<PAGE> 1
February 13, 1995 Registration No. ----------
--------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST NATIONAL BANCORP
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(Exact name of Registrant as Specified in its Charter)
GEORGIA 6711 58-1415138
- ----------- ---------- ----------------
(State of (Primary Standard) (I.R.S. Employer
incorporation) Industrial Classi- Identification
fication Code No.)
Number)
303 Jesse Jewell Parkway, Suite 700
P. O. Drawer 937
Gainesville, Georgia 30503
(404) 503-2000
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(Address, including ZIP code, and telephone number,
including area code of registrant's principal executive offices)
C. Talmadge Garrison
Senior Vice President
Secretary and Treasurer
First National Bancorp
303 Jesse Jewell Parkway, Suite 700
P. O. Drawer 937
Gainesville, Georgia 30503
(404) 503-2104
--------------------------------------------------------
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
Copies to:
T. Treadwell Syfan A. George Igler
Stewart, Melvin & Frost Igler & Dougherty, P.A.
Attorneys at Law Attorneys at Law
Hunt Tower 1501 Park Avenue East
200 Main Street Tallahassee, Florida 32301
P. O. Box 3280
Gainesville, Georgia 30503
Approximate Date of Commencement of Proposed Offering: As soon as practical
after the effective date of this Registration Statement (the approximate
date being , 1995).
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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
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share* Price* Fee
- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock 3,885,050 $18.03 $70,047,451.50 $24,154.29
$1.00 par shares
value
- ----------------------------------------------------------------------------------
</TABLE>
*Pursuant to Rule 457(f), based on the market value of FF Bancorp,
Inc. common stock, as of February 8, 1995, that would be converted into the
First National Bancorp common stock (the offered securities) pursuant to the
transactions described herein.
------------------------------------
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.
[An index of all Exhibits attached hereto is provided at sequentially
numbered page 163]
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FIRST NATIONAL BANCORP
CROSS REFERENCE SHEET
(Pursuant to Item 501(b) of Reg. S-K)
<TABLE>
<CAPTION>
CAPTION OR LOCATION
ITEM NUMBER OF FORM S-4 IN PROSPECTUS
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1. Forepart of Registration Outside Front Cover
Statement and Outside Page of Prospectus
Front Cover Page of
Prospectus
2. Inside Front and Outside Back Available Information;
Cover Pages of Prospectus Incorporation by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings Introduction; Summary of
to Fixed Charges and Merger; Per Share
Other Information Information; Market and
Stock Price Information;
Pro Forma Selected
Financial Data (Unaudited)
4. Terms of the Transaction Summary of Merger; The
Proposed Merger; Effect of
Merger on Shareholders;
Description of Stock;
Federal Income Tax
Consequences
5. Pro Forma Financial Information First Bancorp and FF
Bancorp Pro Forma
Condensed Combined
Balance Sheet Information
(Unaudited); First Bancorp
and FF Bancorp Pro Forma
Condensed Combined Statements
of Income (Unaudited); Condensed
Recent Financial Information
(Unaudited)
6. Material Contacts with the Not Applicable
Company Being Acquired
7. Additional Information Required Not Applicable
for Reoffering by Persons
and Parties Deemed to be
Underwriters
8. Interests of Named Experts Legal Opinion
and Counsel
9. Disclosure of Commission Indemnification
Position on Indemnification
for Securities Act Liabilities
</TABLE>
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<TABLE>
<S> <C> <C>
10. Information with Respect to Not Applicable
S-3 Registrants
11. Incorporation of Certain Not Applicable
Information by Reference
12. Information with Respect to Incorporation of Certain
S-2 or S-3 Registrants Documents by Reference;
Condensed Recent Financial
Information (Unaudited)
13. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference;
Per Share Information;
Market and Stock Price
Information
14. Information with Respect to Not Applicable
Registrants Other Than S-3
or S-2 Registrants
15. Information with Respect Not Applicable
to S-3 Companies
16. Information with Respect Not Applicable
to S-2 or S-3 Companies
17. Information with Respect Introduction; Summary of
to Companies Other than S-3 Merger; Per Share
or S-2 Companies Information; Market and
Stock Price Information;
FF Bancorp Selected
Financial Data
(Unaudited); FF Bancorp,
Inc. and Subsidiaries
Consolidated Financial
Statements; Business of
FF Bancorp; FF Bancorp
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Condensed
Recent Financial Information
(Unaudited)
</TABLE>
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<TABLE>
<S> <C> <C>
18. Information if Proxies, Introduction; No
Consents or Authorizations Dissenter's Rights of
are to be Solicited Appraisal; Incorporation of
Certain Documents by
Reference; FF Bancorp
Shareholders; Management of
First Bancorp; Summary of
Merger; The Proposed Merger
19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited or
in an Exchange Offer
</TABLE>
<PAGE> 6
[FF BANCORP, INC.]
LOGO
, 1995
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
FF Bancorp, Inc. ("FF Bancorp"), which will be held on , 1995, at
p.m., local time, at the Edgewater Branch Office of First Federal Savings Bank
of New Smyrna, 1404 South Ridgewood Avenue, Edgewater, Florida 32132.
At the Special Meeting, you will be asked to vote upon and approve the
Agreement and Plan of Merger dated November 22, 1994, as amended by Amendment
thereto dated January 23, 1995, (collectively, the "Merger Plan"), by and
between FF Bancorp and First National Bancorp ("First Bancorp") wherein First
Bancorp is offering to acquire all of the issued and outstanding shares of FF
Bancorp common stock, par value $.01 per share, in an all stock transaction
whereby shareholders of FF Bancorp will receive .825 shares of First Bancorp
common stock, par value $1.00 per share, for each share of FF Bancorp common
stock ("Exchange Offer"). Cash will be paid in lieu of any fractional share
interests.
The proposed merger has been approved by the Board of Directors of FF
Bancorp which has determined that the Exchange Offer is fair to, and in the best
interests of, FF Bancorp and its shareholders and unanimously recommends that
you vote FOR approval of the Merger Agreement.
Consummation of the merger is subject to certain conditions, including the
approval of the Merger Plan by the shareholders of FF Bancorp and the approval
of the merger by various regulatory agencies. The enclosed Notice of Special
Meeting of Shareholders and Proxy Statement-Prospectus describe the Exchange
Offer and provide specific information concerning the Special Meeting. Please
read these materials carefully and consider the information contained in them.
It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. Failure to vote
will have the same effect as a vote against the proposal. Therefore, I urge you
to execute, date and return the enclosed Proxy Card in the enclosed postage-paid
envelope as soon as possible to ensure that your shares will be voted at the
Special Meeting.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Frances R. Ford
Frances R. Ford
Chairman of the Board
<PAGE> 7
FF BANCORP, INC.
900 NORTH DIXIE FREEWAY
NEW SMYRNA BEACH, FLORIDA
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of FF
Bancorp, Inc. ("FF Bancorp") has been called by the Board of Directors and will
be held at p.m., local time, on , 1995, at the Edgewater Branch
Office of First Federal Savings Bank of New Smyrna, 1404 South Ridgewood Avenue,
Edgewater, Florida, for the purpose of considering and voting upon the following
matters:
(1) To consider and vote upon the proposal to approve the Agreement
and Plan of Merger dated November 22, 1994, as amended by the Amendment
thereto dated January 23, 1995 (collectively referred to as the "Merger
Plan") attached as Exhibit A to the Proxy Statement-Prospectus dated
, 1995 between FF Bancorp and First National Bancorp ("First
Bancorp") whereby (i) FF Bancorp will be merged into FNB Subsidiary
Corporation (an interim corporation incorporated as a subsidiary of First
Bancorp to facilitate the merger) in a forward triangular merger (the
"Merger"); (ii) shareholders of FF Bancorp will receive .825 shares of
First Bancorp common stock for each share of FF Bancorp common stock; and
(iii) the assets of FF Bancorp will be acquired by FNB Subsidiary
Corporation, a wholly-owned subsidiary of First Bancorp;
(2) To approve the adjournment of the Special Meeting to solicit
additional proxies in the event that there are not sufficient votes to
approve the Merger; and
(3) Any other business as may properly be brought before the Special
Meeting or any adjournments thereof. Management at present knows of no
other business to be presented.
The approval of the Merger, which has the support of your Board of
Directors, requires the affirmative vote of a majority ( shares) of the
outstanding shares of FF Bancorp. Only those shareholders of record at
the close of business on , 1995, shall be entitled to notice and to
vote at the Special Meeting of Shareholders, or any adjournments thereof.
For the Board of Directors,
/s/ Frances R. Ford
Frances R. Ford,
Chairman of the Board
New Smyrna Beach, Florida
, 1995
SINCE THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF FF BANCORP
COMMON STOCK IS REQUIRED TO APPROVE THE MERGER PLAN, WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING IN PERSON. YOUR PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE PROXY STATEMENT-PROSPECTUS.
ANY SHAREHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENTS
THEREOF, MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT
BEFORE THE SPECIAL MEETING.
<PAGE> 8
PROXY STATEMENT FOR
FF BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1995
---------------------
FIRST NATIONAL BANCORP PROSPECTUS FOR 3,885,050 SHARES OF COMMON STOCK OF
FIRST NATIONAL BANCORP WHICH MAY BE ISSUED IN CONNECTION WITH THE MERGER OF FF
BANCORP, INC. INTO FIRST NATIONAL BANCORP
---------------------
FIRST NATIONAL BANCORP HAS FILED A REGISTRATION STATEMENT WITH THE
SECURITIES AND EXCHANGE COMMISSION COVERING THE MAXIMUM OF 3,885,050 SHARES OF
COMMON STOCK OF FIRST NATIONAL BANCORP TO BE ISSUED TO SHAREHOLDERS OF FF
BANCORP, INC. IN CONNECTION WITH THE FORWARD TRIANGULAR MERGER OF FF BANCORP,
INC., FNB SUBSIDIARY CORPORATION AND FIRST NATIONAL BANCORP. THIS PROXY
STATEMENT ALSO CONSTITUTES A PROSPECTUS OF FIRST NATIONAL BANCORP FILED AS PART
OF SUCH REGISTRATION STATEMENT. SEE "THE PROPOSED MERGER."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FIRST NATIONAL BANCORP. THIS PROXY STATEMENT DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THE SHARES OF COMMON STOCK OF FIRST NATIONAL BANCORP TO BE ISSUED IN CONNECTION
WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION; NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROXY STATEMENT DOES NOT RELATE TO ANY RESALES OF COMMON STOCK OF
FIRST NATIONAL BANCORP RECEIVED BY ANY PERSON UPON CONSUMMATION OF THE MERGER
AND NO PERSON IS AUTHORIZED TO MAKE ANY USE OF THIS PROXY STATEMENT IN
CONNECTION WITH ANY SUCH RESALE.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT WITH RESPECT TO FIRST
NATIONAL BANCORP AND ITS SUBSIDIARIES WAS SUPPLIED BY FIRST NATIONAL BANCORP,
AND ALL INFORMATION WITH RESPECT TO FF BANCORP, INC. AND ITS SUBSIDIARIES WAS
SUPPLIED BY FF BANCORP, INC.
THE DATE OF THIS PROXY STATEMENT IS , 1995.
<PAGE> 9
AVAILABLE INFORMATION
First National Bancorp is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information filed by First National Bancorp can be inspected and copied at the
public reference facilities maintained by the Commission at the Commission's
office at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices in New York (75 Park Place, 14th Floor, New York,
New York 10007) and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621-2511). Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
Additional information regarding First National Bancorp and the shares of
common stock offered hereby is contained in the Registration Statement and the
exhibits relating thereto filed with the Commission under the Securities Act of
1933, which may be inspected without charge at the office of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies thereof may be
obtained from the Commission at prescribed rates. This Proxy Statement does not
contain all of the information set forth in the Registration Statement and
exhibits thereto which First National Bancorp has filed with the Commission
under the Securities Act of 1933 and to which reference is hereby made for
further information with respect to First National Bancorp and the securities
offered hereby.
The common stock of First National Bancorp, $1.00 par value per share, is
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") and reports and other information concerning First National
Bancorp can be inspected at the offices of NASDAQ at NASDAQ Reports Section, 3rd
Floor, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS OR PARTS OF DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. UPON WRITTEN OR ORAL
REQUEST OF ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, FIRST NATIONAL
BANCORP WILL PROMPTLY FURNISH TO SUCH PERSON, WITHOUT CHARGE, A COPY OF ANY AND
ALL INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE HEREIN. SUCH REQUESTS
SHOULD BE DIRECTED TO C. TALMADGE GARRISON, SECRETARY, P.O. DRAWER 937,
GAINESVILLE, GEORGIA 30503 (404-503-2104). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , , 1995.
2
<PAGE> 10
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION..........................................................................
SUMMARY OF MERGER.....................................................................
Terms of the Agreement and Plan of Merger...........................................
Business of the Parties to the Merger...............................................
Reasons for the Merger; Recommendation of Board of Directors........................
Opinion of Financial Advisor........................................................
Operations of FF Bancorp and First Bancorp after Merger.............................
Regulatory Approval Required........................................................
Vote Required to Approve Merger.....................................................
No Dissenter's Rights of Appraisal..................................................
Conversion of FF Bancorp Stock......................................................
Right of Termination of the Merger Plan.............................................
Effect of Merger on FF Bancorp Shareholders.........................................
Tax Consequences....................................................................
Interests of Certain Persons........................................................
Accounting Treatment................................................................
Expenses of Solicitation and Merger.................................................
CONDENSED RECENT FINANCIAL INFORMATION (UNAUDITED)....................................
PER SHARE INFORMATION.................................................................
MARKET AND STOCK PRICE INFORMATION....................................................
First Bancorp.......................................................................
FF Bancorp..........................................................................
Comparison of Stock Prices..........................................................
FIRST BANCORP AND FF BANCORP PRO FORMA CONDENSED COMBINED BALANCE SHEET INFORMATION
(UNAUDITED).........................................................................
FIRST BANCORP AND FF BANCORP PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED).........................................................................
FF BANCORP SELECTED FINANCIAL DATA (UNAUDITED)........................................
FIRST BANCORP AND FF BANCORP PRO FORMA COMBINED SELECTED FINANCIAL DATA (UNAUDITED)...
THE PROPOSED MERGER...................................................................
The Agreement and Plan of Merger....................................................
Description of the Merger...........................................................
Reasons for the Merger; Recommendation of Board of Directors........................
Opinion of Financial Advisor........................................................
Conversion of FF Bancorp Stock......................................................
Fractional Shares...................................................................
Closing Date of the Merger..........................................................
Manner of Surrendering FF Bancorp Stock.............................................
Issuance of First Bancorp Shares....................................................
Source of Funds.....................................................................
Shareholder Approval................................................................
Conditions of Certain Obligations of FF Bancorp.....................................
Conditions of Certain Obligations of First Bancorp..................................
</TABLE>
3
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Conditions of Certain Obligations of Both First Bancorp and FF Bancorp..............
Interests of Certain Persons in the Merger..........................................
Accounting Treatment................................................................
EFFECT OF MERGER ON SHAREHOLDERS......................................................
Preemptive Rights...................................................................
Cumulative Voting Rights............................................................
Limitations of Liability and Indemnification of Directors, Officers and Employees...
Dividend Restrictions...............................................................
Shareholder Voting Rights...........................................................
Right of First Bancorp and FF Bancorp to Acquire their Own Shares...................
Rights of Dissent and Appraisal.....................................................
State Taxation of Shares of Stock...................................................
Authorized Capital Stock............................................................
Certain Restrictions on Transfer....................................................
Restrictions on Stock of Both Companies.............................................
Commitments to Subsidiary Banks by First Bancorp....................................
Federal Deposit Insurance Corporation Improvement Act of 1991.......................
Recent Banking Legislation..........................................................
NO DISSENTER'S RIGHTS OF APPRAISAL....................................................
FEDERAL INCOME TAX CONSEQUENCES.......................................................
BUSINESS OF FF BANCORP................................................................
FF BANCORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..........................................................................
FF BANCORP SHAREHOLDERS...............................................................
Principal Shareholders..............................................................
Shares of Management................................................................
MANAGEMENT OF FIRST BANCORP AND FNB SUBSIDIARY........................................
DESCRIPTION OF STOCK..................................................................
First Bancorp.......................................................................
FF Bancorp..........................................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................................
EXPERTS...............................................................................
LEGAL OPINION.........................................................................
INDEMNIFICATION.......................................................................
SHAREHOLDER PROPOSALS.................................................................
OTHER BUSINESS........................................................................
ADDITIONAL INFORMATION................................................................
FF BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS................... F-
APPENDIX A --
Agreement and Plan of Merger and Amendment thereto.................................. A-
APPENDIX B --
Opinion of Professional Bank Services, Inc.......................................... B-
</TABLE>
4
<PAGE> 12
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS OF
FF BANCORP, INC.
TO BE HELD , 1995
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the board of directors of FF Bancorp, Inc. of proxies for use at the special
meeting of the shareholders of the company to be held at on ,
, 1995, at the Edgewater Branch Office of First Federal Savings Bank
of New Smyrna, 1404 South Ridgewood Avenue, Edgewater, Florida. The approximate
date of the mailing of this Proxy Statement to shareholders was ,
1995.
At the special meeting, shareholders will vote whether to approve the
Agreement and Plan of Merger as amended by the Amendment thereto (collectively,
the "Merger Plan"). A copy of the Merger Plan is attached hereto as Appendix A.
Under the Merger Plan, FF Bancorp, Inc. ("FF Bancorp") will be merged into FNB
Subsidiary Corporation ("FNB Subsidiary"), a wholly-owned subsidiary of First
National Bancorp ("First Bancorp") recently formed to facilitate the forward
triangular merger, with First Bancorp thereby acquiring FF Bancorp. FF Bancorp
owns all of the outstanding stock of First Federal Savings Bank of New Smyrna
("New Smyrna Bank"), New Smyrna Beach, Florida, and all of the outstanding stock
of First Federal Savings Bank of Citrus County ("Citrus Bank"), Inverness,
Florida, and 98.9% of the outstanding stock of Key Bancshares, Inc. ("Key
Bancshares"), Tampa, Florida. Bancshares owns 99.9% of the outstanding stock of
The Key Bank of Florida ("Key Bank"), Tampa, Florida. New Smyrna Bank, Citrus
Bank, Key Bancshares and Key Bank are hereinafter referred to as the "FF
Subsidiaries," and New Smyrna Bank, Citrus Bank and Key Bank are hereinafter
referred to as the "FF Banking Subsidiaries." In the merger of FF Bancorp into
FNB Subsidiary, each outstanding share of common stock of FF Bancorp will be
converted into .825 shares of common stock of First Bancorp. No fractional
shares will be issued, and, if necessary, a cash payment in lieu of fractional
shares will be made by First Bancorp.
As of October 31, 1994, FF Bancorp had authorized 5,000,000 shares of
common stock, with 4,680,818 shares issued and outstanding to approximately 925
shareholders. This constitutes FF Bancorp's only class of stock under which
shares are issued and outstanding, with each share entitled to notice of and to
one vote at the FF Bancorp meeting or any adjournment thereof. As of October 31,
1994, FF Bancorp also had outstanding employee stock options to purchase
84,397.5 shares, 28,333.8 of which are to be exercised prior to consummation of
the proposed merger or exchanged in return for First Bancorp shares based on the
value of the options, and 56,063.7 of which are to be converted into options to
purchase First Bancorp stock. Only the FF Bancorp shareholders of record at the
close of business on , 1995, will be entitled to notice of and to
vote at the special meeting or any adjournment thereof.
As of October 31, 1994, First Bancorp had authorized 30,000,000 shares of
common stock, with 16,489,469 shares issued and outstanding to approximately
7,100 shareholders (including approximately 2,000 beneficial owners of shares
held by nominees). This constitutes First Bancorp's only class of stock, with
each share entitled to one vote, except in the case of election of directors, in
which event shareholders have cumulative voting rights.
Any proxy given by shareholders of FF Bancorp pursuant to this solicitation
may be revoked at any time before it is voted by so notifying the President of
FF Bancorp in writing prior to the meeting or by appearance at the meeting and
requesting the right to vote in person, without compliance with any other
formalities.
If the proxy is properly signed and returned by a FF Bancorp shareholder
and is not revoked, it will be voted at the meeting in the manner specified
therein. If a shareholder does not specify how the proxy is to be voted, the
proxy will be voted in accordance with the recommendations of management in
favor of the Merger Plan.
5
<PAGE> 13
FF Bancorp and First Bancorp will each pay its own expenses incurred in
connection with this solicitation, including the fees and expenses of legal
counsel and independent auditors and the printing and filing costs incurred in
connection with this Proxy Statement. In addition to solicitation by mail,
directors, officers and regular employees of FF Bancorp may solicit proxies by
telephone, telegram or personal interview, for which they will receive no
compensation in addition to their regular salaries.
The principal executive offices of FF Bancorp are located at 900 North
Dixie Freeway, New Smyrna Beach, Florida 32168, and the telephone number at that
address is (904) 428-2466. The principal executive offices of First Bancorp are
located at 303 Jesse Jewell Parkway, Suite 700, Post Office Drawer 937,
Gainesville, Georgia 30503, and the telephone number at that address is (404)
503-2000.
First Bancorp, a Georgia corporation, is a multi-bank holding company
formed in 1981 and subject to regulation by the Board of Governors of the
Federal Reserve System, the Georgia Department of Banking and Finance and the
Securities and Exchange Commission. At the time of First Bancorp's formation,
The First National Bank of Gainesville ("FNBG") became a wholly-owned subsidiary
of First Bancorp. FNBG, which was formed in 1889 as a national banking
association, operates a full service banking, mortgage banking and trust
business in Hall County, Georgia, with a main office, six full service branches
and two stand-alone automated teller machine locations. The First National Bank
of Habersham ("FNBH") became a wholly-owned subsidiary of First Bancorp in
September, 1982. FNBH, which was formed in 1909, operates a full service banking
business in Habersham County, Georgia, with a main office and two full service
branches. Granite City Bank ("GCB") became a wholly-owned subsidiary of First
Bancorp in August 1984. GCB, which was formed in 1928, operates a full service
banking business in Elbert County, Georgia, with a main office and two full
service branches. Bank of Clayton ("BOC") became a wholly-owned subsidiary of
First Bancorp in October 1984. BOC, which was formed in 1904, operates a full
service banking business in Rabun County, Georgia, with a main office and one
full service branch. First National Bank of White County ("FNBW") (formerly The
Peoples Bank) in Cleveland, Georgia, became a wholly-owned subsidiary of First
Bancorp in September, 1985. FNBW, which was formed in 1941 (as The Peoples
Bank), operates a full service banking business in White County, Georgia, with a
main office in Cleveland, Georgia and one full service branch in Helen, Georgia.
In 1986, FNBW, formerly a Georgia state banking institution, was converted to a
national bank, and its name was changed to First National Bank of White County.
