately prior to the Effective Time of
the Merger, as defined in the Merger Agreement (the "Effective Time of the
Merger"), other than shares as to which statutory dissenters' rights have been
perfected, will be converted into the right to receive consideration equal to
the Merger Consideration (as specified in the Merger Agreement), payable in
whole shares of the common stock, $1.00 par value per share, of ABC ("ABC Common
Stock"); and
WHEREAS, Acquiror and Irwin desire that Acquiror appoint Bank to act as
Exchange Agent to effect the exchange described herein, and Bank desires to
accept such appointment. (For convenience, hereinafter in this Agreement, Irwin
Shares outstanding immediately prior to the Effective Time of the Merger are
called "Shares," the certificates representing such shares are called
"Certificates," and the holders of such Certificates are called "Shareholders").
NOW, THEREFORE, based on the mutual covenants set forth herein, and other
good and valuable consideration, the adequacy and sufficiency of which is hereby
acknowledged by each party, and with the intent to be legally bound, the parties
hereto hereby represent, warrant and agree as follows:
1. Appointment. Acquiror and Irwin hereby appoint Bank as Exchange Agent
-----------
to make payments to Shareholders in accordance with the provisions of Article 3
of the Merger Agreement, which provisions are incorporated herein by reference,
and Bank hereby accepts such appointment and agrees to act as Exchange Agent in
accordance with the terms of Article 3 of the Merger Agreement, and the
remaining provisions of this Agreement.
<PAGE>
2. Duties of Bank. Bank's duties as Exchange Agent shall be as set forth
--------------
in Article 3 of the Merger Agreement and as follows:
(a) Upon receipt of a Letter of Transmittal and related Certificates,
Bank shall determine whether (i) the Letter of Transmittal has been properly
completed, and (ii) the accompanying Certificate(s) are in proper order
(including proper endorsement, if required). If the Letter of Transmittal and/or
Certificates are not in proper order, Bank shall advise the presenter promptly.
(b) Bank shall also verify by examining stop transfer records to be
furnished to Bank by Irwin as to lost, stolen, destroyed or otherwise invalid
Certificates that no stop order has been issued against the Shares represented
by the surrendered Certificates, the registration of the Certificates should be
checked against the certified list of shareholders of record of Irwin Shares at
the Effective Time of the Merger.
(c) If Certificates are surrendered to Bank with instructions to
deliver the check and/or the certificates of ABC Common Stock in a name other
than the name of the record holder, Bank shall determine whether each such
Certificate is properly endorsed or accompanied by an appropriate stock power
and the signatures thereon are guaranteed by an eligible guarantor institution
(bank, broker, savings and loan association or credit union) with membership in
an approved Medallion Signature Guarantee Program pursuant to Rule 17Ad-15 of
the Securities and Exchange Commission. Where a Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, officer of a corporation,
attorney-in-fact or other person acting in a fiduciary capacity and the
surrendered Certificate is not registered in the fiduciary's name, the Letter of
Transmittal must be accompanied by proper evidence of the signer's authority to
act. If more than one person is the record holder of the surrendered
Certificate, each person must sign the Letter of Transmittal. Any necessary
stock transfer stamps must be affixed to the Certificate, or funds in lieu
thereof must be furnished to Bank.
(d) Bank shall promptly notify the Acquiror if a person submits a
Letter of Transmittal to Bank and alleges that the Certificate or Certificates
representing the Shares to which the Letter of Transmittal relates have been
lost, stolen or destroyed. Bank shall then instruct such person as to the
procedure for obtaining a bond of indemnification reasonably satisfactory to
Bank and to Acquiror.
(e) Bank shall promptly notify Acquiror if Bank receives any
Certificate bearing the name of a person on the list of those persons who have
taken steps to perfect their dissenters' rights, which list shall be provided to
Bank by Acquiror and Irwin.
(f) After examining the Certificates which have been surrendered to
Bank and the accompanying Letters of Transmittal, Bank shall be obligated to
issue certificates for shares of ABC Common Stock (and checks for fractional
shares) and deliver same in accordance with Article 3 of the Merger Agreement
and in accordance with the duly completed Letters of Transmittal.
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<PAGE>
(g) Bank shall cancel all those Certificates which have been
surrendered to it and with respect to which issuance of a check and/or
certificates for shares of ABC Common Stock has been made. All such Certificates
so surrendered and cancelled shall be held by Bank until Bank's duties as
Exchange Agent shall terminate, at which time Acquiror will take delivery of the
Certificates and other documents in the possession of the Exchange Agent
concerning the records of the former Shareholders.
(h) Bank shall maintain on a continuing basis, for the term of this
Agreement, a list of Shareholders who have not yet surrendered their
Certificates.
(i) In examining and processing Certificates and Letters of Transmittal
submitted hereunder and making issuances therefor, Bank shall in all cases act
as promptly as practicable.
(j) Bank's duties as Exchange Agent shall continue until the earliest
of: (i) the payment of all amounts due to Shareholders under Article 3 of the
Merger Agreement; (ii) the notification by Acquiror to Bank that Acquiror has
appointed a new exchange agent that satisfies the qualifications specified in
Section 8(c) of this Agreement; (iii) the issuance of all certificates (and
checks for fractional shares) for shares of ABC Common Stock pursuant to the
terms of Article 3 of the Merger Agreement; (iv) a date which is one year after
the Effective Time of the Merger; or (v) the termination of the Merger Agreement
prior to the consummation of the Merger for any reason whatsoever. Upon
termination, the Exchange Agent will direct the Shareholders to the new agent,
the Acquiror, or Irwin, as appropriate. If Bank's duties as Exchange Agent
terminate because of the termination of the Merger Agreement prior to
consummation of the Merger, Bank shall promptly return all Certificates and
records of Irwin in its possession to the Shareholders and Irwin, respectively,
and all costs and expenses incurred in such delivery shall be paid equally by
Acquiror and Irwin. If notice of the appointment of a new exchange agent is
given to Bank at any time, Bank shall transfer all blank certificates then held
by it under this Agreement to the new exchange agent upon receipt of a copy of a
fully executed exchange agent agreement with such new exchange agent.