First National Bank of Jackson County ("FNBJ") in Jefferson, Georgia, became a
wholly-owned subsidiary of First Bancorp in March 1986. FNBJ, which was formed
in 1908, operates a full service banking business in Jackson County, Georgia
with a main office in Jefferson, Georgia and one full service branch in
Commerce, Georgia. The Citizens Bank of Toccoa, Georgia ("CBT") became a
wholly-owned subsidiary of First Bancorp in December, 1986. CBT, which was
formed in 1951, operates a full service banking business in Stephens County,
Georgia with a main office and one full service branch in Toccoa, Georgia. The
Bank of Banks County ("BBC") became a wholly-owned subsidiary of First Bancorp
in June, 1987. BBC, which was formed in 1974, operates a full service banking
business in Banks County, Georgia with the main office in Homer, Georgia and two
full-service branches. First National Bank of Gilmer County ("FNBGC") (formerly
First State Bank of Gilmer County) became a wholly-owned subsidiary of First
Bancorp in December, 1987. FNBGC, which was formed in 1973 (as First State Bank
of Gilmer County), operates a full service banking business in Gilmer County,
Georgia, with a main office in Ellijay, Georgia and one limited-service branch
in East Ellijay, Georgia. On January 1, 1991, FNBGC, formerly a Georgia state
banking institution, was converted to a national bank, and its name was changed
to First National Bank of Gilmer County. On April 12, 1989 The Peoples Bank of
Forsyth County ("PBF") became a wholly-owned subsidiary of First Bancorp. PBF is
a state banking association, formed in December, 1983, which operates a
full-service banking business in Forsyth County, Georgia, with a main office and
three full service branches. Pickens County Bank ("PCB") became a wholly-owned
subsidiary of First Bancorp on June 30, 1989. PCB, which was formed in 1976,
operates a full service banking business in Pickens County, Georgia, with its
main office located in Jasper, Georgia. First National Bank of Paulding County
("FNBPC") became a wholly-owned subsidiary of First Bancorp on January 30, 1992.
FNBPC, which was formed in 1922, operates a full service banking business in
Paulding County, Georgia, with its main office located in Dallas, Georgia and
with four full service branches, one limited service branch and one stand alone
ATM facility. The Citizens Bank, Ball Ground, Georgia ("CBBG") became a
wholly-owned subsidiary of First Bancorp on October 30, 1992. CBBG, which
6
<PAGE> 14
was formed in 1926, operates a full service banking business in Cherokee County,
Georgia, with its main office located in Ball Ground, Georgia and with three
full service branches. The Bank of Villa Rica ("VRB"), Villa Rica, Georgia,
became a wholly-owned subsidiary of First Bancorp on May 31, 1993. VRB, which
was formed in 1899, operates a full service banking business in Carroll County,
Georgia, with its only office located in Villa Rica, Georgia. The Community Bank
of Carrollton ("CBC") became a wholly-owned subsidiary of First Bancorp on
August 31, 1993. CBC, which was formed in 1987, operates a full service banking
business in Carroll County, Georgia, with its only office located in Carrollton,
Georgia. The Commercial Bank, Douglasville, Georgia ("CBD") became a
wholly-owned subsidiary of First Bancorp on February 28, 1994. CBD, which was
formed in 1928, operates a full service banking business in Douglas County,
Georgia, with its main office in Douglasville, Georgia and with four full
service branches and four limited service branches. The Barrow Bank & Trust
Company ("BBT") became a wholly-owned subsidiary of First Bancorp on July 31,
1994. BBT, which was formed in 1989, operates a full service banking business in
Barrow County, Georgia, with its main office in Winder, Georgia and with one
full service branch. FNB Subsidiary was incorporated in February, 1995, as a
wholly-owned subsidiary of First Bancorp to facilitate the merger with FF
Bancorp.
FF Bancorp was incorporated in Florida in May 1992, became a multiple
savings and loan holding company in July 1992, and became a multiple savings and
loan and one-bank holding company in April 1994. FF Bancorp currently holds all
of the outstanding shares of New Smyrna Bank and Citrus Bank and 97.3% of the
outstanding stock of Key Bancshares, which owns 99.9% of the outstanding shares
of Key Bank. New Smyrna Bank is a federal savings bank, formed in 1935 as a
mutual savings association and converted to a stock savings bank on July 1,
1991. It operates a full-service banking business in Volusia County, Florida.
The main office of New Smyrna Bank is located at 900 North Dixie Freeway, New
Smyrna Beach, Florida, and the building, containing approximately 17,000 square
feet of useable office and banking space, is owned by New Smyrna Bank. New
Smyrna Bank has two branches, one located in New Smyrna Beach and the other
located in Edgewater, Florida. From these offices in Volusia County, New Smyrna
Bank carries on a banking business which consists primarily of making
single-family residential loans and accepting deposits. It also makes secured
and unsecured loans to finance commercial and personal transactions and provides
checking and savings accounts primarily for businesses and residents of Volusia
County. New Smyrna Bank had approximately 77 employees (15 of whom were
officers) as of September 30, 1994.
FF Bancorp also currently holds all of the outstanding shares of Citrus
Bank. Citrus Bank is a federal savings bank, which was formed in 1963 as a
mutual savings association and converted to a stock savings bank on July 8,
1992. It operates a full service banking business in Citrus County, Florida and
also serves customers located in Hernando County and Marion County, Florida. The
main office of Citrus Bank is located at 800 West Main Street, Inverness,
Florida, and the building containing approximately 32,000 square feet of usable
office and banking space, is owned by Citrus Bank. Citrus Bank has three
branches located in Beverly Hills, Crystal River and Homosassa Springs, Florida.
From these offices in Citrus County, Citrus Bank carries on a banking business
which consists primarily of making single-family residential loans and accepting
deposits. It also makes secured and unsecured loans to finance commercial and
personal transactions and provides checking and savings accounts primarily for
businesses and residents of Citrus County. Citrus Bank had approximately 66
employees (14 of whom were officers) as of September 30, 1994.
FF Bancorp also currently holds 98.9% of the outstanding stock of
Bancshares, and Bancshares currently holds 99.9% of the outstanding stock of Key
Bank. Key Bank is a state banking association which was formed in December 1973
and which operates a full service banking business in the Tampa Bay area of
Florida. The main office of Key Bank is located at 3601 West Waters Avenue,
Tampa, Florida and the building containing approximately 9,000 square feet of
usable office and banking space is owned by Key Bank. Key Bank has one branch,
located in Tampa, Florida. From these offices in the Tampa Bay area, Key Bank
carries on a full service banking business including making secured and
unsecured loans to finance commercial and personal transactions, accepting
deposits and providing checking and savings accounts primarily for businesses
and residents of Hillsborough County. Key Bank had approximately 41 employees
(10 of whom were officers) as of September 30, 1994.
7
<PAGE> 15
SUMMARY OF MERGER
The following is a summary of certain features of the proposed merger,
which is qualified in its entirety by reference to the Merger Plan attached
hereto as Appendix A and to the other textual information and financial data set
forth elsewhere in this Proxy Statement.
TERMS OF THE AGREEMENT AND PLAN OF MERGER
Pursuant to the Merger Plan, FNB Subsidiary, a Florida business
corporation, has been organized as a wholly-owned subsidiary of First Bancorp.
Under the Merger Plan, FF Bancorp will be merged with and into FNB Subsidiary in
a forward triangular merger, with FNB Subsidiary being the surviving corporation
in the merger under its charter. The name of FNB Subsidiary will be changed to
"FF Bancorp, Inc." as a result of the merger. The surviving corporation will
thereafter be operated as a wholly-owned subsidiary of First Bancorp, and FF
Bancorp as originally incorporated will cease to exist. As a result of the
merger, each outstanding share of common stock of FF Bancorp will be converted
into .825 shares of common stock of First Bancorp.
BUSINESS OF THE PARTIES TO THE MERGER
First Bancorp currently is a multi-bank holding company with its operating
subsidiaries being the following seventeen commercial banks which are all
located in Georgia: The First National Bank of Gainesville, First National Bank
of Habersham, Granite City Bank in Elberton, Georgia, Bank of Clayton, First
National Bank of White County, First National Bank of Jackson County, The
Citizens Bank in Toccoa, Georgia, Bank of Banks County, First National Bank of
Gilmer County, The Peoples Bank of Forsyth County, Pickens County Bank, First
National Bank of Paulding County, Citizens Bank, Ball Ground, Georgia, Bank of
Villa Rica, The Community Bank of Carrollton, The Commercial Bank, Douglasville,
Georgia, and Barrow Bank & Trust Company, Winder, Georgia.
First Bancorp is not engaged in any business other than normal banking and
mortgage banking services provided through its subsidiaries.
Through its subsidiaries, First Bancorp operates a full-service banking
business in Hall, Habersham, Elbert, Rabun, White, Jackson, Stephens, Banks,
Gilmer, Forsyth, Pickens, Paulding, Cherokee, Carroll, Douglas, and Barrow
Counties, Georgia. The First Bancorp subsidiaries provide such customary banking
services as checking and savings accounts, various other types of time deposits,
safe deposit facilities and money transfers. They also finance commercial and
personal transactions by making secured and unsecured loans. Through The First
National Bank of Gainesville, First Bancorp performs corporate, employee benefit
and personal trust services and provides other financial services to its
customers, including permanent residential mortgage loan financing. The First
National Bank of Gainesville engages in various mortgage banking activities
through a division called The Mortgage Source. The First National Bank of
Gainesville also provides data processing services for banking applications to
other banks in the area and services mortgage loans which are owned by certain
outside investors.
FF Bancorp is a multiple savings and loan and one bank holding company with
four subsidiaries, New Smyrna Bank, Citrus Bank, Key Bancshares and Key Bank.
Through these subsidiaries, FF Bancorp operates a full-service banking business
in Volusia, Citrus, and Hillsborough Counties, Florida. The FF Banking
Subsidiaries provide such customary banking services as checking and savings
accounts, various other types of time deposits, safe deposit facilities and
money transfers. They also finance commercial and personal transactions by
making secured and unsecured loans and provide other financial services to their
customers. See "BUSINESS OF FF BANCORP."
REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of FF Bancorp has unanimously approved the Merger
Plan and recommends that the shareholders of FF Bancorp vote in favor of its
approval.
8
<PAGE> 16
In deciding to approve and recommend the Merger Plan, the Board of
Directors concluded that the Merger Plan offered shareholders of FF Bancorp the
opportunity to exchange, at an equitable exchange ratio and on a tax-free basis,
their current equity investment for a more liquid investment in a larger, more
geographically diversified company, whose business philosophy and financial and
managerial resources should allow for continued enhancement of shareholder
value. See "THE PROPOSED MERGER -- Reasons for the Merger; Recommendation of
Board of Directors."
OPINION OF FINANCIAL ADVISOR
Professional Bank Services, Inc. ("PBS") has served as financial advisor to
FF Bancorp in connection with the merger. PBS has delivered to the Board of
Directors of FF Bancorp a written opinion, dated December 16, 1994, to the
effect that the consideration to be received in the merger is fair from a
financial perspective to the holders of FF Bancorp common stock. For additional
information, see "THE PROPOSED MERGER -- Opinion of Financial Advisor." The
opinion of PBS, dated as of December 16, 1994, is attached as Appendix B to this
Proxy Statement. As a condition of consummation of the merger, PBS has also been
engaged to provide the FF Bancorp Board of Directors a confirmation of such
opinion as of a date not more than 20 days nor less than 10 days from the date
of consummation of the merger to the effect that the consideration to be
received in the merger is still fair to the FF Bancorp shareholders as of the
date of confirmation. See "THE PROPOSED MERGER -- Conditions of Certain
Obligations of FF Bancorp."
OPERATIONS OF FF BANCORP AND FIRST BANCORP AFTER MERGER
If the merger is consummated, FF Bancorp will be merged into FNB
Subsidiary, a wholly-owned subsidiary of First Bancorp, and the FF Subsidiaries
will become subsidiaries of FNB Subsidiary and will continue to engage in
substantially the same business and activities in which they are presently
engaged. It is contemplated that, at the time of consummation, the officers and
directors of the FF Subsidiaries will remain those who are currently serving,
except that Frances R. Ford, Chairman of the Board and President of FF Bancorp,
has informed First Bancorp that she intends to retire and resign after the
merger from her positions with the FF Subsidiaries.
If the Merger Plan is consummated, the merger would have the following
effect on the balance sheet, income, and shares outstanding of First Bancorp.
The information presented is provided on a pro forma basis based upon the
September 30, 1994, consolidated financial statements of FF Bancorp and of First
Bancorp (including the acquisition of the Barrow Bank & Trust Company, Winder,
Georgia, which became a subsidiary on July 31, 1994). Total assets of First
Bancorp would increase to approximately $2.9 billion on a pro forma basis due to
the addition of the assets of FF Bancorp and its subsidiaries; FF Bancorp's
assets would be approximately 20.5% of the total assets of First Bancorp after
the merger. Total deposits of subsidiaries of First Bancorp would increase to
approximately $2.4 billion on a pro forma basis due to the addition of the
deposits of the FF Banking Subsidiaries; the FF Banking Subsidiaries' deposits
would be approximately 22.1% of the total deposits of First Bancorp after the
merger. The maximum number of First Bancorp shares outstanding would increase to
approximately 20,374,000 shares due to the projected 3,885,050 shares which
would be issued to FF Bancorp shareholders in the merger; the 3,885,050 shares
would be approximately 19.1% of outstanding shares of First Bancorp after the
merger. The projections of number of shares assume that 100% of the shares of FF
Bancorp are exchanged for First Bancorp common stock and include shares which
may be issued upon exercise of FF Bancorp incentive stock options (outstanding
as of October 31, 1994) for the purchase of 28,333.8 shares. See "THE PROPOSED
MERGER."
It is First Bancorp's intent that the boards of directors of the FF
Subsidiaries operate as boards mostly made up of directors who are members of
the local community. First Bancorp will continue to be operated as a bank
holding company under the federal Bank Holding Company Act of 1956, as amended,
and the bank holding company laws of Georgia, and as a reporting company under
the Federal Securities Exchange Act of 1934. In addition, after the merger First
Bancorp will also become a multiple savings and loan holding company under the
federal Savings and Loan Holding Company Act, as amended, and the bank holding
company laws of Florida.
9
<PAGE> 17
Under the Merger Plan, First Bancorp has agreed to appoint Charles H. Byrd,
Vice Chairman of FF Bancorp, and Tildon W. Smith, Executive Vice President of FF
Bancorp, to the Board of Directors of Bancorp at the first scheduled Board
meeting following consummation of the merger.
REGULATORY APPROVAL REQUIRED
The merger is subject to the approval of the Georgia Department of Banking
and Finance, the Board of Governors of the Federal Reserve System, the Florida
Department of Banking and Finance, and the Office of Thrift Supervision.
Applications for those approvals have been filed with these agencies. As of this
time, no formal action has been taken by any of the agencies to approve or
disapprove the transactions. If preliminary approval is granted, final approval
will be subject to, among other things, the approval of the shareholders of FF
Bancorp.
VOTE REQUIRED TO APPROVE MERGER
The affirmative vote of a majority ( shares) of the outstanding shares
of FF Bancorp common stock entitled to vote at the special shareholders meeting
is required for approval of the Merger Plan. FF Bancorp directors, executive
officers, and their affiliates own approximately % ( shares) of the
outstanding shares of FF Bancorp. The Board of Directors of FF Bancorp has
approved the Merger Plan by the unanimous affirmative vote of the directors and
recommends that shareholders vote in favor of approval. Each director has also
agreed, in a letter agreement with First Bancorp, to vote his shares in favor of
approval of the Merger Plan. The enclosed proxy, if properly executed, duly
returned and not revoked, will be voted in accordance with the instructions
contained therein. If no instructions are given, properly executed and returned
proxies will be voted in favor of the Merger Plan.
No vote is required by the shareholders of First Bancorp to carry out the
merger; First Bancorp directors, executive officers and their affiliates (in
regard to which they do not disclaim beneficial ownership of shares) own
approximately 7% of the outstanding stock of First Bancorp.
NO DISSENTER'S RIGHTS OF APPRAISAL
Shareholders of FF Bancorp will not have any dissenter's rights of
appraisal in connection with the merger.
CONVERSION OF FF BANCORP STOCK
As a result of the merger, each outstanding share of common stock of FF
Bancorp will be converted into .825 shares of common stock of First Bancorp.
Fractional shares of First Bancorp common stock will not be issued in the
merger. Any FF Bancorp shareholder who would be entitled to a fraction of a
First Bancorp share shall receive a cash payment in lieu of such fractional
share in an amount determined by multiplying the fraction of a share he would
otherwise be entitled to receive by $20.50.
RIGHT OF TERMINATION OF THE MERGER PLAN
The obligations of First Bancorp and FNB Subsidiary to consummate and
effect the merger contemplated by the Merger Plan are subject to the
satisfaction of certain conditions. These conditions are fully described in
Paragraph IX of the Merger Plan attached hereto as Appendix A. The conditions
include, but are not necessarily limited to, certain representations of FF
Bancorp being true; no material adverse financial changes in FF Bancorp or its
subsidiary; and that the transaction will qualify to be accounted for using the
"pooling of interests" method of accounting. See the Merger Plan for the full
text of these conditions. See also "THE PROPOSED MERGER -- Conditions of Certain
Obligations of First Bancorp."
The obligation of FF Bancorp to consummate and effect the merger
contemplated by the Merger Plan is subject to the satisfaction of certain
conditions. These conditions are fully described in Paragraph VIII of the Merger
Plan attached hereto as Appendix A. The conditions include, but are not
necessarily limited to, certain representations of First Bancorp being true; no
material adverse financial changes in First Bancorp; receipt of a
10
<PAGE> 18
fairness opinion from PBS regarding the consideration to be received by the FF
Bancorp shareholders in the merger; receipt from PBS of confirmation of such
fairness opinion as of a date close to the date of consummation; the receipt of
an opinion of Stewart, Melvin & Frost, attorneys-at-law, regarding certain tax
consequences of the merger. See Merger Plan for the full text of these
conditions. See also "THE PROPOSED MERGER -- Conditions of Certain Obligations
of FF Bancorp."
The obligations of First Bancorp, FNB Subsidiary and FF Bancorp under the
Merger Plan are, at the option of either of them, subject to the satisfaction of
certain conditions. These conditions are fully described in Paragraph X of the
Merger Plan attached as Appendix A. The conditions include, but are not
necessarily limited to, FF Bancorp shareholder approval; satisfaction of all
laws, regulations and directives; and the stock of First Bancorp being the
subject of an effective registration statement under the Federal Securities Act
of 1933. See "THE PROPOSED MERGER -- Conditions of Certain Obligations of Both
First Bancorp and FF Bancorp."
The Merger Plan may be terminated based on the failure of the conditions
referred to in the Merger Plan, or the failure to consummate the proposed merger
due to no fault of the terminating party by August 31, 1995.
EFFECT OF MERGER ON FF BANCORP SHAREHOLDERS
If the merger is consummated, the holders of the common stock of FF Bancorp
will become holders of First Bancorp common stock through a stock conversion in
a forward triangular merger as outlined in the Merger Plan. For a comparison of
rights of the shareholders of FF Bancorp and First Bancorp and the effect of
receiving cash in the Merger, please refer to the sections entitled "EFFECT OF
MERGER ON SHAREHOLDERS" and "FEDERAL INCOME TAX CONSEQUENCES."
TAX CONSEQUENCES
Consummation of the merger is conditioned on FF Bancorp receiving an
opinion from Stewart, Melvin & Frost, general counsel to First Bancorp, to the
effect that, under applicable provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), no gain or loss will be recognized for Federal income
tax purposes by FF Bancorp, First Bancorp, or the shareholders of FF Bancorp
(except in connection with any cash received in lieu of a fractional share) and
to the effect that the merger qualifies as a "reorganization" under Section 368
of the Code.
Assuming the merger so qualifies as a "reorganization" for Federal income
tax purposes, a FF Bancorp shareholder who receives shares of First Bancorp
common stock (and cash in lieu of a fractional share) in the merger will
recognize no gain or loss (except in connection with any such cash received in
lieu of a fractional share). If the merger qualifies as a Section 368
reorganization, neither First Bancorp nor FF Bancorp will recognize gain or loss
as a result of the merger. EACH HOLDER OF FF BANCORP SHARES SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF THE MERGER TO SUCH
HOLDER. SEE "FEDERAL INCOME TAX CONSEQUENCES."
INTERESTS OF CERTAIN PERSONS
Under their respective employment agreements, Frances R. Ford, Chairman,
President and Chief Executive Officer of FF Bancorp, and Charles H. Byrd, Vice
Chairman of FF Bancorp, will receive termination payments of approximately
$520,000 and $382,000, respectively, due to the change of control of FF Bancorp
and a change of their respective duties as a result of the merger. Also, in
January, 1995, for personal financial reasons Mrs. Ford sold 20,000 shares of
her FF Bancorp common stock through a broker. The shares were purchased by the
Vice Chairman of the Board of Key Bank. In addition, upon merger the outstanding
options to purchase 56,063 shares of FF Bancorp common stock held by Tildon W.
Smith, Executive Vice President of FF Bancorp, will be converted into options to
purchase 46,252 shares of First Bancorp common stock. See "THE PROPOSED
MERGER -- Interests of Certain Persons in the Merger."
11
<PAGE> 19
ACCOUNTING TREATMENT
If the proposed merger is consummated, it is contemplated that the
acquisition will be accounted for by First Bancorp using the "pooling of
interests" method of accounting. See "THE PROPOSED MERGER -- Accounting
Treatment."
EXPENSES OF SOLICITATION AND MERGER
First Bancorp, FNB Subsidiary and FF Bancorp will each pay its own expenses
in connection with this solicitation and the transactions contemplated by the
Merger Plan including all fees and expenses of its respective legal counsel and
independent auditors. See the Merger Plan attached hereto as Appendix "A."
12
<PAGE> 20
CONDENSED RECENT FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FF BANCORP -----------------------
(UNAUDITED) 1994 1993
------- -------
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
SUMMARY OF INCOME:
Interest income................................................................ $42,769 $39,746
Interest expense............................................................... 19,886 19,651
------- -------
Net interest income............................................................ 22,883 20,095
Provision for losses on loans.................................................. 1,939 177
------- -------
Net interest income after provision for losses on loans........................ 20,944 19,918
Noninterest income............................................................. 1,031 1,198
Noninterest expenses........................................................... 12,141 9,877
------- -------
Earnings before income taxes and cumulative effect of change in accounting
principle.................................................................... 9,834 11,239
Provision for income tax....................................................... 3,332 4,258
------- -------
Earnings before cumulative effect of change in accounting principle............ 6,502 6,981
Cumulative effect of change in accounting principle............................ -- 824
------- -------
Net earnings................................................................... $ 6,502 $ 7,805
======== ========
PER SHARE DATA:
Earnings before cumulative effect of change in accounting principle............ $ 1.44 $ 1.50
Cumulative effect of change in accounting principle............................ $ -- $ 0.18
------- -------
Net earnings................................................................... $ 1.44 $ 1.68
======== ========
Cash dividends................................................................. $ 0.53 $ 0.45
======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
Cash, interest-bearing deposits, and federal funds sold.......................... $101,054 $ 95,504
Investment securities available-for-sale......................................... 30,104 23,339
Investment securities held-to-maturity........................................... -- 52,013
Loans, net....................................................................... 420,631 353,756
All other assets................................................................. 37,943 20,249
-------- --------
Total assets............................................................ $589,732 $544,861
========= =========
Deposits......................................................................... $539,194 $490,041
Borrowings....................................................................... -- 5,000
All other liabilities............................................................ 5,519 7,543
Shareholders' equity............................................................. 45,019 42,277
-------- --------
Total liabilities and shareholders' equity.............................. $589,732 $544,861
========= =========
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR
THE YEAR ENDED
DECEMBER 31,
-----------------
1994 1993
----- -----
<S> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets............................................................. 1.11% 1.43%
Return on average equity............................................................. 14.53 20.50
Average equity to average assets..................................................... 7.64 6.96
Interest rate spread................................................................. 3.75 3.71
Net interest margin.................................................................. 4.09 3.87
Noninterest expense to average assets................................................ 2.07 1.81
Nonperforming loans and other real estate owned as a percentage of total assets...... 1.74 1.25
Allowance for loan losses as a percentage of total loans, net........................ 1.43 0.74
</TABLE>
13
<PAGE> 21
COMPARISON OF FF BANCORP FINANCIAL CONDITION AT DECEMBER 31, 1994 AND 1993
Balance Sheet
Cash and cash equivalents totaled $101,054 at December 31, 1994, an
increase of $5.6 million from December 31, 1993. The increase came from
increased cash on deposit of $4.5 million and an investment in federal funds
sold of $1.1 million, while investment in interest-bearing deposits remained
relatively the same at $87.7 million. A portion of this increase was due to
inclusion of Key Bank following its acquisition in 1994 under the purchase
method of accounting.
On December 31, 1993, FF Bancorp adopted Statement of Financial Accounting
Standards No. 115 ("SFAS 115") and classified certain investment securities as
available-for-sale. This resulted in a net increase in the recorded amount of
investment securities by $2,698,000 and stockholders' equity by $1,673,000 net
of the estimated tax effect of the unrealized gains at December 31, 1993.
In 1994, the classification of investment securities, including
mortgage-backed securities, changed significantly from December 31, 1993 to
December 31, 1994. These changes were made as a management decision rather than
as satisfaction of SFAS 115. At year end 1993, investment securities totaled
$75.4 million with $52.0 million classified as held-to-maturity and $23.3
million classified as available-for-sale. The changes occurred primarily at
Citrus Bank, where the interest rate risk position has been weak for several
months and was a concern to management. Citrus Bank was in a liability sensitive
position, and the longer term, low yielding securities were having a negative
effect on earnings in the rising interest rate environment. Management decided
to address the interest rate risk problem and the future effect on earnings by
the sale of some securities and the reclassification of others to the available
for sale category. Specifically, in addition to other normal recurring
securities transactions during 1994, in the fourth quarter management of FF
Bancorp sold approximately $15,100,000 of fixed rate mortgage-backed securities
from its available-for-sale portfolio and approximately $12,700,000 of fixed
rate mortgage-backed securities from its held-to-maturity portfolio at a
combined pre-tax loss of approximately $600,000. Additionally, in the fourth
quarter of 1994, management of FF Bancorp decided to reclassify all remaining
investment securities as available-for-sale. This resulted in FF Bancorp having
no securities at December 31, 1994 classified as held-to-maturity and $30.1
million of investment securities classified as available-for-sale. This
reclassification resulted in a net decrease in the recorded amount of
stockholders' equity of $1,742,000, net of the estimated tax effect of the
unrealized losses.
The allowance for loan losses was increased during the fourth quarter of
1994 as discussed below under Provision for Loan Losses.
Total assets of FF Bancorp at December 31, 1994 were $590 million, a net
increase of $44.9 million over year end 1993 total assets. The December 31, 1994
amount includes Key Bank whose assets totaled $67.2 million at December 31, 1994
but were not included in the year end 1993 amount since Key Bank was acquired in
1994 under the purchase method of accounting. Total assets of New Smyrna Bank
and Citrus Bank each declined approximately 4% from December 31, 1993 to
December 31, 1994.
COMPARISON OF FF BANCORP RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1994
AND 1993
General
Net earnings for the year ended December 31, 1994 were $6.5 million or
$1.44 per share compared to earnings before the cumulative effect of the change
in accounting principle of $7.0 million or $1.50 per share and net earnings of
$7.8 million or $1.68 per share for 1993. The decrease in earnings was primarily
due to an increase in provision for loan loss, and an increase in noninterest
expense partially offset by an increase in net interest income. Effective
January 1, 1993, FF Bancorp adopted SFAS 109 relating to the method of
accounting for income taxes. The cumulative effect on years ending prior to
January 1, 1993 amounted to $824,000 or $.18 per share.
14
<PAGE> 22
Interest Income and Expense
Interest income increased $3.0 million or 7.6% to $42.8 million for the
year ended December 31, 1994. Interest on loans increased $3.4 million due to an
increase in the average balance of the loan portfolio, partially offset by a
decrease in the weighted average yield from 8.84% during the year ended December
31, 1993 to 8.46% during the year ended December 31, 1994. The average balance
increased primarily because of the acquisition of Key Bank during 1994. Interest
on mortgage-backed securities decreased $2.0 million due primarily to a decrease
in the average amounts invested in these securities during 1994 compared to
1993.
Interest expense on deposit accounts increased from $19.4 million for the
year ended December 31, 1993 to $19.9 million for the year ended December 31,
1994. This increase was the result of an increase in the average balance of
deposit accounts due to acquisition of Key Bank during 1994, partially offset by
a decrease in rates paid on deposit accounts.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by FF Bancorp,
industry standards, the amount of nonperforming loans, general economic
conditions, particularly as they relate to FF Bancorp's market areas, and other
factors related to the collectibility of FF Bancorp's loan portfolio. The
provision for loan losses increased from $.2 million for the year ended December
31, 1993 to $1.9 million during 1994. The allowance for loan losses increased
from $2.7 million at December 31, 1993 to $6.0 million at December 31, 1994. The
increase is due to the adoption of a new loan loss policy and acquisition of Key
Bank during 1994. Management has adopted a uniform (for all financial
institutions it operates) and more stringent method of determining these
allowances through a more aggressive and more standardized approach to grading
loans as well as using standard factors for calculating estimated losses on
nonclassified loans. Management has made this change effective December 31, 1994
and has reported the effect of this change in the fourth quarter of 1994. This
change resulted in an additional provision of $2 million. While management
believes that its allowance for loan losses is adequate as of December 31, 1994,
future adjustments to FF Bancorp's allowance for loan losses may be necessary if
economic conditions differ substantially from the assumptions used in making the
initial determination.
Noninterest Expense
Total noninterest expense increased $2.3 million to $12.1 million for the
year ended December 31, 1994. Most noninterest expenses increased, and the
increase was primarily due to the acquisition of Key Bank during 1994.
Income Tax Provision
The income tax provision decreased from $4.3 million for the year ended
December 31, 1993 (an effective rate of 38%) to $3.3 million (an effective rate
of 34%) for 1994. The decrease was due to a favorable resolution of income taxes
which were previously provided for.
15
<PAGE> 23
FIRST BANCORP
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
SUMMARY OF INCOME:
Interest income........................................................ $163,145 $151,131
Interest expense....................................................... 66,132 62,930
-------- --------
Net interest income.................................................... 97,013 88,201
Provision for losses on loans.......................................... (362) 2,985
-------- --------
Net interest income after provision for losses on loans................ 97,375 85,216
Noninterest income..................................................... 27,081 31,841
Noninterest expenses................................................... 86,639 81,144
-------- --------
Earnings before income tax expense and cumulative effect of accounting
change............................................................... 37,817 35,913
Income tax expense..................................................... 9,683 9,419
-------- --------
Income before cumulative effect of accounting change................... 28,134 26,494
Cumulative effect of accounting change................................. -- 160
-------- --------
Net earnings........................................................... 28,134 26,654
======== ========
PER SHARE DATA:
Earnings per share before cumulative effect of accounting change....... $ 1.72 $ 1.67
Net earnings per share................................................. $ 1.72 $ 1.68
Cash dividends per share............................................... $ 0.78 $ 0.71
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
Investment securities available-for-sale.............................. $ 549,432 $ 410,252
Investment securities held-to-maturity................................ 157,567 139,368
Loans, net............................................................ 1,403,805 1,285,025
All other assets...................................................... 269,744 307,307
---------- ----------
Total assets................................................ $2,380,548 $2,141,952
========= =========
Deposits.............................................................. $1,943,264 $1,764,641
Borrowings............................................................ 185,367 135,144
All other liabilities................................................. 24,960 24,108
Shareholders' equity.................................................. 226,957 218,059
---------- ----------
Total liabilities and shareholders' equity.................. $2,380,548 $2,141,952
========= =========
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED
DECEMBER 31,
--------------------
1994 1993
------ ------
<S> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets................................................ 1.24% 1.29%
Return on average equity................................................ 12.51 13.53
Average equity to average assets........................................ 9.90 9.50
Interest rate spread.................................................... 4.29 4.22
Net interest margin..................................................... 4.96 4.89
Noninterest expense to average assets................................... 3.81 3.91
Nonperforming loans and other real estate owned as a percentage of total
assets................................................................ 1.21 1.42
Allowance for loan losses as a percentage of total loans, net........... 1.44 1.65
</TABLE>
16
<PAGE> 24
COMPARISON OF FIRST BANCORP FINANCIAL CONDITION AT DECEMBER 31, 1994 AND 1993
Balance Sheet
First Bancorp's consolidated total assets increased 11.1% from $2.142
billion at year end 1993 to $2.381 billion as of year end 1994. This growth was
due to internal growth and the acquisition of The Commercial Bank, Douglasville,
whose asset's totaled approximately $140 million, and which did not require
prior period financial information restatement because the purchase method of
accounting was used. Financial information has been restated for the acquisition
of Barrow Bank & Trust, Winder, which was accounted for under the
pooling-of-interests method and acquired effective July 31, 1994.
COMPARISON OF FIRST BANCORP RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31,
1994 AND 1993
General
First Bancorp's net income for 1994 was $28.1 million, an increase of $1.5
million over the $26.6 million reported for 1993. Earnings per share of $1.72
for 1994 compared to $1.68 per share for 1993. The loan origination income from
First Bancorp's mortgage banking business declined substantially in 1994 which
negatively impacted 1994 earnings when compared to 1993 performance. The return
on average assets was 1.24% and return on average equity was 12.51% for the 1994
year compared to 1.29% and 13.53%, respectively, for 1993.
Net Interest Income
Net interest income for 1994 was $97.0 million, a 10% increase over the
year ended December 31, 1993. The net interest margin increased favorably to
4.96% for the 1994 year compared to 4.89% for the 1993 year with the increase
being driven by a modest increase in the yield spread.
Noninterest Income and Expense
Noninterest income for 1994 was down $4.8 million, or 15.0%, from the 1993
year as increases in most noninterest income categories partially offset a $5.4
million reduction in mortgage loan fees income due to a sharp decline in
mortgage loan originations and a reduction in securities gains. Noninterest
expense for 1994 increased $5.5 million, or 6.8%, from 1993 primarily as a
result of the acquisition of The Commercial Bank, Douglasville, on February 28,
1994, which was accounted for under the purchase method of accounting.
Income Tax Provision
Income tax expense of $9.7 million for 1994 was almost the same as the $9.4
million income tax expense for 1993, although 1994 pretax income was up 5.3%
over 1993. This is primarily due to the use of certain operating loss carry
forwards which originated in certain subsidiary banks prior to their
acquisition.
Provision for Loan Losses
Nonperforming assets at year end 1994 were $28.8 million and represented
2.01% of loans and other real estate. This is a material improvement over the
1993 year end total of $30.4 million which was 2.31% of loans and other real
estate. This improvement was achieved even with the addition of $5.4 million to
the nonperforming loan portfolio through the acquisition of The Commercial Bank,
Douglasville. The allowance for losses on loans was allowed to decline $1.1
million to $20.4 million at December 31, 1994 due to continued material
improvement in asset quality. This resulted in a negative provision for losses
on loans in 1994 of $.4 million compared to a provision of $2.98 million in
1993. According to First Bancorp's loan loss reserve methodology, this $20.4
million allowance for losses on loans still exceeded the amount required under
the methodology calculations. As of year end 1994, the allowance for losses on
loans was 1.45% of net loans outstanding, excluding mortgage loans held for
sale.
17
<PAGE> 25
FIRST BANCORP AND FF BANCORP PRO FORMA CONDENSED COMBINED RECENT BALANCE SHEET
INFORMATION
First Bancorp has entered into the Merger Plan with FF Bancorp which, if
consummated, would result in FF Bancorp becoming a subsidiary of First Bancorp.
Under the Merger Plan, the 4,680,897 outstanding FF Bancorp common shares (as of
December 31, 1994) will be exchanged for 3,861,740 shares of First Bancorp
common stock. Additionally, certain officers and employees of FF Bancorp have
options to purchase 84,318.5 additional shares of FF Bancorp common stock. It is
anticipated that 28,254.8 shares will be issued pursuant to such options which
are not exercisable after the acquisition of FF Bancorp, and that 56,063.7
options which are not required to be exercised prior to the acquisition will be
converted into options to acquire First Bancorp common stock at the .825
exchange ratio proposed for the exchange of outstanding FF Bancorp shares. For
purposes of the pro forma condensed combined balance sheet and statement of
income information, it is anticipated that the 28,254.8 shares to be issued
pursuant to currently exercisable options will be exchanged for 23,310 shares of
First Bancorp common stock. No cash, except cash to be paid for fractional
shares, will be offered in the transaction which will be accounted for as a
pooling-of-interests. The following unaudited pro forma combined balance sheet
information of First Bancorp and FF Bancorp at December 31, 1994 gives effect to
the proposed acquisition of FF Bancorp. The pro forma condensed combined balance
sheet should be read in conjunction with the notes to the pro forma financial
statements and related financial statements of the respective entities appearing
elsewhere or incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
FF BANCORP
FIRST FF PRO FORMA PRO FORMA
BANCORP BANCORP ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(AMOUNTS ARE PRESENTED IN THOUSANDS)
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash and due from banks............................. $ 84,260 $ 12,173 $ 98(A) $ 96,531
--
Federal funds sold.................................. 28,908 1,150 -- 30,058
Interest-bearing deposits in other financial
institutions...................................... 16,259 87,731 -- 103,990
Investment securities available-for-sale............ 549,432 30,104 -- 579,536
Investment securities held-to-maturity.............. 157,567 -- -- 157,567
Loans, net.......................................... 1,403,805 420,631 -- 1,824,436
Premises and equipment, net......................... 57,004 9,969 -- 66,973
Other assets........................................ 83,313 27,974 -- 111,287
---------- -------- ----------- ----------
Total assets.............................. $2,380,548 $589,732 $ 98 $2,970,378
========= ======== ========= =========
Deposits............................................ $1,943,264 $539,194 $ -- $2,482,458
Federal funds purchased, securities sold under
agreements to repurchase, and other short-term
borrowings........................................ 105,129 -- -- 105,129
Long-term debt...................................... 80,238 -- -- 80,238
Other liabilities................................... 24,960 5,519 -- 30,479
---------- -------- ----------- ----------
Total liabilities......................... 2,153,591 544,713 -- 2,698,304
---------- -------- ----------- ----------
Common stock........................................ 16,540 47 3,885 (B) 20,425
(48)(B)
1 (A)
Additional paid-in-capital.......................... 67,606 20,197 97 (A) 83,977
(3,923)(B)
Retained earnings................................... 155,541 25,854 -- 181,395
--
Stock held by Management Recognition Plan Trust..... -- (86) 86 (B) --
Net unrealized holding (losses) gains on investment
securities available for sale..................... (12,730) (993) -- (13,723)
---------- -------- ----------- ----------
Total shareholders' equity................ 226,957 45,019 98 272,074
========= ======== ========= =========
Total liabilities and shareholders'
equity.................................. $2,380,548 $589,732 $ 98 $2,970,378
========= ======== ========= =========
</TABLE>
18
<PAGE> 26
FIRST BANCORP AND FF BANCORP PRO FORMA CONDENSED COMBINED RECENT STATEMENTS OF
INCOME
The following unaudited pro forma condensed combined recent statements of
income of First Bancorp and FF Bancorp for the year ended December 31, 1994,
gives effect to the proposed acquisition of FF Bancorp for 3,885,050 shares of
First Bancorp common stock, and the completed acquisition of Barrow Bancshares
by First Bancorp on July 31,1994. The acquisition of FF Bancorp will be
accounted for as a pooling-of-interests and hence all periods presented reflect
combined First Bancorp and FF Bancorp data. The acquisition of Barrow Bancshares
was accounted for as a pooling-of-interests. On February 28, 1994, First Bancorp
completed its acquisition of Metro Bancorp, and on April 8, 1994, FF Bancorp
completed its acquisition of Key Bancshares. Both acquisitions were accounted
for using the purchase method of accounting. The combined financial position and
results of operations of Metro Bancorp and Key Bancshares is not significant to
the combined financial position and results of operations of First Bancorp and
FF Bancshares and accordingly, the pro forma effects of Metro Bancorp and Key
Bancshares have not been included in the following pro forma condensed combined
statements of income. The pro forma condensed combined statements of income
should be read in conjunction with the notes to the pro forma financial
statements and separate financial statements and related notes of the respective
entities appearing elsewhere or incorporated herein by reference in this Proxy
Statement. The pro forma financial data has been prepared based upon the
historical financial statements of First Bancorp and FF Bancorp. These pro forma
statements may not be indicative of the results that actually would have
occurred if the transactions had been in effect on the dates indicated or which
may be obtained in the future.
<TABLE>
<CAPTION>
FIRST FF PRO FORMA
BANCORP BANCORP COMBINED
-------- ------- ---------
(AMOUNTS ARE PRESENTED IN
THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
(UNAUDITED)
Interest income............................................. $163,145 $42,769 $205,914
Interest expense............................................ 66,132 19,886 86,018
-------- ------- ---------
Net interest income............................... 97,013 22,883 119,896
Provision for loan losses................................... (362) 1,939 1,577
Noninterest income.......................................... 27,081 1,031 28,112
Noninterest expenses........................................ 86,639 12,141 98,780
-------- ------- ---------
Income before income taxes........................ 37,817 9,834 47,651
Income tax expense.......................................... 9,683 3,332 13,015
-------- ------- ---------
Net income........................................ $ 28,134 $ 6,502 $ 34,636
======== ======= ========
Net income per share based on weighted average shares....... $ 1.71
========
Weighted average number of outstanding shares............... 20,280
========
</TABLE>
19
<PAGE> 27
NOTES TO FIRST BANCORP AND FF BANCORP PRO FORMA CONDENSED COMBINED BALANCE SHEET
INFORMATION AND STATEMENTS OF INCOME
The following notes describe the proforma adjustments necessary to reflect
the proposed acquisition of FF Bancorp by First Bancorp. For purposes of the
proforma financial information, it has been assumed that all of the 4,680,897
outstanding shares, at December 31, 1994, of FF Bancorp common stock, will be
acquired by First Bancorp for 3,861,740 shares of First Bancorp common stock.
Additionally, certain directors, officers, and employees of FF Bancorp have
options to purchase 84,318.5 additional shares of FF Bancorp common stock. It is
anticipated that the options which are not exercisable after the merger will be
exercised prior to the acquisition of FF Bancorp, and the remaining options will
be converted into options to acquire First Bancorp common stock at the same
exchange ratio proposed for outstanding FF Bancorp shares.
(A) Reflects the issuance of 28,254.8 shares of FF Bancorp common stock
from the exercise of outstanding options which are not exercisable
after the acquisition of FF Bancorp by First Bancorp.
(B) Reflects the acquisition of 4,709,151.8 shares, including 28,254.8
shares to be issued pursuant to options to be exercised prior to
merger, of FF Bancorp common stock by First Bancorp and the elimination
of the common stock of FF Bancorp. Additionally, the FF Bancorp stock
held by the Management Recognition Plan Trust will be distributed to
the FF Bancorp management members and such plan will be terminated at
the date of acquisition by First Bancorp.
20
<PAGE> 28
PER SHARE INFORMATION
The following table sets forth at the dates and for the periods indicated
historical, pro forma, and equivalent pro forma per share information with
respect to book value, net income and cash dividends declared on First Bancorp
and FF Bancorp common stock. The pro forma and equivalent pro forma per share
information gives effect to the proposed acquisition of FF Bancorp under the
pooling of interests method of accounting. In presenting pro forma and
equivalent pro forma per share amounts, First Bancorp data reflects one share of
FF Bancorp common stock as .825 shares of First Bancorp common stock for each of
the 4,709,151.8 shares (4,680,818 shares presently outstanding and 28,333.8
shares to be issued pursuant to options) of FF Bancorp common stock. The pro
forma and equivalent pro forma share information assumes that FF Bancorp
shareholders exchange 100% of their shares for First Bancorp stock. Historical,
pro forma, and equivalent pro forma per share information is also included
giving effect to First Bancorp's 1994 acquisition of Barrow Bancshares, Inc.,
accounted for as a pooling of interests. This table should be read in
conjunction with the financial statements of the organizations and the pro forma
condensed combined balance sheet and statements of income information appearing
elsewhere in this Proxy Statement or incorporated herein by reference.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
BOOK VALUE NET INCOME DECLARED
PER SHARE PER SHARE PER SHARE(1)
---------- ---------- -------------
<S> <C> <C> <C>
HISTORICAL:
FIRST BANCORP
At or for the year ended December 31, 1993.................. $13.60 $ 1.68 $ 0.705
At or for the year ended December 31, 1992.................. N/A 1.50 0.64
At or for the year ended December 31, 1991.................. N/A 1.32 0.55
At or for the nine-month period ended September 30, 1994.... 13.73 1.28 0.58
</TABLE>
<TABLE>
<CAPTION>
CASH
DIVIDENDS
BOOK VALUE NET INCOME DECLARED
PER SHARE PER SHARE PER SHARE(2)
---------- ---------- -------------
<S> <C> <C> <C>
HISTORICAL:
FF BANCORP
At or for the year ended December 31, 1993.................. $ 9.72 $ 1.68 $ .44
At or for the year ended December 31, 1992.................. N/A 1.24 .30
At or for the year ended December 31, 1991.................. N/A .28(3) .05
At or for the nine-month period ended September 30, 1994.... 10.11 1.44 .39
PRO FORMA:
FIRST BANCORP
At or for the year ended December 31, 1993.................. $13.07 $ 1.74 N/A
At or for the year ended December 31, 1992.................. N/A 1.48 N/A
At or for the year ended December 31, 1991.................. N/A 1.15 N/A
At or for the nine-month period ended September 30, 1994.... 13.43 1.36 N/A
</TABLE>
<TABLE>
<CAPTION>
CASH
DIVIDENDS
BOOK VALUE NET INCOME DECLARED
PER SHARE PER SHARE PER SHARE
---------- ---------- -------------
<S> <C> <C> <C>
EQUIVALENT PRO FORMA PER SHARE INFORMATION:
FF BANCORP(4)
At or for the year ended December 31, 1993.................. $10.78 $ 1.44 $ .58
At or for the year ended December 31, 1992.................. N/A 1.22 .53
At or for the year ended December 31, 1991.................. N/A .95 .45
At or for the nine-month period ended September 30, 1994.... 11.08 1.12 .48
</TABLE>
- ---------------
(1) The primary source of funds of First Bancorp to pay stockholder dividends is
dividends from its subsidiary banks. The subsidiary banks are subject to
certain statutory and regulatory restrictions regarding the
21
<PAGE> 29
payment of dividends. For a discussion of such restrictions, see Note 14 to
consolidated financial statements on page 52 of First Bancorp's 1993 Annual
Report to Shareholders.
(2) The primary source of funds of FF Bancorp to pay stockholder dividends is
dividends received from the Florida Subsidiaries. The Florida Subsidiaries
are subject to certain statutory and regulatory restrictions regarding the
payment of dividends. For a discussion of such restrictions, see Note 14 to
consolidated financial statements of FF Bancorp on page F-26 of this Proxy
Statement. See "EFFECT OF MERGER ON SHAREHOLDERS -- Dividends
Restrictions."
(3) Net income per share and cash dividends declared per share for FF Bancorp
for 1991 include only the net income and dividends declared by New Smyrna
Bank from July 1, 1991, the date of its conversion from a mutual to a stock
institution.