3. Special Instructions, Etc. Bank shall be entitled to request further
-------------------------
instruction of Acquiror and may rely upon any letter of instruction executed by
Acquiror. In performing its duties hereunder, Bank shall follow the same
standards, customs and practices as it follows in its stock transfer business
generally.
4. Cooperation. Every party to this Agreement shall furnish to every
------------
other party, upon request, such additional documents, information and other
material as may be reasonably required by the requesting party in order to carry
out the purpose and intent of this Agreement.
5. Liability of Bank Hereunder. Bank may rely, and shall be protected in
---------------------------
acting or refraining from acting, on any instrument reasonably believed by it to
be genuine and to have been executed or presented by the proper party or
parties. Bank may rely on and shall be protected in acting upon the written or
oral instructions, with respect to any matter relating to its actions as
Exchange Agent specifically covered by this Agreement, or supplementing or
3
<PAGE>
qualifying any such actions, of counsel for Acquiror or of officers of Acquiror;
and shall be entitled to request further instructions from such persons to act
in accordance therewith. Bank may appoint attorneys satisfactory to it
(including attorneys of Acquiror), and the advice or opinion of such attorneys
shall constitute a full and complete authorization in respect of any action
taken, suffered or omitted by Bank hereunder in good faith and in accordance
with such advice or opinion. Bank shall not be liable for any action taken or
omitted by it in accordance with this Agreement, nor for any action taken or
omitted by it in good faith in accordance with the advice of its attorney or any
attorney for Acquiror. If Bank consults with counsel concerning any of its
duties or obligations as Exchange Agent pursuant hereto, or in case it becomes
involved in litigation on account of being Exchange Agent pursuant hereto, then
its costs, expenses and reasonable attorneys' fees shall be paid equally by
Acquiror and Irwin, unless Acquiror consents to pay all such costs, expenses or
fees,
Bank shall have no duty of inquiry nor incur any liability in the event of
any payment being made to Shareholders for Shares against which a "stop" order
has been reported to it by Irwin or to which a transfer restriction may apply,
unless it is furnished, on a timely basis, with an accurate list of Shares
(including certificate numbers) subject to such orders or restrictions.
Bank is to act hereunder solely as Exchange Agent and shall have no
liabilities or obligations except for its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
7. Fees and Expenses of Bank. As compensation for services rendered as
-------------------------
Exchange Agent hereunder, the Bank shall be entitled to fees as set forth in
Exhibit A attached hereto and incorporated herein by this reference.
8. Miscellaneous Provisions.
------------------------
(a) This Agreement may be executed in one or more counterparts, each of
which shall be an original, and all of which together shall constitute but one
instrument. This Agreement shall become effective whenever each party shall have
executed at least one counterpart.
(b) This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns.
(c) Bank may resign its appointment upon 30 days' prior written notice
to Acquiror. In case of the resignation of Bank hereunder, Acquiror may by
written instrument appoint as successor exchange agent any bank or trust company
located in the United States having capital and surplus at least equal to that
of Bank and which has trust powers and is a member of The Stock Transfer
Association, Inc. Such successor shall have all the rights, powers, obligations
and immunities of Bank hereunder and such additional obligations as Acquiror
shall require.
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<PAGE>
(d) This Agreement may not be amended in any respect to adversely
affect the rights of the Shareholders.
(e) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia, without regard to any
principles of conflicts of laws thereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
SUNTRUST BANK, ATLANTA
By: /s/ T. J. Donaldson
-------------------------------------
Title: T. J. Donaldson
----------------------------------
ABC BANCORP
By: /s/ Kenneth J. Hunnicutt
-------------------------------------
Title: President and CEO
----------------------------------
IRWIN BANKCORP, INC.
By: /s/ C. Larry Young
-------------------------------------
Title: Vice President
----------------------------------
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<PAGE>
EXHIBIT 99.3
PROXY
IRWIN BANKCORP, INC.
Irwin & 2nd Street
Ocilla, Georgia 31774-0165
Telephone: (912) 468-9411
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF IRWIN BANKCORP, INC.
The undersigned hereby appoints Dr. W. C. Sams, Jr. and C. Larry Young, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all shares
of common stock of Irwin Bankcorp, Inc. which the undersigned is entitled to
vote at the Special Meeting of Shareholders (the "Meeting") to be held on August
29, 1997, or any adjournment or postponement thereof, on the following matters:
1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER DATED
AS OF MAY 15, 1997 BETWEEN IRWIN BANKCORP, INC. AND ABC BANCORP
AND APPROVE THE MERGER OF IRWIN BANKCORP, INC. WITH AND INTO ABC
BANCORP PURSUANT THERETO.
FOR AGAINST ABSTAIN
------------ ------------ ------------
2. In their discretion upon such other business as may properly come
before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL NO. 1.
---
Please sign exactly as name appears on stock certificate(s). If there are
two or more owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated:
------------------- ----------------------------------------------------
(Signature)
----------------------------------------------------
(Signature if held jointly)
Your vote is important.
Please mark, sign, date and
return this Proxy promptly,
using the enclosed envelope.