(4) Equivalent pro forma book value and net income per share data for FF Bancorp
were determined by multiplying pro forma amounts for First Bancorp
(including the effect of the 1994 acquisition of Barrow Bancshares, Inc.,
accounted for as a pooling of interests) by the exchange ratio of .825.
Equivalent pro forma dividends per share data for FF Bancorp were
determined by multiplying historical amounts for First Bancorp by the
exchange ratio of .825.
22
<PAGE> 30
MARKET AND STOCK PRICE INFORMATION
FIRST BANCORP
The following table sets forth the high and low sales prices in the
over-the-counter market, where First Bancorp's common stock is traded, for the
period from January 1, 1992 to December 31, 1994. The prices are based upon
trades as shown through the National Association of Securities Dealers Automatic
Quotation System (the "NASDAQ/National Market System"). First Bancorp stock is
traded under the symbol "FBAC." The information regarding First Bancorp has been
adjusted for a three-for-two stock split by First Bancorp effected by the
distribution on November 16, 1992 of a stock dividend of one share of First
Bancorp stock for each two shares outstanding. As of November 15, 1994, there
were approximately 5,100 holders of record of First Bancorp common stock, and
possibly as many as 7,100 beneficial owners if shareholders who own stock in
names of investment firms are considered.
<TABLE>
<CAPTION>
SALES PRICES
-----------------
HIGH LOW
------ ------
<S> <C> <C>
, 1995......................................... $ $
1994
4th Quarter................................................ 20.75 16.62
3rd Quarter................................................ 22.25 20.00
2nd Quarter................................................ 21.50 19.75
1st Quarter................................................ 22.25 20.25
1993
4th Quarter................................................ 21.25 19.50
3rd Quarter................................................ 22.50 19.75
2nd Quarter................................................ 22.25 20.00
1st Quarter................................................ 21.50 17.50
1992
4th Quarter................................................ 17.66 16.75
3rd Quarter................................................ 18.33 15.50
2nd Quarter................................................ 16.17 15.33
1st Quarter................................................ 16.33 15.50
</TABLE>
FF BANCORP
FF Bancorp common stock is listed and principally traded on the
NASDAQ/National Market System under the symbol "FFSB." The following table sets
forth the high and low sales prices for FF Bancorp's common stock, for the
period from July 8, 1992 (the date of beginning operation as a holding company)
to December 31, 1994. The prices are based upon trades as shown on the
NASDAQ/National Market System. The information regarding FF Bancorp has been
adjusted for a three-for-one stock split by FF Bancorp on July 26, 1993 and for
a 10% stock dividend by FF Bancorp declared on September 19, 1994. As of
September 30, 1994, there were approximately 925 holders of record of FF Bancorp
common stock, and
23
<PAGE> 31
possibly as many as 1,075 beneficial owners if shareholders who own stock in
names of investment firms are considered.
<TABLE>
<CAPTION>
SALES PRICES
-----------------
HIGH LOW
------ ------
<S> <C> <C>
, 1995......................................... $ $
1994
4th Quarter................................................ 15.75 12.25
3rd Quarter................................................ 16.00 12.73
2nd Quarter................................................ 13.41 11.02
1st Quarter................................................ 11.81 10.45
1993
4th Quarter................................................ 12.73 10.45
3rd Quarter................................................ 12.95 10.68
2nd Quarter................................................ 11.48 9.89
1st Quarter................................................ 10.11 7.16
1992
4th Quarter................................................ 7.73 6.14
3rd Quarter................................................ 7.39 5.00
</TABLE>
COMPARISON OF STOCK PRICES
A Letter of Intent regarding the acquisition of FF Bancorp by First Bancorp
was signed on October 27, 1994, with public announcement of the merger proposal
being made on October 27, 1994. As of the first business day preceding public
announcement, the closing price of First Bancorp stock was $20.00 per share and
the closing price of FF Bancorp stock was $14.75 per share. Provided below is a
table comparing the market values of First Bancorp stock and FF Bancorp stock as
of the date preceding public announcement of the proposed merger.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
MARKET VALUE MARKET VALUE VALUE OF
PER PER FF BANCORP SHARE
FIRST BANCORP FF BANCORP ON EQUIVALENT
SHARE SHARE PER SHARE BASIS(1)
------------- ------------ ------------------
<S> <C> <C> <C>
As of October 26, 1994............... $ 20.00 $14.75 $16.50
</TABLE>
- ---------------
(1) Equivalent per share value was determined by multiplying the historical
market value per First Bancorp share by the exchange ratio of .825.
24
<PAGE> 32
FIRST BANCORP AND FF BANCORP
PRO FORMA CONDENSED COMBINED BALANCE SHEET INFORMATION
First Bancorp has entered into the Merger Plan with FF Bancorp which, if
consummated, would result in FF Bancorp becoming a subsidiary of First Bancorp.
Under the Merger Plan, the 4,680,818 outstanding common shares of FF Bancorp
will be exchanged for 3,861,675 shares of First Bancorp common stock.
Additionally, certain officers and employees of FF Bancorp have options to
purchase 84,397.5 additional shares of FF Bancorp common stock. It is
anticipated that 28,333.8 shares will be issued pursuant to such options which
are not exercisable after the acquisition of FF Bancorp, and that 56,063.7
options which are not required to be exercised prior to the acquisition will be
converted into options to acquire First Bancorp common stock at the .825
exchange ratio proposed for the exchange of outstanding FF Bancorp shares. For
purposes of the pro forma condensed combined balance sheet and statement of
income information, it is anticipated that the 28,333.8 shares to be issued
pursuant to options not exercisable after the merger will be exchanged for
23,375 shares of First Bancorp common stock. No cash, except cash to be paid for
fractional shares, will be offered in the transaction which will be accounted
for as a pooling-of-interests. The following unaudited pro forma combined
balance sheet information of First Bancorp and FF Bancorp at September 30, 1994
gives effect to the proposed acquisition of FF Bancorp. The pro forma condensed
combined balance sheet should be read in conjunction with the notes to the pro
forma financial statements and related financial statements of the respective
entities appearing elsewhere or incorporated by reference in this Proxy
Statement.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------------------------------------
FF BANCORP
FIRST FF PRO FORMA PRO FORMA
BANCORP BANCORP ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(AMOUNTS ARE PRESENTED IN THOUSANDS)
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash and due from banks................................... $ 86,910 $ 9,003 $ 98 (A) $ 96,011
Federal funds sold........................................ 23,950 1,100 -- 25,050
Interest-bearing deposits in other financial
institutions............................................ 22,301 72,023 -- 94,324
Investment securities available-for-sale.................. 518,462 18,090 -- 536,552
Investment securities held-to-maturity.................... 148,209 52,875 -- 201,084
Loans, net................................................ 1,374,291 417,318 -- 1,791,609
Premises and equipment, net............................... 56,755 10,066 -- 66,821
Other assets.............................................. 83,048 16,950 -- 99,998
---------- -------- ----------- ----------
Total assets..................................... $2,313,926 $597,425 $ 98 $2,911,449
========== ========= ========== ==========
Deposits.................................................. $1,897,135 $539,183 $ -- $2,436,318
Federal funds purchased, securities sold under agreements
to repurchase, and other short-term borrowings.......... 75,371 -- -- 75,371
Long-term debt............................................ 90,592 -- -- 90,592
Other liabilities......................................... 24,711 10,918 -- 35,629
---------- -------- ----------- ----------
Total liabilities................................ 2,087,809 550,101 -- 2,637,910
---------- -------- ----------- ----------
Common stock.............................................. 16,465 47 3,885 (B) 20,350
(48)(B)
1 (A)
Additional paid-in-capital................................ 66,410 20,197 97 (A) 82,781
(3,923)(B)
Retained earnings......................................... 151,691 26,470 -- 178,161
--
Stock held by Management Recognition Plan Trust........... -- (86) 86 (B) --
Net unrealized holding (losses) gains on investment
securities available for sale........................... (8,449) 696 -- (7,753)
---------- -------- ----------- ----------
Total shareholders' equity....................... 226,117 47,324 98 273,539
---------- -------- ----------- ----------
Total liabilities and shareholders' equity....... $2,313,926 $597,425 $ 98 $2,911,449
========== ========= ========== ==========
</TABLE>
25
<PAGE> 33
FIRST BANCORP AND FF BANCORP
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The following unaudited pro forma condensed combined statements of income
of First Bancorp and FF Bancorp for each of the years ended December 31, 1993,
1992 and 1991, and each of the nine month periods ended September 30, 1994 and
1993, give effect to the proposed acquisition of FF Bancorp for 3,885,050 shares
of First Bancorp common stock, and the completed acquisition of Barrow
Bancshares by First Bancorp on July 31, 1994. The acquisition of FF Bancorp will
be accounted for as a pooling-of-interests and hence all periods presented
reflect combined First Bancorp and FF Bancorp data. The acquisition of Barrow
Bancshares was accounted for as a pooling-of-interests. On February 28, 1994,
First Bancorp completed its acquisition of Metro Bancorp, and on April 8, 1994,
FF Bancorp completed its acquisition of Key Bancshares. Both acquisitions were
accounted for using the purchase method of accounting. The combined financial
position and results of operations of Metro Bancorp and Key Bancshares is not
significant to the combined financial position and results of operations of
First Bancorp and FF Bancshares and accordingly, the pro forma effects of Metro
Bancorp and Key Bancshares have not been included in the following pro forma
condensed combined statements of income. The pro forma condensed combined
statements of income should be read in conjunction with the notes to the pro
forma financial statements and separate financial statements and related notes
of the respective entities appearing elsewhere or incorporated herein by
reference in this Proxy Statement. The pro forma financial data has been
prepared based upon the historical financial statements of First Bancorp and FF
Bancorp appearing elsewhere or incorporated by reference in this Proxy
Statement, and there are no pro forma adjustments required for any of the
periods presented. These pro forma statements may not be indicative of the
results that actually would have occurred if the transactions had been in effect
on the dates indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- -------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
(AMOUNTS ARE PRESENTED IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FIRST FF PRO FORMA
BANCORP BANCORP COMBINED
-------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............... $119,576 $31,513 $151,089 $143,525 $190,870 $200,347 $222,027
Interest expense.............. 47,855 14,607 62,462 62,525 82,572 100,352 136,066
-------- ------- -------- -------- -------- -------- --------
Net interest
income............. 71,721 16,906 88,627 81,000 108,298 99,995 85,961
Provision for loan losses..... (136) -- (136) 2,838 3,162 12,295 10,874
Noninterest income............ 21,209 1,522 22,731 23,068 33,075 31,284 27,687
Noninterest expenses.......... 64,441 8,501 72,942 66,860 91,059 78,621 72,456
-------- ------- -------- -------- -------- -------- --------
Income before income taxes
and cumulative effect of
accounting change......... 28,625 9,927 38,552 34,370 47,152 40,363 30,318
Income tax expense............ 7,645 3,463 11,108 10,416 13,677 11,429 7,842
-------- ------- -------- -------- -------- -------- --------
Income before cumulative
effect of accounting
change.................... 20,980 6,464 27,444 23,954 33,475 28,934 22,476
Cumulative effect of
accounting change........... -- -- -- 984 984 -- --
-------- ------- -------- -------- -------- -------- --------
Net income........... $ 20,980 $ 6,464 $ 27,444 $ 24,938 $ 34,459 $ 28,934 $ 22,476
========= ======== ========= ========= ========= ========= =========
Net income per share based on
weighted average shares..... $ 1.36 $ 1.27 $ 1.74 $ 1.48 $ 1.15
========= ========= ========= ========= =========
Weighted average number of
outstanding shares.......... 20,243 19,703 19,768 19,566 19,516
========= ========= ========= ========= =========
</TABLE>
Columnar historical statement of income information for First Bancorp and
FF Bancorp individually for each period is not presented in the table above
since there are no adjustments which are applicable to the statements of income
and the information presented is simply a result of combined statement of income
numbers of each organization which are presented elsewhere in this Proxy
Statement.
26
<PAGE> 34
NOTES TO FIRST BANCORP AND FF BANCORP UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET INFORMATION AND STATEMENTS OF INCOME
The following notes describe the pro forma adjustments necessary to reflect
the proposed acquisition of FF Bancorp by First Bancorp. For purposes of the pro
forma financial information, it has been assumed that all of the 4,680,818
outstanding shares, at September 30, 1994, of FF Bancorp common stock, will be
acquired by First Bancorp for 3,861,675 shares of First Bancorp common stock.
Additionally, certain directors, officers and employees of FF Bancorp have
options to purchase 84,397.5 additional shares of FF Bancorp common stock. It is
anticipated that the options which are not exercisable after the merger will be
exercised prior to the acquisition of FF Bancorp, and those options which are
not required to be exercised prior to the acquisition will be converted into
options to acquire First Bancorp common stock at the same exchange ratio
proposed for outstanding FF Bancorp shares.
(A) Reflects the issuance of 28,333.8 shares of FF Bancorp common stock
from the exercise of outstanding options which are not exercisable
after the acquisition of FF Bancorp by First Bancorp.
(B) Reflects the acquisition of 4,709,151.8 shares, including 28,333.8
shares to be issued pursuant to options which are not exercisable after
the merger, of FF Bancorp common stock by First Bancorp and the
elimination of the common stock of FF Bancorp. Additionally, the FF
Bancorp stock held by the Management Recognition Plan Trust will be
distributed to the FF Bancorp management members and such plan will be
terminated at the date of acquisition by First Bancorp.
In December 1994, FF Bancorp increased its allowance for loan losses by
approximately $1.9 million and its allowance for losses on the disposition of
other real estate by approximately $250,000, relating to adoption of more
uniform loan loss reserve methodology in all three of its subsidiary banks and a
more stringent method of determining the allowance for loan and other real
estate losses by using a more standardized approach to grading loans as well as
using standard factors for calculating estimated losses on nonclassified loans.
In December 1994 FF Bancorp sold approximately $15,100,000 of fixed rate
mortgage-backed securities from its available-for-sale portfolio and
approximately $12,700,000 of fixed rate mortgage-backed securities from its
held-to-maturity portfolio at a combined pre-tax loss of approximately $600,000.
Additionally, management decided in December 1994 to reclassify as available for
sale approximately $31,500,000 of additional mortgage-backed securities and
certain other investment securities, previously classified as held-to-maturity.
In conjunction with the reclassification, FF Bancorp recorded an unrealized loss
of approximately $1,742,000, net of income taxes, as a direct reduction of
equity.
The unaudited pro forma condensed combined balance sheet of First Bancorp
and FF Bancorp at December 31, 1994 and the unaudited pro forma condensed
combined statements of income of First Bancorp and FF Bancorp for the year ended
December 31, 1994 appearing elsewhere in this Proxy Statement under the caption
"CONDENSED RECENT FINANCIAL INFORMATION (UNAUDITED)" reflect the effects of such
transactions.
27
<PAGE> 35
FF BANCORP
SELECTED FINANCIAL DATA
The selected consolidated financial data presented below for each of the
years in the five-year period ended December 31, 1993, other than the
information included under "other data" have been derived from the audited
consolidated financial statements of FF Bancorp. The selected consolidated
financial data for the nine-month periods ended September 30, 1994 and 1993,
other than the information included under "other data" have been derived from
unaudited financial statements but reflect, in the opinion of management of FF
Bancorp, all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the information set forth therein. Results for the
nine-month period ended September 30, 1994 are not necessarily indicative of
results to be expected for the entire year. The selected consolidated financial
data should be read in conjunction with the consolidated financial statements
and notes thereto and "FF BANCORP MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- ----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash, noninterest-earning.............. $ 9,003 $ 6,070 $ 7,644 $ 7,536 $ 5,652 $ 7,514 $ 7,450
Investments(1)......................... 95,795 82,842 103,586 97,893 62,264 46,342 57,055
Mortgage-backed securities............. 48,293 78,076 63,952 82,329 107,643 75,720 84,919
Loans, net............................. 417,318 351,947 353,756 339,757 354,259 366,657 365,704
All other assets....................... 27,016 22,576 15,923 20,967 22,755 22,064 22,530
---------- ---------- ---------- ---------- ---------- -------- --------
Total assets.................. $ 597,425 $ 541,511 $ 544,861 $ 548,482 $ 552,573 $518,297 $537,658
========== ========== ========== ========== ========== ========= =========
Deposit accounts....................... 539,183 486,984 490,041 501,096 517,985 497,284 498,407
Borrowed funds......................... -- 5,000 5,000 5,000 -- -- 19,630
All other liabilities.................. 10,918 9,759 7,543 7,670 6,515 4,951 3,854
Stockholders' equity................... 47,324 39,768 42,277 34,716 28,073 16,062 15,767
---------- ---------- ---------- ---------- ---------- -------- --------
Total liabilities and
stockholders' equity........ $ 597,425 $ 541,511 $ 544,861 $ 548,482 $ 552,573 $518,297 $537,658
========== ========== ========== ========== ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income.................. $ 31,513 $ 30,104 $ 39,746 $ 43,874 $ 48,063 $ 48,921 $ 50,150
Total interest expenses................ 14,607 14,928 19,651 25,398 36,599 38,977 41,871
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income.................... 16,906 15,176 20,095 18,476 11,464 9,944 8,279
Provision for loan losses.............. -- 177 177 1,011 859 1,096 3,027
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income after provision for
loan losses.......................... 16,906 14,999 19,918 17,465 10,605 8,848 5,252
Noninterest income..................... 1,522 890 1,198 1,059 1,381 1,054 499
Noninterest expenses................... 8,501 7,257 9,877 9,676 8,907 8,842 8,751
---------- ---------- ---------- ---------- ---------- -------- --------
Earnings before provision for income
taxes and cumulative effect of change
in accounting principle.............. 9,927 8,632 11,239 8,848 3,079 1,060 (3,000)
Provisions for income taxes............ 3,463 3,252 4,258 3,320 1,173 764 (417)
---------- ---------- ---------- ---------- ---------- -------- --------
Earnings (loss) before cumulative
effect of changes in accounting
principle............................ 6,464 5,380 6,981 5,528 1,906 296 (2,583)
Cumulative effect of changes in
accounting principle................. -- 824 824 -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net earnings (loss).................... $ 6,464 $ 6,204 $ 7,805 $ 5,528 $ 1,906 $ 296 $ (2,583)
========== ========== ========== ========== ========== ========= =========
</TABLE>
28
<PAGE> 36
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings per share:(2)(3)
Earnings before cumulative effect of
change in accounting principle..... $ 1.44 $ 1.17 $ 1.50 $ 1.24 $ .28 $ -- $ --
Cumulative effect of change in
accounting principle............... -- .18 .18 -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net earnings....................... $ 1.44 $ 1.35 $ 1.68 $ 1.24 $ .28 $ -- $ --
========== ========== ========== ========== ========== ========= =========
Weighted average number of shares
outstanding.......................... 4,478,957 4,605,160 4,637,287 4,445,862 3,795,000 -- --
========== ========== ========== ========== ========== ========= =========
</TABLE>
OTHER DATA
<TABLE>
<CAPTION>
AT OR FOR
THE NINE MONTHS
ENDED SEPTEMBER 30, AT OR FOR YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets.................... 1.48% 1.51% 1.43% 1.01% 0.34% 0.06% (0.74)%
Return on average equity.................... 19.40 22.10 20.50 17.74 8.52 1.74 (14.76)
Dividend payout ratio....................... 27.71 24.91 25.96 23.90 19.36 -- --
Average equity to average assets ratio...... 7.63 6.85 6.96 5.68 4.08 3.21 3.21
Interest rate spread during the period(4)... 3.88 3.81 3.71 3.40 2.15 2.02 1.55
Net yield on average interest-earning
assets.................................... 4.05 3.93 3.87 3.54 2.20 1.99 1.59
Noninterest expenses to average assets...... 1.95 1.77 1.81 1.77 1.62 1.67 1.61
Ratio of average interest-earning assets to
average interest-bearing liabilities...... 1.05 1.03 1.04 1.03 1.01 1.00 1.01
Nonperforming loans and real estate owned as
a percentage of total assets.............. 1.51 1.58 1.25 2.30 2.92 3.12 3.42
Allowance for loan losses as a percentage of
nonperforming loans....................... 147.92 139.72 133.97 103.07 32.23 37.00 40.55
Total shares outstanding at end of
period(5)(6).............................. 4,680,818 4,416,536 4,367,728 4,341,322 3,795,000 -- --
Book value per share (5)(6)(7).............. $10.11 $9.96 $9.72 $8.06 $7.49 -- --
Dividends declared per share(5)(6).......... .39 .35 .45 .30 .05 -- --
</TABLE>
- ---------------
(1) Includes interest-earning balances in other banks, federal funds sold, U.S.
government and agency obligations, FHLB Stock and marketable equity
securities.
(2) FF Bancorp's Thrift Subsidiaries were mutual institutions during the year,
therefore, earnings per share is not applicable.
(3) Earnings per share for 1991 includes only the earnings of New Smyrna Bank
from July 1, 1991, the date the institution completed its conversion from
mutual to stock institution.
(4) Difference between weighted average yield on all interest-earning assets and
weighted average rate on all interest-bearing liabilities.
(5) The Board of Directors approved a three for one stock split effective July
26, 1993, all per share amounts reflect this split.
(6) The Board of Directors approved a 10% stock dividend declared July 18, 1994;
all per share amounts reflect this dividend.
(7) Book value per share is not presented for periods prior to 1991 since there
was no outstanding common stock in prior years.
29
<PAGE> 37
FIRST BANCORP AND FF BANCORP
PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following table sets forth unaudited pro forma combined selected
financial data of First Bancorp and FF Bancorp for each of the years ended
December 31, 1993, 1992 and 1991 and for the nine-month period ended September
30, 1994, assuming the merger is consummated and accounted for under the
pooling-of-interests method. The data reflects, in the opinion of management of
First Bancorp, the information necessary to present fairly the pro forma
information set forth herein. The pro forma combined selected financial data
should be read in conjunction with the consolidated financial statements and
notes thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" of both First Bancorp and FF Bancorp appearing
elsewhere or incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ------------------------------------
1994 1993 1992 1991
---------------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C> <C>
Cash, noninterest-earning.................... $ 96,011 $ 94,039 $ 73,031 $ 70,732
Investments.................................. 857,010 817,360 802,862 695,215
Loans, net................................... 1,791,609 1,638,777 1,566,601 1,541,843
All other assets............................. 166,819 136,480 134,156 135,191
---------------- ---------- ---------- ----------
Total assets....................... $2,911,449 $2,686,656 $2,576,650 $2,442,981
============ ========= ========= =========
Deposit accounts............................. 2,436,318 2,254,473 2,222,659 2,113,270
Borrowed funds............................... 165,963 140,144 104,268 105,080
All other liabilities........................ 35,629 31,702 20,262 18,680
Stockholders' equity......................... 273,539 260,337 229,461 205,951
---------------- ---------- ---------- ----------
Total liabilities and stockholders'
equity........................... $2,911,449 $2,686,656 $2,576,650 $2,442,981
============ ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED DECEMBER 31,
ENDED SEPTEMBER 30, ---------------------------------------
1994 1993 1992 1991
------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total interest income.................. $ 151,089 $ 190,870 $ 200,347 $ 222,027
Total interest expense................. 62,462 82,572 100,352 136,066
------------------- ----------- ----------- -----------
Net interest income.................... 88,627 108,298 99,995 85,961
Provision for loan losses.............. (136) 3,162 12,295 10,874
------------------- ----------- ----------- -----------
Net interest after provision for loan
losses............................... 88,763 105,136 87,700 75,087
Noninterest income..................... 22,731 33,075 31,284 27,687
Noninterest expenses................... 72,942 91,059 78,621 72,456
------------------- ----------- ----------- -----------
Earnings before provision for income
taxes and cumulative effect of change
in accounting principle.............. 38,552 47,152 40,363 30,318
Provisions for income taxes............ 11,108 13,677 11,429 7,842
------------------- ----------- ----------- -----------
Earnings (loss) before cumulative
effect of change in accounting
principle............................ 27,444 33,475 28,934 22,476
Cumulative effect of change in
accounting principle................. -- 984 -- --
------------------- ----------- ----------- -----------
Net earnings (loss).................... $ 27,444 $ 34,459 $ 28,934 $ 22,476
=============== ========== ========== ==========
Net earnings per share................. $ 1.36 $ 1.74 $ 1.48 $ 1.15
=============== ========== ========== ==========
Dividends declared per share........... $ .58 $ .71 $ .64 $ .55
=============== ========== ========== ==========
Weighted average number of shares
outstanding.......................... 20,243,000 19,768,000 19,566,000 19,516,000
=============== ========== ========== ==========
</TABLE>
30
<PAGE> 38
THE PROPOSED MERGER
THE AGREEMENT AND PLAN OF MERGER
Reference is made to a copy of the Merger Plan set forth in full as
Appendix A hereto for a complete statement of terms of the proposed merger. The
statements contained herein with respect to the Merger Plan are qualified in
their entirety by reference to Appendix A.
DESCRIPTION OF THE MERGER
The Boards of Directors of First Bancorp and FF Bancorp have determined
that it is desirable for First Bancorp and FF Bancorp to enter into the Merger
Plan whereby First Bancorp will acquire FF Bancorp in exchange for First Bancorp
shares in a forward triangular merger.
If the Merger Plan is approved, each outstanding share of common stock of
FF Bancorp will be converted into .825 shares of common stock of First Bancorp.
Under the Merger Plan, First Bancorp has the right to split its stock or to
issue stock dividends prior to the consummation of the merger. The Merger Plan
provides that in such event the number of shares to be issued to FF Bancorp
shareholders will be adjusted proportionately to give the FF Bancorp
shareholders the benefit of any such stock split or stock dividend. First
Bancorp currently has no plans to declare any stock split or stock dividend
prior to consummation of the transactions contemplated by the Merger Plan.
If the Merger Plan is approved by the shareholders of FF Bancorp and by all
regulatory authorities required to approve the merger, then upon consummation of
the merger, FF Bancorp will be merged into FNB Subsidiary, a wholly-owned
subsidiary of First Bancorp, in a forward triangular merger, with First Bancorp
thereby acquiring FF Bancorp in exchange for First Bancorp common stock. Such
merger will be pursuant to the applicable provisions of the Florida Business
Corporation Act (Chapter 607, Florida Statutes (1993)). The articles of
incorporation of FNB Subsidiary will be the articles of incorporation of the
surviving corporation, except the name of the surviving corporation will be
changed to "FF Bancorp Inc." as a result of the merger. The bylaws of FNB
Subsidiary will be the bylaws of the surviving corporation. The corporate
existence of FF Bancorp will end when it is merged into FNB Subsidiary as the
surviving corporation. FNB Subsidiary, as the surviving corporation in the
merger, will continue to be a wholly-owned subsidiary of First Bancorp.
It is contemplated that the established offices and facilities of the FF
Subsidiaries immediately prior to the merger will remain the established offices
and facilities of the FF Subsidiaries, and that the officers, directors, and
employees of the FF Subsidiaries will continue to be the officers, directors,
and employees of the FF Subsidiaries, except that Frances R. Ford, Chairman of
the Board and President of FF Bancorp, has informed First Bancorp that she
intends to retire and resign from her positions with the FF Subsidiaries in
1995.
All rights, privileges, immunities, powers and franchises of FF Bancorp and
FNB Subsidiary in and to every type of property, real, personal and mixed, and
choses in action will be vested in FNB Subsidiary as the surviving corporation
by virtue of the merger without any deed or other transfer. All property, real,
personal and mixed, including all choses in action, all debts due on whatever
account and all and every other interest or right belonging to or due to each of
the merging corporations including all liens, mortgages, security interests and
properties held as collateral for debts owed such organizations will be vested
in FNB Subsidiary as the surviving corporation without further act or deed; the
title to any real estate, or interest therein, vested in either of the merging
corporations will not revert or be in any way impaired by reason of the merger;
and FNB Subsidiary as the surviving corporation will, thenceforth, be
responsible and liable for all of the liabilities and obligations of FF Bancorp
and FNB Subsidiary. After the merger, FNB Subsidiary will continue to be a
wholly-owned subsidiary of First Bancorp.
If the Merger Plan is approved and consummated, First Bancorp will own
eighteen subsidiary commercial banks: First National Bank of Jackson County;
First National Bank of Habersham; The First National Bank of Gainesville;
Granite City Bank; Bank of Clayton; First National Bank of White County;
31
<PAGE> 39
The Citizens Bank, Toccoa; Bank of Banks County; First National Bank of Gilmer
County; The Peoples Bank of Forsyth County; Pickens County Bank; First National
Bank of Paulding County; Citizens Bank, Ball Ground, Georgia; Bank of Villa
Rica; The Community Bank of Carrollton; The Commercial Bank, Douglasville,
Georgia; Barrow Bank & Trust Company, Winder, Georgia; and Key Bank (through FNB
Subsidiary and Key Bancshares). First Bancorp will also own (through FNB
Subsidiary) two federal savings banks: New Smyrna Bank and Citrus Bank.
REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of FF Bancorp has approved the Merger Plan and
recommends that the shareholders of FF Bancorp vote in favor of its approval.
In deciding to approve and recommend the Merger Plan, the FF Bancorp Board
of Directors considered a number of factors, including among others, that the
exchange ratio was fair, that the exchange would be tax-free, that continuing
changes in corporate management presented an opportunity for new management to
rely on First Bancorp's experienced management, that FF Bancorp had not reached
the necessary size and strength to earn, grow, and compete effectively in the
future and that the proposed merger would create a company with the necessary
size and strength, that the personnel policies of First Bancorp would be
beneficial to FF Bancorp's employees, that the communities served by the FF
Banking Subsidiaries would benefit from First Bancorp's philosophy of allowing
its subsidiaries to serve their communities in their individual styles, and
finally that the probability of finding a suitable alternative merger candidate
was low. All factors were considered important and no relative or specific
weights were assigned to them.
The Board of Directors of FF Bancorp believes that the proposed exchange
ratio of .825 shares of First Bancorp stock for each share of FF Bancorp stock,
which was negotiated at arms-length, is fair to the shareholders of FF Bancorp.
In assessing the fairness of the exchange ratio, the Board examined the
financial condition and historical performance of First Bancorp and FF Bancorp,
the historical trading prices of First Bancorp stock (and the historical trading
prices for FF Bancorp stock), the dividend payment history of First Bancorp and
FF Bancorp, and other information. Based on that information and its analysis,
the Board concluded that the value of the exchange of .825 First Bancorp shares
for each share of outstanding common stock of FF Bancorp, represented a fair
multiple of the book value, market value and earnings per share of FF Bancorp
stock. The Board has obtained an independent opinion from PBS concerning the
fairness of the exchange ratio. See the subsection entitled "Opinion of
Financial Advisor" immediately following this subsection. See "PER SHARE
INFORMATION", "MARKET AND STOCK PRICE" and other financial information appearing
elsewhere in this Proxy Statement.
The Board of Directors of FF Bancorp believes that the proposed merger will
offer the shareholders of FF Bancorp the opportunity to continue their
investment in FF Bancorp through their investment in First Bancorp, while
enhancing the geographic diversity of that investment. Shareholders of FF
Bancorp currently own an equity interest in a $597 million asset multiple
savings and loan and one-bank holding company operating in three counties in
Florida. Following the proposed merger, the shareholders will own an equity
investment in a $2.9 billion asset multiple bank and savings and loan holding
company operating 18 commercial banks and two savings and loan associations
across North Georgia and Central Florida.
The proposed Merger Plan allows shareholders of FF Bancorp to exchange
their current equity interest for common stock of First Bancorp without
recognizing income for federal income tax purposes. Income would be recognized
upon a subsequent sale of the First Bancorp stock received if the sales price
exceeds the shareholder's tax basis in the stock sold. See "FEDERAL INCOME TAX
CONSEQUENCES."
The Board of Directors viewed favorably the enhanced investment liquidity
offered by the proposed Merger Plan. FF Bancorp common stock, like the common
stock of First Bancorp, is traded on the NASDAQ/National Market System. Subject
to certain restrictions applicable to affiliates, the stock of First Bancorp
after the merger should generally be more marketable, with a wider market, than
the stock of FF Bancorp alone. See "MARKET AND STOCK PRICE INFORMATION."
32
<PAGE> 40
First Bancorp's business philosophy emphasizes local management of its
subsidiary banks under the direction of a board of directors comprised primarily
of local citizens. Following the proposed merger the FF Banking Subsidiaries
anticipate that no significant changes will be made to the management or board
of directors of the FF Banking Subsidiaries (except Frances R. Ford, Chairman of
the Board and President of FF Bancorp, has informed First Bancorp that she
intends to retire and resign her positions with the FF Banking Subsidiaries
after the merger). Banking decisions will continue to be made locally.
Centralization of certain non-retail functions and access to greater financial
and other resources of the First Bancorp organization should allow the FF
Banking Subsidiaries to deliver more efficiently a greater array of banking
services than currently offered.
THE BOARD OF DIRECTORS OF FF BANCORP RECOMMENDS THAT FF BANCORP
SHAREHOLDERS VOTE FOR THE MERGER PLAN.
OPINION OF FINANCIAL ADVISOR
Professional Bank Services, Inc. ("PBS") was engaged by FF Bancorp, to
advise the FF Bancorp Board of Directors as to the fairness of the
consideration, from a financial perspective, to be paid by First Bancorp to FF
Bancorp shareholders under the Merger Plan. PBS is a bank consulting firm with
offices in Louisville, Nashville, Washington, D.C., and Ocala, Florida. As part
of its investment banking business, PBS is regularly engaged in reviewing the
fairness of financial institution acquisition transactions from a financial
perspective and in the valuation of financial Institutions and other businesses
and their securities in connection with mergers, acquisitions, estate
settlements, and other transactions. Neither PBS nor any of its affiliates has a
material financial interest in FF Bancorp or First Bancorp. PBS was selected to
advise the FF Bancorp Board of Directors based upon its familiarity with Florida
financial institutions and its knowledge of the banking industry as a whole.
PBS performed certain analyses described below and discussed the range of
values for FF Bancorp resulting from such analyses with the Board of Directors
of FF Bancorp in connection with its advice as to the fairness of the
consideration to be paid by First Bancorp.
A fairness opinion of PBS was delivered to the Board of Directors of FF
Bancorp on December 16, 1994, at a regular meeting of the Board of Directors. A
copy of the fairness opinion, is attached as Appendix B to this Proxy Statement
and should be read in its entirety.
In arriving at its fairness opinion, PBS reviewed certain publicly
available business and financial information relating to FF Bancorp and First
Bancorp. PBS considered certain financial and stock market data of FF Bancorp
and First Bancorp, compared that data with similar data for certain other
publicly-held bank holding companies which own Florida financial institutions,
and considered the financial terms of certain other comparable Florida thrift
transactions that had recently been effected. PBS also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant. In connection with its
review, PBS did not independently verify the foregoing information and relied on
such information as being complete and accurate in all material respects.
Financial forecasts prepared by PBS were based on assumptions believed by PBS to
be reasonable and to reflect currently available information. PBS did not make
an independent evaluation or appraisal of the assets of FF Bancorp or First
Bancorp.
PBS was not requested to, and did not, solicit third party indications of
interest in acquiring all or any part of FF Bancorp. PBS reviewed the
correspondence and information regarding the 14 financial institutions contacted
regarding their interest in a merger or acquisition of FF Bancorp. All the
institutions contacted by FF Bancorp are located in Florida, have an extensive
market presence in Florida or have publicly expressed an interest in expanding
to Florida.
As part of preparing the fairness opinion, PBS performed a due diligence
review of First Bancorp. As part of the due diligence, PBS reviewed minutes of
Board of Directors and all Board Committees of First Bancorp for 1992, 1993, and
1994 to date of the fairness opinion; minutes of Board of Directors and all
Board Committees of The First National Bank of Gainesville (the "Bank") for
1992, 1993, and 1994 to date of the
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fairness opinion; reports filed with the Securities and Exchange Commission by
First Bancorp on Forms 10-K, 10-Q and 8-K for the year ending December 31, 1992
throughout 1993 and 1994 to date of the fairness opinion; reports of independent
auditors for the years ending December 31, 1992 and 1993; management letters
from independent auditors for 1992 and 1993 and management's responses thereto;
problem loan list for First Bancorp and the Bank as of December 31, 1993 and any
subsequent reports; analysis and calculation of the Allowance for Loan and Lease
Losses as of December 31, 1992 and 1993 and any subsequent analysis for First
Bancorp and the Bank; internal loan review reports issued in 1993 and 1994 to
date; internal audit reports issued in 1993 and 1994 to date; and charter and
bylaws of First Bancorp and of the Bank.
PBS also interviewed senior management, external auditors and general
counsel of First Bancorp regarding operations, performance and the future
prospects of First Bancorp. PBS compared the historical common stock market of
financial institutions headquartered in the Southeast Region of the United
States to First Bancorp.
PBS also performed a due diligence review of FF Bancorp. The due diligence
included a review of Minutes of the Board of Directors and all Board Committees
of FF Bancorp and New Smyrna Bank, reports filed with the Securities and
Exchange Commission by FF Bancorp on Forms 10-K, 10-Q and 8-K, reports of
independent auditors for the years ending December 31, 1992 and 1993, loan data
and 1995 budgets for New Smyrna Bank, Citrus Bank and Key Bank. PBS also
interviewed senior management, external auditors and special legal counsel.
Based on the analyses and studies performed by PBS, certain observations
were noted that influenced the value received in the proposed merger with First
Bancorp. FF Bancorp's affiliates are located considerable distance from each
other. It was very difficult to locate a potential merger partner whose
geographic needs were met by FF Bancorp. Due to anti-trust and anti-competitive
factors, certain affiliates or branches would have to be divested in order to
consummate a merger with certain institutions.
Chairman Ford plans to retire in 1995 and other members of management plan
to retire in the near future.
Recent expansion activities (the acquisitions of Citrus Bank and Key Bank)
present challenges in the future for FF Bancorp. The subsidiaries are run
autonomously with no central management information systems. A significant
increase in overhead expense can be expected in the future due to centralization
of systems and procedures. Intermediate earnings are expected to decline due to
increasing market interest rates and a flattening of the yield curve in relation
to the matching of interest sensitive assets and liabilities of FF Bancorp.
Overhead expense is expected to increase due to Management needs and development
of controls and systems for the affiliated institutions.
In connection with rendering the fairness opinion and preparing its various
written and oral presentations to FF Bancorp's Board of Directors, PBS performed
a variety of financial analyses, including those summarized below. The summary
set forth below does not purport to be a complete description of the analyses
performed by PBS in this regard. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized below, PBS believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors could create an incomplete view of
the evaluation process underlying its opinion. In performing its analyses, PBS
made numerous assumptions with respect to industry performance, business and
economic, conditions and other matters, many of which are beyond FF Bancorp's or
First Bancorp's control. The analyses performed by PBS are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable then suggested by such analyses. In addition, analyses
relating to the values of businesses do not purport to be appraisals or to
reflect the process by which businesses actually may be sold.
PBS performed an acquisition comparison analysis. In performing this
analysis, PBS reviewed 32 Florida thrift and thrift holding company acquisition
transactions announced since 1990. The purpose of the analysis
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was to obtain an evaluation range based on these Florida acquisition
transactions. Multiples of earnings and book value implied by the comparable
transactions were utilized in obtaining a range for the acquisition value of FF
Bancorp. In addition to reviewing recent Florida thrift transactions, PBS
performed separate comparable analyses for acquisitions of Florida thrifts
which, like FF Bancorp, had a return on equity ratio of greater than 12%. The
median acquisition values for the 32 Florida thrift acquisitions, expressed as
multiples of both book value and earnings were 1.55 and 15.2, respectively. The
multiples of book value and earnings for acquisitions of Florida thrifts with
return on equity ratios greater than 12% were 1.61 and 13.0, respectively. Based
on the market value of First Bancorp common stock of $17.50 as of December 16,
1994, the pro forma market value per share of FF Bancorp common stock is $14.44
or 1.44 times book value and 8.4 times earnings. At the announcement date First
Bancorp's common stock price was $20.00 per share which equals $16.50 per FF
Bancorp common share. This represents a multiple of book value and a multiple of
earnings of 1.65 and 9.6, respectively.
At the announcement date the proposed value to be received by FF Bancorp
was in the 60th percentile for Florida transactions as measured by a multiple of
book value and in the 15th percentile as measured by the price earnings ratio.
At December 16, 1994 the offer was in the 35th percentile based on multiple of
book value and 15th percentile based on a multiple of earnings. Based on Florida
transactions with a return on equity greater than 12% at the announcement date,
the value per share to be received was in the 64th percentile based on book
value and 45th percentile based on earnings and at December 16, 1994 the value
was in the 18th percentile based on the multiple of book value and 36th
percentile based on a multiple of earnings.
The return on equity ratio of FF Bancorp was greater than 19% in 1994. An
analysis was performed of Southeast thrift organizations which sold since 1990
and compared the multiple of book value and multiple of earnings ratios to the
value to be received by FF Bancorp shareholders. The Southeast region included
thrifts located in Florida, North Carolina, Georgia, Alabama and Tennessee. The
median multiple of book value for this list of comparable institutions was 1.52
and the multiple of earnings was 9.26. The proposed value to be received by the
shareholders of FF Bancorp was in the 67th percentile based on book value
multiples and the 53rd percentile based on earnings multiples at the
announcement date and in the 40th percentile at December 16, 1994 on both a
multiple of book and earnings bases.
PBS also performed a discounted earnings analysis. A dividend discount
analysis was performed by PBS pursuant to which a range of stand-alone values of
FF Bancorp was determined by adding (i) the present value of estimated future
dividend streams that FF Bancorp could generate over a five-year period
beginning in 1995 and ending in 1999, and (ii) the present value of the
"terminal value" of FF Bancorp's common equity at the end of 1999. The "terminal
value" of FF Bancorp's common equity at the end of the five-year period was
determined by applying a multiple of 1.52 times the projected terminal year's
book value. The 1.52 multiple represents the median price paid as a multiple of
book value for all thrifts located in the Southeast with return on equity ratios
greater than 15% since 1990. Dividend streams and terminal values were
discounted to present values using a discount rate of 14%. This rate reflects
assumptions regarding the required rate of return of holders or buyers of FF
Bancorp common stock. The value of FF Bancorp, determined by adding the present
value of the total cash flows, was $13.39 per FF Bancorp share, which is less
than the proposed exchange value as of the announcement date and as of December
16, 1994.
PBS also performed a pro forma merger analysis. PBS compared the historical
performance of FF Bancorp to that of First Bancorp and other regional bank
holding companies. This included, among other things, a comparison of
profitability, asset quality and capital adequacy measures. In addition, the
contribution of both FF Bancorp and First Bancorp to the income statement and
balance sheet of the pro forma combined company was analyzed.
The effect of the merger on the historical and pro forma financial date of
First Bancorp, as well as the projected financial data prepared by PBS, was
analyzed. First Bancorp's historical financial data was compared to pro forma
combined historical and projected earnings and book value per share as well as
other measures of profitability, capital adequacy, and credit quality. Pro forma
shareholders' equity per share of FF Bancorp will increase approximately 10%.
Earnings per share based on trailing four quarter earnings will decrease
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approximately 12%; however, projected pro forma earnings per share are expected
to increase. Pro forma dividends per share will increase approximately 14%.
The fairness opinion is directed only to the question of whether the
consideration to be received by FF Bancorp's shareholders under the Merger Plan
is fair and equitable from a financial perspective and does not constitute a
recommendation to any FF Bancorp shareholder to vote in favor of the merger. No
limitations were imposed on PBS regarding the scope of its investigation or
otherwise by FF Bancorp or any of its affiliates.
Based on the results of the various analyses described above, PBS concluded
that the consideration to be received by FF Bancorp shareholders under the
Merger Plan is fair and equitable from a financial perspective.
PBS will receive a fee not to exceed $40,000 from FF Bancorp for all of its
services performed in connection with the merger, including rendering the
fairness opinion. In addition, FF Bancorp has agreed to indemnify PBS and its
directors, officers and employees, from liability in connection with the merger,
and to hold PBS harmless from any losses, actions, claims, damages, expenses or
liabilities related to any of PBS' acts or decisions made in good faith and in
the best interest of FF Bancorp.
CONVERSION OF FF BANCORP STOCK
Upon consummation of the merger, each of the outstanding shares of common
stock of FF Bancorp will be converted into .825 shares of fully paid and
non-assessable common stock of First Bancorp. Please refer to the preceding
section entitled "Reasons for the Merger" for a discussion of how stock values
and prices were arrived at for FF Bancorp and First Bancorp stock. Of course,
First Bancorp and FF Bancorp share prices are subject to market fluctuations.
See "MARKET AND STOCK PRICE INFORMATION".
Owners of five percent or more of FF Bancorp common stock and the FF
Bancorp directors and officers who are shareholders of FF Bancorp will receive
First Bancorp common stock on the same basis as other shareholders of FF
Bancorp. Assuming consummation of the merger and receipt by FF Bancorp
shareholders of .825 First Bancorp shares for each share of FF Bancorp stock, FF
Bancorp shareholders would receive a maximum of 3,885,050 First Bancorp shares,
which would be approximately 19.1% of the shares of First Bancorp common stock
outstanding immediately after consummation of the Merger Plan. See "Description
of the Merger."
IF THE MERGER PLAN IS APPROVED, EACH SHARE OF FF BANCORP COMMON STOCK WILL
BE CONVERTED INTO .825 SHARES OF FIRST BANCORP COMMON STOCK AS A RESULT OF THE
MERGER.
FRACTIONAL SHARES
No fractional shares will be issued. Any shareholder who would be entitled
to a fraction of a First Bancorp share will receive a cash payment in lieu of
such fractional share in an amount determined by multiplying the fraction of a
share he would otherwise be entitled to receive by $20.50.
CLOSING DATE OF THE MERGER
The "Closing Date" of the merger will be the date that the appropriate
documents to consummate the merger ("Closing Documents") are delivered or filed
as required by law or on such later date as the Closing Documents may specify.
The Closing Documents will be delivered or filed on a date that is selected by
First Bancorp that is not later than the end of the month during which the later
of the following occurs: (i) the expiration date of any applicable waiting
period in connection with approvals of governmental authorities and (ii) the
receipt of all other required approvals, or on such later date as may be agreed
upon by the parties. Under the Merger Plan the Closing Date shall not be later
than August 31, 1995. The parties may, however, further extend the Closing Date
by mutual consent. The Closing Date will be the effective date of the merger.
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MANNER OF SURRENDERING FF BANCORP STOCK
After the effective date of the merger, each holder of a certificate or
certificates representing shares of common stock of FF Bancorp will surrender
such certificates to First Bancorp, and will receive in exchange a certificate
representing the number of shares of First Bancorp stock into which such FF
Bancorp shares have been converted at the conversion ratio set forth in this
Proxy Statement and in the Merger Plan and a First Bancorp check in payment for
any fractional share of First Bancorp stock. After the effective date, until
surrendered, each FF Bancorp certificate shall be deemed for all corporate
purposes to evidence the number of whole shares of First Bancorp common stock
into which the FF Bancorp stock represented by such certificate shall have been
converted, and such certificates, as between the holders and First Bancorp shall
evidence the holder's right to receive First Bancorp stock certificates in
accordance with the Merger Plan.
PLEASE NOTE, HOWEVER, THAT FIRST BANCORP STOCK CERTIFICATES WILL NOT BE
DISTRIBUTED TO FF BANCORP SHAREHOLDERS UNTIL THEIR FF BANCORP CERTIFICATES HAVE
BEEN SURRENDERED TO FIRST BANCORP, AND DIVIDENDS OR OTHER DISTRIBUTIONS PAYABLE
TO FF BANCORP SHAREHOLDERS IN RESPECT OF FIRST BANCORP STOCK INTO WHICH FF
BANCORP STOCK HAS BEEN CONVERTED UNDER THE MERGER PLAN WILL BE RETAINED, WITHOUT
INTEREST, FOR THE ACCOUNT OF SUCH SHAREHOLDERS AND WILL NOT BE PAID UNTIL THEIR
FF BANCORP CERTIFICATES HAVE BEEN SURRENDERED IN EXCHANGE FOR FIRST BANCORP
CERTIFICATES. NO INTEREST WILL BE PAYABLE ON CASH PAYMENTS TO WHICH FF BANCORP
SHAREHOLDERS MAY BE ENTITLED, EITHER BEFORE OR AFTER THE EFFECTIVE DATE UNLESS
SUCH CASH PAYMENTS ARE WITHHELD DUE TO THE NEGLIGENCE OR BAD FAITH OF FIRST
BANCORP.
ISSUANCE OF FIRST BANCORP SHARES
Subject to the terms and conditions of the Merger Plan, First Bancorp will
issue to each FF Bancorp shareholder after the effective date of the merger,
upon surrender of his FF Bancorp stock certificates to First Bancorp accompanied
by properly completed and signed endorsements and transmittal instructions,
certificates representing shares of First Bancorp stock in accordance with the
Merger Plan.
SOURCE OF FUNDS
Consummation of the transaction will be almost entirely a stock for stock
exchange with the only cash payments required being those for fractional shares.
First Bancorp will pay these amounts from internal funds. FF Bancorp currently
does not have any long-term debt outstanding, and therefore no long-term debt of
FF Bancorp will be assumed or paid off by First Bancorp or FNB Subsidiary in the
merger.
SHAREHOLDER APPROVAL
Consummation of the Merger Plan requires the affirmative vote of the
holders of at least a majority of the outstanding shares of common stock of FF
Bancorp. Approval of the shareholders of First Bancorp is not required.
CONDITIONS OF CERTAIN OBLIGATIONS OF FF BANCORP
Under the Merger Plan, the obligation of FF Bancorp to consummate and
effect the merger contemplated by the Merger Plan is subject to the satisfaction
of certain conditions, including the following:
(a) There shall have been issued an opinion of Stewart, Melvin &
Frost, counsel to First Bancorp, in form and substance reasonably
satisfactory to FF Bancorp, to the effect that, under applicable provisions
of the Internal Revenue Code of 1986, as amended, no gain or loss will be
recognized for federal income tax purposes by FF Bancorp, First Bancorp or
the shareholders of FF Bancorp to the extent that they receive only stock
of First Bancorp in connection with the proposed merger. The opinion will
not state that cash received in exchange for fractional shares will be
nontaxable.
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(b) As of the date of the merger, there shall have occurred no
material adverse change in the financial condition or results of operations
of First Bancorp from that represented in the consolidated unaudited
financial statements of First Bancorp as of September 30, 1994, which were
provided to FF Bancorp prior to execution of the Merger Plan, and there
shall not have occurred any loss or damage to any of First Bancorp's
properties or assets which would materially impair its ability to conduct
its business after the merger as it is now being conducted.
(c) The representations of First Bancorp contained in the Merger Plan
shall be true in all material respects as of the date of the merger.
(d) A preliminary fairness opinion shall have been received by FF
Bancorp from Professional Bank Services, Inc. ("PBS") prior to the
distribution of this Proxy Statement to FF Bancorp shareholders, to the
effect that the consideration to be received by FF Bancorp shareholders
pursuant to paragraph II of the Merger Plan is fair to the shareholders
from a financial point of view and such opinion shall not have been
withdrawn or materially modified prior to the vote of the shareholders. In
addition, FF Bancorp shall have received a confirmation of the fairness
opinion from PBS, dated not more than 20 days nor less than 10 days from
the date of the merger, that the consideration to be received by FF Bancorp
shareholders is still fair to the shareholders as of the date of the
confirmation.
CONDITIONS OF CERTAIN OBLIGATIONS OF FIRST BANCORP
Under the Merger Plan, the obligations of First Bancorp and FNB Subsidiary
to consummate and effect the merger contemplated by the Merger Plan are subject
to the satisfaction of certain conditions, including the following:
(a) The representations of FF Bancorp contained in the Merger Plan
shall be true in all material respects as of the date thereof and as of the
time of the merger.
(b) FF Bancorp shall have performed all agreements and covenants
required by the Merger Plan to be performed by it at or prior to the
merger.
(c) As of the proposed date of the merger, there shall have occurred
no material adverse change in the financial condition or results of
operations of FF Bancorp and the Florida Subsidiaries, taken as a whole,
from that presented in the unaudited financial statements of FF Bancorp and
the Florida Subsidiaries as of September 30, 1994, which were provided to
First Bancorp prior to execution of the Merger Plan, and there shall not
have occurred any loss or damage to any of their properties or assets,
taken as a whole, which would materially adversely affect their financial
condition, taken as a whole, or impair their ability to conduct their
businesses, taken as a whole, after the merger as now being conducted.
(d) First Bancorp shall have received an opinion of KPMG Peat Marwick
LLP in form and substance reasonably satisfactory to the Board of Directors
of First Bancorp to the effect that the transactions contemplated by the
Merger Plan may be accounted for by First Bancorp using the "pooling of
interests" method of accounting.
CONDITIONS OF CERTAIN OBLIGATIONS OF BOTH FIRST BANCORP AND FF BANCORP
Under the Merger Plan, the obligations of First Bancorp, FNB Subsidiary and
FF Bancorp to consummate the merger contemplated by the Merger Plan are, at the
option of either of them, subject to the following conditions having been
satisfied:
(a) The holders of at least a majority of the shares of issued and
outstanding stock of FF Bancorp shall have voted in favor of the merger at
the special meeting of the shareholders duly called and held with respect
thereto pursuant to proper notice of such meeting accompanied by a proper
proxy statement.
(b) Any and all orders, permits, approvals, licenses or qualifications
from authorities administering federal laws or laws of any state or other
political subdivision having jurisdiction required for the consummation of
the transaction contemplated by the Merger Plan shall have been obtained.
The Merger
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Plan and the sale or exchange of the shares therein contemplated must be in
compliance with regulations and directives of all governmental agencies
having jurisdiction.
(c) At the time of mailing the Proxy Statements to shareholders of FF
Bancorp and thereafter through the closing date, the First Bancorp stock to
be received by FF Bancorp shareholders upon the conversion of their stock
shall be the subject of an effective registration statement under the
Federal Securities Act of 1933 and shall be duly registered or qualified
under the securities laws of all states in which registration or
qualification is required, or must be exempt therefrom.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
There are currently outstanding employment agreements, dated July 9, 1992,
between New Smyrna Bank and Frances R. Ford, Chairman, President and C.E.O. of
FF Bancorp and Chairman and C.E.O. of New Smyrna Bank, and Charles H. Byrd, Vice
Chairman of FF Bancorp and President of New Smyrna Bank, respectively. The
employment agreements were initially for a three year term with a provision for
renewal for successive one-year terms at each anniversary date of the
commencement of the respective employment agreements. The employment agreements
provide for termination payments to become payable upon the occurrence of
certain events, including a change of control of FF Bancorp as a result of a
merger, coupled with the occurrence of a change in the employment terms for the
particular officer. First Bancorp has, under the merger agreement, specifically
acknowledged and agreed that the termination payment provisions of the
respective employment agreements for Frances R. Ford and Charles H. Byrd will be
triggered upon consummation of the merger due to the change of control and the
simultaneous changes which First Bancorp will require to be made in the
employment terms for these officers under the agreements. Mrs. Ford will be
retiring from her positions as Chairman and C.E.O. of New Smyrna Bank and will
no longer be actively engaged in the management of New Smyrna Bank. In the case
of Mr. Byrd, his duties and terms of employment will change upon consummation of
the merger. Mr. Byrd will remain with New Smyrna Bank, but with reduced duties
and responsibilities. The amounts which the respective employment agreements
require to be paid to Mrs. Ford and Mr. Byrd following consummation of the
merger are determined by a formula contained in the agreements. New Smyrna Bank
is required to pay an amount equal to the aggregate present value of the product
of (i) the average aggregate annual compensation paid and includable in Mrs.
Ford's or Mr. Byrd's respective gross income for federal income tax purposes
during the five calendar years preceding the taxable year in which the date of
termination occurs, multiplied by (ii) 2.99, with each such payment to be made
in lump sum. The payments to which Mrs. Ford and Mr. Byrd will be entitled to
receive under their respective employment agreements following consummation of
the merger are estimated to be $520,000 and $382,000, respectively.
Tildon W. Smith, Executive Vice President of FF Bancorp, holds options to
purchase 56,063 common stock shares of FF Bancorp. Stock options for 18,688
shares are currently exercisable. The remaining stock options become exercisable
on a cumulative basis over two years, except that the options become exercisable
immediately in the event of a change of control of FF Bancorp. Under the terms
of the Merger Plan, if the merger is consummated, the 56,063 FF Bancorp options
will be converted, by application of the .825 exchange ratio, into options to
purchase 46,252 shares of First Bancorp common stock; 40,837 shares of which may
be purchased at a price of $4.59 per share and 5,415 shares of which may be
purchased at a price of $5.83 per share.
In January, 1995, for personal financial reasons Mrs. Ford sold 20,000
shares of her FF Bancorp common stock through a broker. The shares were
purchased by the Vice Chairman of the board of Key Bank.
ACCOUNTING TREATMENT
First Bancorp will account for the merger as a pooling-of-interests
transaction in accordance with generally accepted accounting principles, which,
among other things, requires that the number of shares of FF Bancorp stock
acquired for cash in lieu of fractional shares, or otherwise, not exceed 10% of
the outstanding shares of FF Bancorp stock. Under this accounting treatment,
assets and liabilities of FF Bancorp would be added to those of First Bancorp at
their recorded book values, and the shareholders' equity of the two
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companies would be combined in First Bancorp's consolidated balance sheet.
Financial statements of First Bancorp issued after consummation of the merger
will be restated to reflect the consolidated operations of First Bancorp and FF
Bancorp as if the merger had taken place prior to the periods covered by the
financial statements.
EFFECT OF MERGER ON SHAREHOLDERS
If the proposed merger is consummated, the holders of the common stock of
FF Bancorp will receive common stock of First Bancorp, in exchange for their FF
Bancorp shares. The rights of holders of common stock of First Bancorp are
governed by the provisions of the Georgia Business Corporation Code and federal
and state laws regulating bank holding companies.
Upon conversion of a shareholder's FF Bancorp stock into First Bancorp
stock, the shareholder's percentage of equity ownership in First Bancorp will be
substantially less than his or her present percentage of equity ownership in FF
Bancorp. Shareholders will receive dividend distributions in the form of cash,
stock or other property on each share of FF Bancorp stock converted into shares
of First Bancorp stock if, when and in the form that such dividends are declared
by the Board of Directors of First Bancorp.
After the merger, the former shareholders of FF Bancorp will have no
continuing interest in the assets or business of FF Bancorp and the Florida
Subsidiaries except as shareholders of First Bancorp.
PREEMPTIVE RIGHTS
First Bancorp Common Stock
Shareholders of First Bancorp do not have the preemptive right to subscribe
for additional shares in proportion to the number of shares of capital stock
owned at the time any increase in outstanding stock is authorized. Consequently,
an offering of First Bancorp stock, after the merger, could result in an
existing shareholder's percentage of ownership being reduced by an increase in
the number of outstanding shares. In addition, shares of First Bancorp can be
issued by authorization of the Board of Directors of First Bancorp without any
approval of the shareholders, except in certain instances prescribed by the
Georgia Business Corporation Code.
FF Bancorp Common Stock
Like First Bancorp shareholders, shareholders of FF Bancorp do not have the
preemptive right to subscribe for additional shares at the time any increase in
outstanding stock is authorized. Shares of FF Bancorp can be issued by
authorization of the Board of Directors of FF Bancorp without any approval of
the shareholders, except in certain instances prescribed by the Florida Business
Corporation Act.
CUMULATIVE VOTING RIGHTS
First Bancorp Common Stock
The shareholders of First Bancorp have cumulative voting rights in the
election of directors, that is, the right to vote the number of shares owned by
them for as many persons as there are directors to be elected, or to accumulate
such shares and give one candidate as many votes as the number of directors to
be elected multiplied by the number of their shares shall equal, or to
distribute them on the same principle among as many candidates as they shall
desire. The purpose of cumulative voting is to allow minority shareholders a
better chance to elect representation on the Board of Directors which is closer
in proportion to their stock ownership. The voting upon other transactions by
the shareholders of First Bancorp is on the basis of one vote for each share
without any cumulative voting rights.
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FF Bancorp Common Stock
Shareholders of FF Bancorp have no cumulative voting rights in the election
of directors; for all purposes each holder of record of shares of common stock
of FF Bancorp is entitled to one vote for each share of common stock outstanding
in his name on the books of the corporation.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND
EMPLOYEES
First Bancorp
The bylaws of First Bancorp provide for the indemnification of directors
and officers of the corporation. The provisions allow indemnification of such
persons for reasonable expenses and damages incurred in connection with any
action, suit or proceeding, civil or criminal, to which they shall be made a
party by reason of their being or having been a director, officer or employee.
However, no person shall be indemnified or reimbursed in relation to any matter
in such action, suit or proceeding as to which he shall be finally adjudged to
have been guilty of or liable for gross negligence, willful misconduct, or
criminal acts. These indemnification provisions are in addition to
indemnification otherwise provided under the Georgia Business Corporation Code
(O.C.G.A. Section 14-2-851), which is hereinafter described.
First Bancorp's bylaws also provide for the purchase of insurance for the
purpose of such indemnification. First Bancorp currently provides this insurance
coverage under a directors and officers reimbursement policy with a $12,000,000
aggregate coverage limit.
The Georgia Business Corporation Code (O.C.G.A. Section 14-2-851), provides
that an officer or director may be indemnified (1) in the case of actions by
third persons, if he acted in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, in regard to criminal
actions, he had no reasonable cause to believe that his conduct was unlawful and
(2) in the case of actions by or on behalf of the corporation, if he acted in
good faith and in a manner he reasonably believed to be in the best interests of
the corporation unless he has been adjudged liable for negligence or misconduct
in the performance of his duty to the corporation and the court in which such
action is brought has not determined that he should, nevertheless, be
indemnified.
In addition to the above-described indemnification provisions, the articles
of incorporation of First Bancorp have provisions limiting the liability of
directors. As permitted by Georgia law, the articles of incorporation of First
Bancorp were amended in 1990 to limit the standards of conduct required of
directors by providing that no director shall be personally liable to the
corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director; provided, however, that this provision does not
eliminate or limit the liability of a director:
(a) For any appropriation, in violation of his duties, of any business
opportunity of the corporation;
(b) For acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(c) For the types of liabilities set forth in Official Code of Georgia
Annotated Section 14-2-832 (relating primarily to improper dividends or
other distributions by the corporation);
(d) For any transaction from which the director derives an improper
personal benefit; or
(e) For any liability or expenses related to any action or omission by
a director occurring prior to the adoption of the amendment.
Further, the right of First Bancorp or its shareholders to seek injunctive
or other equitable relief not involving monetary damages is not limited by the
above provisions.
FF Bancorp
The articles of incorporation of FF Bancorp provide for indemnification of
directors and officers of the corporation. The articles provide that each person
who was or is made a party or is threatened to be made a
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party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the legal representative, is or
was a director or officer of FF Bancorp or is or was serving at the request of
FF Bancorp as a director, officer, employee or agent of another corporation,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by FF Bancorp to the fullest extent authorized by the Florida Business
Corporation Act as the same exists or may be amended against all expenses,
liability and loss (including attorney's fees, judgements, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that FF Bancorp shall indemnify
any such person seeking indemnity in connection with an action, suit or
proceeding (or part thereof) was authorized by the Board of Directors of FF
Bancorp. The Florida Business Corporation Act authorizes indemnification in such
circumstances if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interest of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Such right shall be a contract right and shall
include the right to be paid by FF Bancorp expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
FF Bancorp of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified.
In addition, the articles of incorporation of FF Bancorp provide that the
rights conferred on any person by the articles shall not be inclusive of any
other right which such person may have or hereafter acquire under any statute,
other provision of the articles of incorporation, bylaws of FF Bancorp,
agreement, vote of stockholders or disinterested directors or otherwise.
Also, the articles provide that FF Bancorp may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
FF Bancorp or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not FF
Bancorp would have the power to indemnify such person against such expense,
liability or loss under the Florida Business Corporation Act. FF Bancorp
presently provides this insurance coverage under a directors and officers
liability insurance policy with a $3,000,000 aggregate coverage limit.
In addition, the articles provide that a director of FF Bancorp shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Florida Business
Corporation Act, or (iv) for any transaction from which the director derived an
improper personal benefit. The articles further provide that if the Florida
Business Corporation Act is amended after approval by the stockholders of an
article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Florida Business Corporation Act, as so amended.
DIVIDEND RESTRICTIONS
First Bancorp
Under the Georgia Business Corporation Code, dividends may be declared and
distributed by First Bancorp as long as:
(a) such distribution would not render First Bancorp unable to pay its
debts as they become due in the usual course of business; or
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(b) such distribution would not cause First Bancorp's total assets to
be less than the sum of its total liabilities plus the amount that would be
needed, if First Bancorp were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution (no preferential rights presently exist).
The source for payment of dividends by First Bancorp generally is dividends
to First Bancorp from its bank subsidiaries. Dividends to First Bancorp from its
bank subsidiaries are subject to applicable banking law dividend restrictions,
which in the case of its national bank subsidiaries, would include those
restrictions applicable to national banks. The Board of Directors of First
Bancorp makes the decision whether to issue dividends to its shareholders
(including those shareholders receiving First Bancorp stock pursuant to the
Merger Plan) based upon the earnings of all of its subsidiaries and based upon
the need to retain earnings at the holding company level.
FF Bancorp
The primary source of payment of dividends by FF Bancorp is dividends from
the FF Subsidiaries, which are restricted by statute and regulation. See Note 14
of the consolidated financial statements of FF Bancorp on page F-26 of this
Proxy Statement. However, assuming the proposed Merger Plan is approved, the
merger would affect dividend payments of each of the FF Subsidiaries in that
allowable dividends declared by each such board from time to time would be paid
to FF Bancorp, which would pay allowable dividends to First Bancorp.
FF Bancorp is a legal business entity separate and distinct from its
subsidiary Key Bancshares and the other FF Subsidiaries. The dividend
restrictions applicable to FF Bancorp under the Florida Business Corporation Act
are the same as those set forth above for First Bancorp under Georgia law.
As stated above, the principal source of cash flow of FF Bancorp, including
cash flow to pay dividends on FF Bancorp Common Stock, is dividends from the FF
Subsidiaries. There are statutory and regulatory limitations on the payment of
dividends by both the savings banks and the commercial bank. In general, the
ability of New Smyrna Bank and Citrus Bank to pay a dividend to FF Bancorp is
governed by the capital distribution regulations of the office of Thrift
Supervision ("OTS"), and the ability of Key Bank to pay a dividend is governed
by the Florida Statutes, Chapter 658. In addition, the payment of dividends by
these banks is restricted by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA").
The OTS capital distribution regulations impose limitations upon all
capital distributions by savings institutions, such as cash dividends, payments
to repurchase or otherwise acquire its shares, payments to shareholders of
another institution in a cash-out merger and other distributions charged against
capital. The rule establishes three tiers of institutions based primarily on an
institution's capital level. An institution which exceeds all capital
requirements before and after the proposed capital distribution ("Tier 1
Association") and which has not been advised by OTS that it is in need of more
than normal supervision could, after notice to OTS, but without the approval of
OTS, make capital distributions during a calendar year equal to the greater of:
(i) 100% of its net income to date during the calendar year, plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its capital requirements at the beginning of the calendar year), or (ii)
75% of the savings institution's net income for the previous four quarters. Any
additional capital distributions require prior regulatory approval. As of
December 31, 1993, FF Bancorp's thrift subsidiaries were both Tier 1
Associations. OTS can prohibit capital distribution by a savings institution,
which would otherwise be permitted by regulation, if OTS determines that such
distribution would constitute an unsafe or unsound practice. In addition, the
thrift subsidiaries would be prohibited from making a capital distribution under
FDICIA if, after the distribution, the thrift subsidiaries would have: (i) a
total risk-based capital ratio of less than 8%; (ii) a Tier 1 risk-based capital
ratio of less than 4%; or (iii) a leverage ratio of less than 4% (3% if the
thrift subsidiaries were assigned CAMEL 1 Ratings).
A Florida chartered commercial bank may not pay cash dividends that would
cause its capital to fall below the minimum amount required by federal or
Florida law. Otherwise, a commercial bank may pay a dividend out of the total
current net profits plus retained net profits of the preceding two years to the
extent it deems expedient, except as described below. First, 20% of the net
profits in the preceding two year period may
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not be paid in dividends but must be retained to increase capital surplus until
such surplus equals the amount of common and preferred stock issued and
outstanding. In addition, no bank may pay a dividend at any time when the net
earnings in the current year when combined with retained net earnings from the
preceding two years produces a loss. The ability of Key Bank to pay dividends
also depends in part on the FDICIA capital requirements in effect at such time
and the ability of Key Bank to comply with such requirements.
SHAREHOLDER VOTING RIGHTS
First Bancorp
A majority vote of the shareholders is required under the Georgia Business
Corporation Code for the approval of certain mergers and consolidations, for the
sale, exchange or lease of substantially all the assets, or for the dissolution
of First Bancorp. A majority vote of the shareholders is also required to
increase the amount of authorized capital stock of First Bancorp. However, First
Bancorp may enter into merger transactions without shareholder approval pursuant
to Section 14-2-1103 of the Georgia Business Corporation Code if (i) First
Bancorp is the surviving corporation, (ii) the merger will not effect any change
in or amendment to its articles of incorporation, (iii) each share of First
Bancorp outstanding immediately prior to the effectiveness of the merger is to
remain outstanding and unchanged after the merger, and (iv) either no new shares
of First Bancorp are to be issued or any new shares of First Bancorp to be
issued under the plan of merger may be issued by the Board of Directors without
further authorization by the shareholders of First Bancorp.
Shares of First Bancorp stock may be issued by authorization of the Board
of Directors of First Bancorp without any approval of the shareholders, except
in certain instances prescribed by the Georgia Business Corporation Code.
Therefore, in most cases the Board of Directors will be able to issue shares of
First Bancorp stock for any lawful corporate purpose without the approval of the
shareholders, and the shareholders will not have any preemptive right to acquire
such shares in proportion to their ownership interest in First Bancorp.
As stated above, shareholders of First Bancorp have cumulative voting
rights in the election of directors; otherwise each share is entitled to one
vote on all corporate matters.
FF Bancorp
Unlike First Bancorp, a 60% vote of the outstanding shares of common stock
is required under FF Bancorp's Articles of Incorporation for the sale, exchange
or lease of substantially all the assets in certain situations, for certain
mergers and consolidations, or for a voluntary dissolution of FF Bancorp in
certain situations. However, if any such proposed action has the prior approval
of a majority of the Board of Directors, only a majority vote of the outstanding
shares of common stock is required. Reference should be made to the section
entitled "DESCRIPTION OF STOCK -- FF Bancorp" in this Proxy Statement for a
complete description of voting approval requirements. Under Florida law and the
Articles of Incorporation of FF Bancorp, only a majority vote of the outstanding
shares of common stock is required for approval of the proposed merger.
Like First Bancorp, shares of FF Bancorp stock may be issued by
authorization of the Board of Directors of FF Bancorp without any approval of
its shareholders, except in certain instances prescribed by the Florida Business
Corporation Act.
Amendments to FF Bancorp Articles must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of at least 60% of the
outstanding voting stock entitled to vote (after giving effect to the provision
limiting voting rights) is required to amend or repeal certain provisions of FF
Bancorp Articles, including the provisions relating to approval of certain
business combinations, calling special meetings, the number and classification
of directors, director and officer indemnification by FF Bancorp and amendment
of FF Bancorp Bylaws and FF Bancorp Articles.
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Unlike First Bancorp, FF Bancorp shareholders do not have cumulative voting
rights in the election of directors. Each share of FF Bancorp common stock is
entitled to one vote on all corporate matters requiring shareholder vote.
RIGHT OF FIRST BANCORP AND FF BANCORP TO ACQUIRE THEIR OWN SHARES
Under the Georgia Business Corporation Code, First Bancorp has the right to
acquire its own shares by gift, bequest, merger, consolidation, or exchange of
its shares, and by purchase if purchased out of unreserved and unrestricted
earned surplus available therefor.
Like First Bancorp, FF Bancorp has the right to acquire its own shares
under the Florida Business Corporation Act.
RIGHTS OF DISSENT AND APPRAISAL
Under the Georgia Business Corporation Code, the shareholders of First
Bancorp have the right to dissent from certain (but not all) mergers or
consolidations to which First Bancorp is a party, any sale or other disposition
of all or substantially all of the property and assets of First Bancorp, any
amendment of the Articles of Incorporation which would generally adversely
affect a shareholder regarding his voting rights, dividend rights and rights
upon redemption or liquidation, and any amendment of the Articles of
Incorporation which would result in the payment of cash for a shareholder's
shares, such as a redemption of a class of stock. There is no right of dissent
with respect to a plan of merger or share exchange or a proposed sale or
exchange of property if the shares entitled to be voted with respect to any such
proposed action are either registered on a national securities exchange or held
of record by not fewer than 2,000 shareholders. The right of dissent of a
shareholder of First Bancorp who votes against any of the above actions and
otherwise complies with applicable legal requirements entitles him to be paid
the fair value of his shares in cash. First Bancorp is required to make an offer
to the dissenting shareholder of what the corporation believes is the fair value
of his shares. If agreement cannot be reached as to the price to be paid, then
First Bancorp is required to petition the Superior Court of the county where
First Bancorp is located for a determination of the fair value of the shares.
The determination by the Superior Court is final.
Under the Florida Business Corporation Act, FF Bancorp shareholders have
substantially the same right to dissent from corporate actions as set forth
above. However, under Florida law there is also no right to dissent with respect
to a plan of merger or share exchange if the shares entitled to be voted with
respect to any such proposed action are designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. Consequently, FF Bancorp shareholders do not have the
right to dissent and be paid cash for the fair value of their shares with
respect to the proposed merger with First Bancorp.
Certain merger transactions, such as that contemplated by the Merger Plan,
do not require the consent of shareholders of First Bancorp and do not trigger
dissenters rights of First Bancorp shareholders.
STATE TAXATION OF SHARES OF STOCK
Shares of common stock of FF Bancorp are generally subject to personal
property taxes in Florida; shares of common stock of First Bancorp will
generally be subject to such taxes in Florida on the same basis. Shares of
common stock of First Bancorp, being stock of a corporation organized under
Georgia law, are generally exempt from personal property taxes in Georgia. Under
the laws of other jurisdictions, the shares of common stock of FF Bancorp and/or
First Bancorp may also be subject to personal property taxes. In connection with
voting on the proposed Merger Plan, FF Bancorp shareholders should determine
whether taxation of their stock ownership under local law or state law as
applicable to them will change.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of First Bancorp consists of 30,000,000 shares
of common stock, $1.00 par value per share, of which 16,489,649 shares were
issued and outstanding as of October 31, 1994. The
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authorized capital stock of FF Bancorp consists of 5,000,000 shares of
authorized common stock, $.01 par value per share, with 4,680,818 shares issued
and outstanding as of October 31, 1994 and 2,500,000 shares of authorized
preferred stock, $.01 par value per share, with no preferred shares outstanding.
As of such date, FF Bancorp also had outstanding employee stock options to
purchase 84,397.5 shares, 28,333.8 of which are not exercisable after
consummation of the proposed merger.
CERTAIN RESTRICTIONS ON TRANSFER
First Bancorp
The First Bancorp stock which is being offered to FF Bancorp shareholders
pursuant to the Merger Plan is being registered pursuant to the Federal
Securities Act of 1933, subject to Securities and Exchange Commission Rule 145
(Reg. Section 230.145). Subparagraphs (c) and (d) of Rule 145 provide
limitations on the ability of certain persons to re-offer or re-sell shares
acquired in a business combination transaction unless those securities are
subsequently registered under the Securities Act of 1933 or an exemption from
registration is available for the proposed offer and sale. Under Rule 145(c) any
person who is an "affiliate" of FF Bancorp at the time the Merger Plan is
submitted to the shareholders who offers the securities of First Bancorp which
are acquired pursuant to the Merger Plan will be deemed to be an underwriter
within the meaning of Section 2(11) of the Securities Act of 1933 and,
therefore, subject to the registration provisions of the 1933 Act. However,
notwithstanding the provisions of Rule 145(c), Rule 145(d) provides that such
person shall not be deemed to be an underwriter if (1) the securities are sold
by such person in accordance with the provisions of paragraphs (c), (e), (f) and
(g) of Rule 144; or (2) such person is not an affiliate of the issuer of the
securities (First Bancorp), has been the beneficial owner of the securities for
at least two (2) years and meets the requirements of paragraph (c) of Rule 144;
or (3) such person has not been an affiliate of the issuer of the securities for
at least three (3) months and has been the beneficial owner of the securities
for at least three (3) years. Beneficial ownership of the First Bancorp stock
will be deemed to commence upon acquisition of the shares pursuant to the Merger
Plan (not at the time of acquisition of the FF Bancorp stock) and is subject to
certain tolling provisions.
Apart from Rule 145, Rule 144 more generally provides that shares held by
"affiliates" of an issuer (First Bancorp) will be subject to resale restrictions
as provided in Rule 144.
An "affiliate" of a corporation is a person that directly or indirectly
controls or is controlled by or is under common control with the corporation.
The term "control" does not require majority voting control of common stock but
rather means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contracts or otherwise. Subject to the above
guidelines, the determination of who is an "affiliate" is inherently a factual
question determined on a case-by-case basis. Any shareholder holding a
significant block of shares, any director of a company or its subsidiaries or
any officer engaged in significant policy-making functions may be deemed an
affiliate under these rules and should seek the advice of counsel on this issue
prior to engaging in a transaction potentially subject to these rules.
Paragraphs (c), (e), (f) and (g) of Rule 144 provide the following
conditions to the ability of an affiliate to resell his shares:
(1) Rule 144(c) requires that there shall be available adequate
current public information with respect to First Bancorp (First Bancorp has
agreed in the Merger Plan that this requirement will be met);
(2) The amount of the securities sold within any three (3) month
period may not exceed the greater of (i) one percent (1%) of the shares of
Bancorp outstanding or (ii) the average weekly reported volume of trading
in such securities on all national exchanges and/or reported through the
automated quotation system of a registered securities association during
the four (4) calendar weeks preceding the filing of the notice required by
Rule 144 to be filed or, if no such notice is required, the date of the
order to execute the transaction by the broker or market maker; and
(3) The securities must be sold in "brokers' transactions" within the
meaning of Section 4(4) of the Securities Act of 1933, or in transactions
directly with the "market maker" as that term is defined in
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Section 3(a)(38) of the Securities Exchange Act of 1934, and the person
selling the securities must not solicit or arrange for the solicitation of
orders to buy the securities or make any payment in connection with the
offer or sale of the securities to any person other than the broker who
executes the order to sell the securities.
As a result of the merger, there will be two individual FF Bancorp
shareholders who will receive more than 1% of the outstanding shares of First
Bancorp common stock following the proposed merger, and there will be two
institutional investors in FF Bancorp who will receive more than 1% of the
outstanding shares of First Bancorp common stock following the proposed merger.
RESTRICTIONS ON STOCK OF BOTH COMPANIES
The Securities and Exchange Commission has stated that risk sharing is an
essential element in meeting the criteria for pooling of interests accounting
treatment, which is the treatment to be applied to the merger contemplated by
the Merger Plan. Generally, the Commission has stated that it will consider that
the risk sharing will have occurred if no "affiliate" of either company in a
business combination sells or in any other way reduces his risk relative to any
shares of common stock beginning thirty (30) days prior to the date of
consummation of the Merger Plan through such time as financial results covering
at least thirty (30) days of post-merger combined operations have been
published. Thus, no affiliate of First Bancorp or FF Bancorp will be able to
sell, transfer or dispose of First Bancorp shares or FF Bancorp shares during
the period generally beginning thirty (30) days prior to the date of
consummation of the Merger Plan and ending on the date on which financial
results covering at least thirty (30) days of post-merger combined operations
have been published as described above. Pursuant to the Merger Plan, First
Bancorp has agreed to publish such post-merger financial data within thirty (30)
days following the end of the first full calendar month following consummation
of the merger.
COMMITMENTS TO SUBSIDIARY BANKS BY FIRST BANCORP
Under the Federal Reserve's policy, First Bancorp is expected to act as a
source of financial strength to its subsidiary banks and to commit resources to
support its subsidiary banks in circumstances when it might not do so absent
such policy. In addition, any capital loans by First Bancorp to any of its
subsidiary banks would also be subordinate in right of payment to depositors and
to certain other indebtedness of such bank.
As a result of the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("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 after August 9, 1989 in connection with (i) the default of
a commonly controlled, FDIC-insured depository institution or (ii) any
assistance provided by the FDIC to a commonly controlled, FDIC-insured
depository institution in danger of default. "Default" is defined generally as
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. All of First Bancorp's
subsidiary depository institutions are FDIC-insured depository institutions
within the meaning of FIRREA.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
Section 302 of the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA) required the FDIC to establish a risk-based assessment system by
July 1, 1993 and to implement it by January 1, 1994. The FDIC has chosen to
implement a risk-based assessment system effective January 1, 1993, which
provides the FDIC with the opportunity to evaluate the impact and effectiveness
of various components of the risk-based system on a continuous basis.
Under the final rule, the risk-based assessment system is designed as a
matrix system where each insured depository institution pays an assessment rate
based on the combination of its capital and supervisory condition. An
institution is assigned to one of three capital categories based on its call
report filed for the period ending six months prior to each semiannual period
(semiannual periods being every January 1 and
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July 1). The capital categories are defined in the same way as the capital
categories established to determine if prompt corrective action is needed to
improve the capital of a depository institution.
Institutions are also assigned to one of three supervisory categories based
on supervisory evaluations by the institution's primary federal regulator and
supplemented by other information including call report data and debt ratings.
FDICIA also provides for the payment of deposit insurance premiums based on
the specific risk category to which each bank is assigned.
RECENT BANKING LEGISLATION
The State of Georgia has allowed regional interstate banking by permitting
Banking organizations in certain Southeastern states to acquire Georgia banking
organizations, if Georgia banking organizations were allowed to acquire banking
organizations in their states (commonly known as the "Southeast Compact"). As a
result of the Southeast Compact, banking organizations in other Southeastern
states have entered the Georgia market through acquisitions of many Georgia
institutions. Those acquisitions were subject to federal and Georgia approval.
Banking organizations outside of the Southeast Compact were prevented from
acquiring banking institutions in Georgia, and Georgia institutions were
prevented from acquiring banks outside of this region. On March 16, 1994, the
Georgia General Assembly passed legislation effective July 1995 to allow
interstate banking, by removing the Southeast Compact barrier effective July
1995.
The federal Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, became law on September 29, 1994. The Interstate Banking Act will allow
banks and bank holding companies throughout the United States to acquire
out-of-state banks after September 29, 1995, and out-of-state branches through
interstate mergers, beginning June 1, 1997.
NO DISSENTER'S RIGHTS OF APPRAISAL
Pursuant to the Florida Business Corporation Code, holders of FF Bancorp
common stock will not have any dissenter's rights of appraisal in connection
with the merger.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the merger is conditioned on FF Bancorp receiving an
opinion from Stewart, Melvin & Frost, general counsel to First Bancorp, that the
merger will be a "reorganization" within the meaning of Section 368 of the
Internal Revenue Code of 1986 (the "Code"), and as to certain other tax
consequences of the merger. Such opinion shall be in form and substance
satisfactory to the Board of Directors of FF Bancorp. The required opinion,
which is dated February 8, 1995, has been delivered to FF Bancorp. The
discussion below fairly summarizes the matters covered in such opinion.
Assuming that the merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, it will have the following federal
income tax consequences:
1. A FF Bancorp shareholder receiving shares of First Bancorp common
stock (and, if applicable, cash in lieu of a fractional share of First
Bancorp common stock) on the conversion of his FF Bancorp shares in the
merger will recognize no gain or loss, except in connection with any cash
received in lieu of a fractional share of First Bancorp common stock. The
tax basis of the shares of First Bancorp stock received upon the conversion
will be the same as the tax basis of the FF Bancorp shares converted in the
merger, except for possible adjustment due to any cash received in lieu of
a fractional share. If the FF Bancorp shares were held as capital assets,
the holding period of the shares of First Bancorp common stock received,
will include the holding period of the FF Bancorp shares converted.
2. Upon a FF Bancorp shareholder's receipt of shares of First Bancorp
common stock and cash in lieu of a fractional share of First Bancorp common
stock in the merger, the cash will, in general, be treated as received in
exchange for such fractional share and not as a dividend. Gain or loss
recognized as
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a result of that exchange will be capital gain or loss if the fractional
share would have been a capital asset if it had been received by the FF
Bancorp shareholder.
3. Neither FF Bancorp nor First Bancorp will recognize gain or loss as
a result of the merger.
4. In the case of a corporate shareholder of FF Bancorp, the tax
consequences described in Paragraphs 1 through 3 are generally applicable.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH HOLDER OF FF BANCORP SHARES SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER,
INCLUDING THE EFFECT OF STATE AND LOCAL TAXES.
49
<PAGE> 57
BUSINESS OF FF BANCORP
GENERAL
FF Bancorp was incorporated under the laws of the state of Florida on May
12, 1992 for the purpose of becoming a savings and loan holding company through
the acquisition of New Smyrna Bank and Citrus Bank. FF Bancorp became a multiple
savings and loan holding company on July 28, 1992 when New Smyrna Bank became a
wholly-owned subsidiary of FF Bancorp through an exchange of shares and Citrus
Bank was acquired in a conversion and reorganization wherein Citrus Bank
converted from a federal mutual savings and loan association to a federal
savings bank and was acquired by FF Bancorp through an exchange of shares. Both
acquisitions were accounted for as poolings of interests.
On April 8, 1994, FF Bancorp acquired Key Bancshares, the parent company of
Key Bank, a state-chartered commercial bank located in Tampa, Florida. The
acquisition was accounted for as a purchase, since FF Bancorp offered a
combination of cash and stock to Key Bancshares shareholders. FF Bancorp
retained Key Bancshares as a subsidiary bank holding company, and FF Bancorp
became a multiple savings and loan and one bank holding company.
Reference should be made to the FF Bancorp consolidated financial
statements and the FF Bancorp Management's Discussion and Analysis of Financial
Condition and Results of Operations, appearing elsewhere in this Proxy Statement
and providing disclosure of FF Bancorp's financial condition and performance.
FF Bancorp is managed by a Board of Directors which currently consists of
five individuals. There is included in this proxy statement under the heading
"FF BANCORP SHAREHOLDERS" information which discloses the current members of the
Board of Directors and the executive officers of FF Bancorp, their current
status or title(s), and their individual share ownership in FF Bancorp.
FF BANCORP SUBSIDIARIES
FF Bancorp carries on its business operations through its four
subsidiaries. New Smyrna Bank, Citrus Bank and Key Bank conduct the normal
business of a federal savings bank or commercial bank, which is primarily
receiving deposits and funds and using them to make loans and investments. New
Smyrna Bank, Citrus Bank and Key Bank try to maintain a positive margin between
earnings on funds loaned or invested and the cost of funds to the banks in order
to cover expenses of operation and provide a profit for payment of dividends and
accumulations of capital.
New Smyrna Bank conducts business from its main office in New Smyrna Beach,
Florida and its branch office in Edgewater, Florida. New Smyrna Bank was founded
in 1935 as a mutual savings association and converted to a stock savings bank on
July 1, 1991. New Smyrna Bank's financial condition and operating results are
consolidated into FF Bancorp's financial statements. New Smyrna Bank,
individually, at September 30, 1994, had total assets of $318 million, total
deposits of $287 million, and equity capital of $25 million.
Citrus Bank conducts business from its main office in Inverness, Florida
and its three branch offices located in Beverly Hills, Crystal River, and
Homosassa Springs, Florida. Citrus Bank was founded in 1963 as a mutual savings
association and converted to a stock savings bank on July 8, 1992, and was
acquired by FF Bancorp on that same date. Citrus Bank's financial condition and
operating results are consolidated into FF Bancorp's financial statements.
Citrus Bank, individually, at September 30, 1994, had total assets of $214
million, total deposits of $195 million, and equity capital of $16 million.
Key Bancshares was organized on November 24, 1982 as the parent holding
company of Key Bank, a commercial bank which was chartered on December 14, 1973.
FF Bancorp acquired Key Bancshares and its subsidiary Key Bank on April 8, 1994.
Key Bank conducts business from its main office in Tampa, Florida and a branch
office which is also located in Tampa. Key Bancshares' and Key Bank's financial
condition and operating results are consolidated into FF Bancorp's financial
statements. Key Bank, individually at
50
<PAGE> 58
September 30, 1994, had total assets of $66 million, total deposits of $60
million, and equity capital of $5 million.
Shown below are certain key financial disclosures for the two savings banks
and one commercial bank subsidiaries of FF Bancorp at September 30, 1994.
<TABLE>
<CAPTION>
FF BANKING SUBSIDIARIES
-------------------------------
NEW SMYRNA CITRUS KEY
BANK BANK BANK
---------- -------- -------
<S> <C> <C> <C>
BALANCE SHEET ($ IN 000'S):
Total Assets........................................... $318,145 $213,762 $66,360
Total Loans............................................ 233,108 141,876 46,652
Earning Assets......................................... 308,911 201,571 57,940
Total Deposits......................................... 286,959 194,986 60,344
Common Equity.......................................... 24,944 15,501 5,317
Primary Capital/Assets................................. 7.77% 7.25% 7.78%
INCOME STATEMENT (YTD 9/30/94; $ IN 000'S):
Net Interest Income.................................... $ 8,319 $ 6,841 $ 1,462
Noninterest Income..................................... 839 524 324
Net Revenue............................................ 9,158 7,365 1,786
Noninterest Expense.................................... 3,995 2,907 1,192
Loan Loss Provision.................................... -- -- --
Pre Tax Income......................................... 5,138 4,458 594
Net Income............................................. 3,193 3,166 594
KEY RATIOS:
Net Interest Margin.................................... 3.90% 4.22% 4.78%
Return on Average Assets............................... 1.33 1.98 1.04
Return on Average Equity............................... 17.42 28.16 14.55
ASSET QUALITY:
Nonaccrual Loans....................................... $ 1,408 $ 553 $ 946
Renegotiated........................................... -- -- --
Nonperforming Loans ("NPL")............................ 1,408 553 946
Other Real Estate Owned ("OREO") and In Substance
Foreclosure Loans ("ISF")............................ 1,843 921 3,990
Non Performing Assets ("NPA").......................... 3,251 1,474 4,936
NPL/Loans.............................................. .60% .39% 2.03%
NPA/Loans & OREO....................................... 1.38 1.03 10.16
NPL/Loan Loss Reserve.................................. 158 33 180
Loan Loss Reserve/Loans................................ .38 1.19 3.66
</TABLE>
- ---------------
Note: Individual bank financial information is based on unaudited financial data
at September 30, 1994. Reference should be made to the FF Bancorp
financial statements included in this Proxy Statement for information on a
consolidated basis.
MARKET AREA AND COMPETITION
FF Bancorp, through New Smyrna Bank, conducts business in Volusia County,
which includes the cities of New Smyrna Beach, Daytona Beach, DeLand and
Edgewater. Among the major industries in Volusia County are manufacturing,
wholesale and retail trade, and government services. Volusia County continues to
be a rapidly growing county with a growth rate which far exceeds the national
rate. In September 1993, based on a report by the Florida Banker's Association,
New Smyrna Bank estimated that its deposits totaled 42% of aggregate deposits
held in all financial institutions in New Smyrna Beach and Edgewater, Florida.
51
<PAGE> 59
Citrus Bank's primary market area consists of Citrus County in West Central
Florida, with additional business coming from Hernando and Marion Counties.
Citrus County is located on Florida's west coast. The economy of Citrus County
is based on commerce, agriculture, service industries, and tourism. The
population base is heavily comprised of retirees. The growth rate for Citrus
County in the past has far exceeded the growth rate of Florida and the nation.
Citrus Bank is the second largest financial institution in Citrus County, based
on a report of the Florida Banker's Association, as of September 30, 1993. Due
to capital deficiency problems in 1988 when assets reached $324 million, Citrus
Bank has downsized to $214 million at September 30, 1994, and Citrus Bank now
exceeds all of its regulatory capital requirement ratios.
Key Bank's primary market area consists of the county of Hillsborough which
includes the city of Tampa where the bank is located. Key Bank's deposit size of
$60 million does not constitute a very large portion of the $8.1 billion Tampa
market deposit total. Key Bank's thrust is to develop a retail and small
business segment in the rapidly growing north Tampa region while also attempting
to service the medium size commercial market. Key Bank will draw on the strength
and size of New Smyrna Bank and Citrus Bank to accommodate commercial lending
overlines.
Shown below are certain selected demographics for the FF Bancorp
subsidiaries' market areas. The demographics for New Smyrna Bank include only
New Smyrna Beach and Edgewater communities, not Volusia County.
<TABLE>
<CAPTION>
FF BANKING SUBSIDIARIES(1)
----------------------------------
NEW
SMYRNA CITRUS KEY
ISSUES BANK BANK BANK
---------------------------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
SELECTED DEMOGRAPHICS
Population.......................................... 35,229 105,188 834,054
% Change Pop 1980-90................................ 43% 71% 29%
Number Households................................... 15,034 45,813 167,922
Median Age.......................................... 39.4 50.8 33.0
% Pop > 65 Years Old................................ 23% 31% 12%
Per Capita Income................................... $ 13,288 $ 12,151 $ 14,203
Average Household Income............................ 34,729 30,838 40,032
Median Household Income............................. 24,818 21,285 28,417
Median House Price.................................. 69,397 66,085 73,057
% Homes Built 80-90................................. 38% 49% 37%
Total Market Deposits(2)............................ $695,198 $1,372,515 $8,055,625
Bank Deposits(2).................................... 286,959 194,986 60,344
Percent Market Share................................ 41% 14% N/A
Position in Market.................................. 1st 3rd N/A
Number Facilities................................... 3 4 2
Deposits Per Facility(2)............................ $ 95,653 $ 48,747 $ 30,172
</TABLE>
- ---------------
(1) Bank financial information is based on unaudited financial data at September
30, 1994.
(2) Dollars in thousands.
LENDING ACTIVITIES
At September 30, 1994, FF Bancorp's net loans totaled $417 million. The net
loans at New Smyrna Bank, Citrus Bank and Key Bank individually were $233
million, $142 million, and $47 million, respectively. Net loans outstanding
represented approximately 70% of the total assets of $597 million of FF Bancorp
at September 30, 1994. FF Bancorp's policy is to originate loans solely within
its primary market areas. Single-family residential loans have comprised
approximately 92% of the total loan portfolio of New Smyrna Bank and Citrus Bank
consolidated over the past few years. Commercial real estate loans, including
multi-family residential loans and land loans, total approximately 7% of the
total loan portfolio of New Smyrna Bank and Citrus Bank with the balance of
approximately 1% of the portfolio being in consumer installment loans and
52
<PAGE> 60
other loans. Key Bank's loan portfolio of $47 million is comprised of
approximately 54% in commercial loans which are secured primarily by real
estate, 14% in other commercial and industrial loans, 25% in residential
mortgage loans, and 7% in consumer and other loans. Key Bank grants loans
primarily to borrowers in the Tampa Bay area. Key Bank experienced problems in
its loan portfolio in 1993 and 1992 when charge-offs of $1.1 million and $1.9
million, respectively, were made against the allowance for credit losses. Key
Bank management has addressed those problems, and management now feels the
problem loans have been identified and further losses will not be as significant
as in 1993 and 1992.
The following table sets forth information concerning FF Bancorp's loan
portfolio on a consolidated basis by type of loan at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
--------------- --------------- --------------- --------------- ---------------
% OF % OF % OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESIDENTIAL REAL ESTATE LOANS:
One-to-four family................. $324,902 88.5% $311,809 88.9% $321,672 88.6% $331,583 88.1% $322,046 84.6%
Construction one-to-four family.... 10,317 2.8 7,818 2.2 7,513 2.1 7,823 2.1 16,639 4.4
Commercial real estate loans
(including multi-family and land
loans)........................... 27,154 7.4 26,816 7.7 28,295 7.8 30,314 8.1 35,618 9.4
CONSUMER AND OTHER LOANS:
Installment(1)..................... 2,662 .7 2,252 .6 3,137 .8 3,017 .8 2,737 .7
Savings account.................... 2,198 .6 2,176 .6 2,568 .7 3,330 .9 3,544 .9
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans................ $367,233 100.0% $350,871 100.0% $363,185 100.0% $376,067 100.0% $380,584 100.0%
===== ===== ===== ===== =====
LESS:
Loans in process................... (6,351) (4,376) (2,999) (2,721) (6,696)
Unearned discounts and loan
origination fees................. (4,400) (4,155) (4,219) (4,537) (4,858)
Allowance for loan losses.......... (2,726) (2,583) (1,708) (2,152) (3,326)
-------- -------- -------- -------- --------
Net loans.................. $353,756 $339,757 $354,259 $366,657 $365,704
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Consists primarily of second mortgage loans and automobile loans.
The following table reflects the contractual principal repayment periods of
FF Bancorp's loan portfolio on a consolidated basis at December 31, 1993.
<TABLE>
<CAPTION>
REAL SAVINGS
ESTATE REAL ESTATE ACCOUNT AND
MORTGAGE CONSTRUCTION INSTALLMENT
YEARS ENDED DECEMBER 31, LOANS LOANS LOANS TOTAL
------------------------------------------- -------- ------------ ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1994....................................... $ 15,008 $ 977 $ 1,369 $ 17,354
1995....................................... 14,565 214 249 15,028
1996....................................... 15,533 232 399 16,164
1997-1998.................................. 31,800 525 1,285 33,610
1999-2003.................................. 81,290 1,757 1,424 84,471
2004-2008.................................. 76,005 2,641 134 78,780
2009 and thereafter........................ 117,855 3,971 -- 121,826
-------- ------------ ----------- --------
Total............................ $352,056 $ 10,317 $ 4,860 $367,233
======== ========= ========= ========
</TABLE>
Of the $349.9 million in loans due after 1993, 70% of such loans have fixed
interest rates and 30% have adjustable interest rates. Scheduled contractual
principal repayments of loans do not reflect the actual life of such assets
because of prepayments and the effect of rate changes.
53
<PAGE> 61
ORIGINATION, PURCHASE AND SALE OF LOANS
Although there are no restrictions on where it can do business, FF Bancorp
originates loans primarily in the market areas in which New Smyrna Bank, Citrus
Bank and Key Bank operate. FF Bancorp's policy is to originate all loans for its
portfolio and in general, FF Bancorp does not engage in the sale of whole loans
or participations. However, FF Bancorp's fixed-rate residential mortgage loans
are originated on terms which permit their sale to the Federal Home Loan
Mortgage Corporation and other investors in the secondary market. Loans are
primarily originated through salaried loan officers who operate from FF Bancorp
subsidiaries in all banking locations. The residential real estate loan
originations are attributable to depositors, other existing customers,
advertising, and referrals from real estate brokers and developers. The
commercial loan originations are primarily originated from existing clients and
customer sales calls while consumer loan origination is attributable largely to
depositors and walk-in customers. All of the loan applications are evaluated by
staff at the main offices to ensure compliance with FF Bancorp underwriting
standards. All loan activities are subject to written, nondiscriminatory
underwriting standards and loan origination procedures prescribed by management
and the Board of Directors. The underwriting standards meet the lending
requirements of regulatory agencies applicable to savings banks and commercial
banks.
The following table sets forth total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ORIGINATION:
Residential real estate:
One-to-four family loans.............................. $41,018 $ 27,159 $ 16,753
Construction one-to-four family loans................. 15,795 15,242 12,804
Commercial real estate loans
(including multi-family and land loans)............ 5,510 2,058 5,113
Consumer and other loans.............................. 2,765 2,539 2,684
------- -------- --------
Total loans originated........................ 65,088 46,998 37,354
Purchases............................................... 2,389 -- 1,379
------- -------- --------
Total loans originated and purchased.......... 67,477 46,998 38,733
------- -------- --------
Sales and principal reductions:
Loans sold............................................ -- 3,264 2,392
Loan principal reductions............................. 51,115 56,048 49,223
------- -------- --------
Total loans sold and principal reductions..... 51,115 59,312 51,615
------- -------- --------
Increase (decrease) in loans receivable (before net
items)................................................ $16,362 $(12,314) $(12,882)
======= ======== ========
</TABLE>
LOAN FEE INCOME
In addition to interest earned on loans, FF Bancorp receives income through
fees in connection with loan origination, loan modifications and late payments
and for miscellaneous services related to its loans. Income from these
activities varies from period to period with the volume and type of loans
originated, which, in turn, is dependent on prevailing mortgage interest rates
and their effect on the demand for loans in FF Bancorp's market served areas.
Loan origination fees are calculated as a percentage of the amount loaned
and are typically up to three points (one point being equivalent to 1% of the
principal amount of the loan) on residential mortgage loans. Fees are also
charged on some commercial or business related loans. All loan origination fees
are deferred and amortized into income over the contractual life of the loan
using a method which approximates the level yield method. If a loan is prepaid
or refinanced, all remaining deferred fees with respect to such loan are taken
into income at such time. Some fees, such as late payment fees, are not on a
deferred basis.
54
<PAGE> 62
The accounting for nonrefundable fees and costs associated with originating
and acquiring loans is governed by Statement of Financial Accounting Standards
("SFAS") 91, promulgated by the Financial Accounting Standards Board ("FASB").
SFAS 91 requires that loan origination fees be offset against certain related
direct loan origination costs and that the resulting net amount be deferred and
amortized over the life of the related loans as an adjustment to the yield of
such related loans. In addition, commitment fees are required to be offset
against related direct costs, and the resulting net amount is recognized either
over the life of the related loans as an adjustment to the yield, if the
commitment is exercised, or upon expiration of the commitment, if the commitment
expires unexercised.
NONPERFORMING LOANS AND REAL ESTATE OWNED
Loans made by New Smyrna Bank and Citrus Bank are primarily single family
residential loans while loans made by Key Bank are approximately 68% commercial
and industrial, 25% residential mortgage loans and the balance are consumer or
other loans. Since single family residential loans comprise approximately 92% of
the total portfolio this discussion of nonperforming loans and real estate owned
is primarily concerning those loans. However, other loans including commercial
and personal are handled in primarily the same manner. When a borrower fails to
make a required payment on a loan, the borrower is first contacted by mail. If a
payment on a loan has not been received by the tenth day from the payment due
date, subsequent notices are mailed, with follow-up contacts made thereafter. In
most cases, the delinquencies are cured promptly. If the delinquency exceeds 90
days and is not cured through normal collection procedures, more formal measures
are instituted to remedy the default, including the commencement of foreclosure
proceedings. FF Bancorp will attempt to negotiate with the delinquent borrower
to establish a satisfactory payment schedule.
If foreclosure is effected, the property is sold at a public auction in
which FF Bancorp may participate as a bidder. If FF Bancorp is the successful
bidder, the acquired real estate property is then included in FF Bancorp's "real
estate owned" account until it is sold. Savings institutions are permitted under
federal regulations to finance sales of real estate owned by "loans to
facilitate," which may involve more favorable interest rates and terms than
generally would be granted under FF Bancorp's underwriting guidelines.
Loans are placed on nonaccrual status when, in the judgment of management,
the probability of collection of interest is deemed to be insufficient to
warrant further accrual. When a loan is placed on nonaccrual status, previously
accrued but unpaid interest is deducted from interest income. As a matter of
policy, FF Bancorp does not accrue interest on loans past due 90 days or more.
Consumer loans more than 120 days delinquent are required to be written off in
accordance with federal regulations.
Real estate acquired by FF Bancorp as a result of foreclosure or by deed in
lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired, it is recorded at the lower of cost or fair value at the
date of acquisition and any write-down resulting therefrom is charged to the
allowance for loan losses. Similar treatment is accorded to the collateral for
loans or securities which have been deemed to constitute in-substance
foreclosures. In-substance foreclosures represent loans which, in substance, are
considered repossessed even though formal foreclosure proceedings have not been
completed. The carrying value of in-substance foreclosures is the lower of its
estimated fair value or the balance of the related loan. Although the collateral
for the loans has not been repossessed, the borrower has little or no equity in
the collateral at its current estimated fair value, proceeds for repayment are
expected to come only from the operation or sale of the collateral, and either
the borrower has abandoned control of the project or it is doubtful the borrower
will rebuild equity in the collateral or repay the loan by other means in the
foreseeable future. The amounts ultimately recoverable from in-substance
foreclosures can differ materially from the amounts used in arriving at the net
carrying value of the assets because of future market factors beyond FF
Bancorp's control or changes in FF Bancorp's strategy for recovering its
investment. All costs incurred in maintaining the property are capitalized
between the date the loan becomes delinquent and the date of acquisition. After
the date of acquisition, all costs incurred in maintaining the property are
expenses and costs incurred for the improvement or development of such property
are capitalized if there is adequate equity to fair value.
55
<PAGE> 63
The following table sets forth certain information regarding nonaccrual
loans and real estate owned, including in substance foreclosure, the ratio of
such loans and real estate owned to total assets as of the dates indicated, and
certain other related information for FF Bancorp.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------
1993 1992 1991 1990 1989
------ ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS:
Residential:
One-to-four family loans................ $2,035 $ 2,123 $ 3,475 $ 3,213 $ 3,055
Construction one-to-four family loans... -- -- 669 1,104 2,226
Commercial real estate loans (including
multi-family and land)............... -- 353 844 1,464 2,655
Consumer and other loans................ -- 30 126 -- --
------ ------- ------- ------- -------
Total nonaccrual loans.......... 2,035 2,506 5,114 5,781 7,936
------ ------- ------- ------- -------
ACCRUING LOANS 90 DAYS OR MORE PAST DUE:
Residential:
One-to-four family loans................ -- -- 185 32 172
Commercial real estate loans (including
multi-family and land)............... -- -- -- -- 94
------ ------- ------- ------- -------
Total accruing loans 90 days or
more past due................. -- -- 185 32 266
------ ------- ------- ------- -------
Total nonperforming loans....... $2,035 $ 2,506 $ 5,299 $ 5,813 $ 8,202
====== ======= ======= ======= =======
Total nonperforming loans to
total assets.................. .37% .46% .96% 1.12% 1.53%
Real estate owned:
Real estate acquired by foreclosure or
deed in lieu of foreclosure.......... $1,563 $ 5,473 $ 6,692 $ 7,660 $10,450
Real estate held for investment......... 21 42 101 534 593
In-substance foreclosures............... 3,949 5,618 5,813 3,726 --
Allowance for loss on real estate
owned................................ (764) (1,033) (1,759) (1,540) (871)
------ ------- ------- ------- -------
Total real estate owned, net.... $4,769 $10,100 $10,847 $10,380 $10,172
====== ======= ======= ======= =======
Total nonperforming loans and
real estate owned............. $6,804 $12,606 $16,146 $16,193 $18,374
====== ======= ======= ======= =======
Total nonperforming loans and
real estate owned, net to
total assets.................. 1.25% 2.30% 2.92% 3.12% 3.42%
====== ======= ======= ======= =======
</TABLE>
- ---------------
See Note (4) to the consolidated financial statements at December 31, 1993 for
information about the interest income which would have been recorded under the
original items of such loans and the amount actually recorded.
ALLOWANCE FOR LOSSES ON LOANS AND REAL ESTATE OWNED
Reserves for losses on delinquent loans are established when management of
FF Bancorp determines that losses are expected to be incurred on such loans. The
allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determinations of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth and composition of the loan portfolio, and other relevant factors. The
allowance is increased by provisions for loan losses which are charged against
income.
56
<PAGE> 64
Although management believed that the allowance for loan losses was
adequate, FF Bancorp's provisions are based on the current and currently
anticipated future operating conditions, thereby causing these estimates to be
susceptible to changes that could result in a material adjustment to results of
operations in the near term. Recovery of the carrying value of such loans is
dependent to a great extent on economic, operating and other conditions that may
be beyond FF Bancorp's control. Therefore, actual losses in future periods could
differ materially from amounts provided in the current period and could result
in a material adjustment to future result of operations.
The following table sets forth information with respect to activity in FF
Bancorp's allowance for loan losses during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net...... $345,037 $346,550 $359,726 $369,402 $368,273
======== ======== ======== ======== ========
Allowance at beginning of period.... $ 2,583 $ 1,708 $ 2,151 $ 3,326 $ 1,163
-------- -------- -------- -------- --------
Charge-offs:
Residential real estate:
Conventional loans............. 48 130 807 420 81
Construction loans............. -- -- -- 680 111
Commercial real estate loans... -- 4 422 1,170 670
Consumer loans................. -- 2 73 1 2
-------- -------- -------- -------- --------
Total loans charged-off... 48 136 1,302 2,271 864
-------- -------- -------- -------- --------
Recoveries.......................... 14 -- -- -- --
-------- -------- -------- -------- --------
Net charge-offs................... 34 136 1,302 2,271 864
-------- -------- -------- -------- --------
Provisions for loan losses charged
to operating expenses............. 177 1,011 859 1,096 3,027
-------- -------- -------- -------- --------
Allowance at end of period.......... $ 2,726 $ 2,583 $ 1,708 $ 2,151 $ 3,326
======== ======== ======== ======== ========
Ratio of net charge-offs to average
loans outstanding................. .01% .04% .36% .61% .23%
======== ======== ======== ======== ========
Ratio of allowance to period-end
loans............................. .77% .76% .48% .59% .91%
======== ======== ======== ======== ========
</TABLE>
A loan or portion thereof is charged off against the allowance when
management has determined that losses on such loans are probable. Recoveries on
any loans charged off in prior periods are credited to the allowance. The ratio
of net charge-offs to average loans outstanding has declined each year from 1990
through 1993 and management decreased the provision to the allowance in 1993.
The decrease in the level of loan loss provision is generally consistent with
management's conclusion that the residential real estate market in FF Bancorp's
market areas continues to improve, and with management's assessment of the
relative risk associated with the composition of the loan portfolio, which is
comprised predominantly of first mortgage loans on single family residential
property.
57
<PAGE> 65
The following table presents information regarding FF Bancorp's total
allowance for loan losses as well as the allocation of such amounts to the
various categories of loans.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----------------- ----------------- ----------------- ----------------- -----------------
% OF % OF % OF % OF % OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential real estate
loans........................ $2,068 91.3% $2,033 91.1% $1,082 90.7% $1,461 90.2% $1,542 89.0%
Commercial real estate loans
(including multi-family and
land loans)................. 607 7.4 486 7.7 566 7.8 673 8.1 1,781 9.4
Consumer loans................ 51 1.3 64 1.2 60 1.5 17 1.7 3 1.6
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Total allowance for
loan losses......... $2,726 100% $2,583 100% $1,708 100% $2,151 100% $3,326 100%
====== ======= ====== ======= ====== ======= ====== ======= ====== =======
</TABLE>
Although management felt the $4.3 million allowance for loan losses at
September 30, 1994 was adequate for losses on an estimated basis, in December,
1994, management made a decision to adopt a more uniform allowance for loan loss
methodology in all three of the Company's subsidiary banks and a more stringent
method of determining the allowance for loan and other real estate losses by
adopting a standardized classification approach to grading loans as well as
using standard factors for calculating estimated losses on nonclassified loans.
Based upon this change in methodology, management, in December, 1994, made a
provision to the allowance for loan losses of approximately $1.9 million in Key
Bank and the New Smyrna Bank and a provision to the allowance for losses on the
disposition of other real estate of approximately $250,000 in Key Bank. This
transaction will be reflected in financial statements prepared for the fourth
quarter and year ending December 31, 1994.
MORTGAGE-BACKED SECURITIES
FF Bancorp has invested in a portfolio of mortgage-backed securities which
are guaranteed as to principal and interest by the full faith and credit of the
United States or insured or guaranteed by agencies of or corporations or
entities chartered by the Federal government. Approximately 80% of the
mortgage-backed securities owned by FF Bancorp are currently insured or
guaranteed by the Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), or the Federal Home Loan Mortgage
Corporation ("FHLMC"), with the remaining 20% in Collateralized Mortgage
Obligations, REMIC's or other mortgage-backed securities. Mortgage backed
securities generally increase the quality of FF Bancorp's assets by virtue of
the agency guarantees that back them, are more liquid than individual mortgage
loans and may be used to collateralize borrowings or other obligations of FF
Bancorp. Due to repayment and prepayments of the underlying loans, the actual
maturities of mortgage-backed securities are substantially less than the
scheduled maturities. All mortgage-backed and related securities at December 31,
1992, were considered held-to-maturity and recorded at amortized cost. On
December 31, 1993, FF Bancorp adopted Statement of Financial Accounting
Standards No. 115 and reclassified certain of its mortgage-backed securities as
available-for-sale. This resulted in an increase in the recorded amount of
mortgage-backed securities by $1,481,000 and an increase in stockholders' equity
of $918,000, which is net of the income tax effect of $563,000. At December 31,
1993, FF Bancorp's total mortgage-backed securities portfolio had a carrying
value of $64.0 million, a fair market value of $65.5 million and a weighted
average yield of 7.6%. As of such date, $15.0 million of mortgage-backed
securities were adjustable rate securities and $49.0 million were fixed rate
securities.
58
<PAGE> 66
The following table sets forth mortgage-backed securities purchased, sold
and repaid during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Purchases............................................ $ 20,008 $ 14,999 $ 52,699
Sales................................................ -- -- (13,539)
Principal reductions net............................. (39,866) (40,313) (7,238)
Unrealized gain on mortgage-backed securities
available-for-sale................................. 1,481 -- --
-------- -------- --------
Increase (decrease) in mortgage-backed securities.... $(18,377) $(25,314) $ 31,922
======== ======== ========
</TABLE>
In addition to other normal recurring securities transactions during 1994,
in December 1994 FF Bancorp management decided to sell approximately $15,100,000
of fixed rate mortgage backed securities from its available for sale portfolio
and approximately $12,700,000 of fixed rate mortgage-backed securities from its
held to maturity portfolio at a combined pretax loss of approximately $600,000.
Additionally, in the fourth quarter of 1994, management of FF Bancorp decided to
reclassify all remaining investment securities as available-for-sale. This
resulted in FF Bancorp having no securities at December 31, 1994 classified as
held-to-maturity and $30.1 million of investment securities classified as
available-for-sale. This reclassification resulted in a net decrease in the
recorded amount of stockholders' equity of $1,742,000, net of the estimated tax
effect of the unrealized losses.
INVESTMENT ACTIVITIES
For purposes of diversification, liquidity, yield opportunities and other
reasons, financial institutions normally have a portion of earning assets in
investment type securities in addition to the loan portfolio. FF Bancorp and its
subsidiaries have authority to invest in various types of securities, including
U.S. Treasury obligations and securities of various federal agencies,
certificates of deposit at insured banks and savings institutions, bankers
acceptances, and federal funds. Subject to various restrictions, the savings
banks may invest a portion of their assets in commercial paper, corporate debt
securities and mutual funds whose assets conform to the investments that a
federally chartered savings institution is authorized to make directly. Also, as
a state chartered institution, Key Bank must maintain a minimum liquidity level.
Key Bank complies with this requirement primarily by maintaining a significant
amount of federal funds and short term U.S. Government securities.
As members of the FHLB System, New Smyrna Bank and Citrus Bank must
maintain a minimum liquidity level specified by the OTS which may vary from time
to time. New Smyrna Bank and Citrus Bank comply with this requirement primarily
by maintaining a significant amount of funds in interest-bearing deposits at the
FHLB of Atlanta. Liquidity may increase or decrease depending upon the yields
available on investment opportunities and upon management's judgment as to the
attractiveness of such yields and its expectation of the level of yields that
will be available in the future. Membership in the FHLB also requires an
investment in the common stock of FHLB of Atlanta.
59
<PAGE> 67
The following table sets forth the carrying value of the Company's
investment portfolio as of the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1993 1992 1991
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term investments
Interest-bearing deposits................................ $ 87,859 $83,280 $47,629
-------- ------- -------
Equity securities:
FHLB stock............................................. 4,326 4,337 4,300
-------- ------- -------
FHLMC common stock available for sale.................. 1,320 104 104
-------- ------- -------
Debt Securities:
FNMA debentures........................................ 5,080 5,162 5,212
FHLB debentures........................................ 5,000 -- --
United States Government and Agency Obligations........ -- 5,010 5,019
-------- ------- -------
Total.......................................... 10,080 10,172 10,231
-------- ------- -------
$103,585 $97,893 $62,264
======== ======= =======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the investment and debt securities and other funds
portfolio at December 31, 1993.
<TABLE>
<CAPTION>
AFTER FIVE
ONE YEAR YEARS AFTER FIVE YEARS OVER
OR LESS TO TEN YEARS TO TEN YEARS TEN YEARS TOTAL
------------------ ------------- ----------------- ------------------ ------------------
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
----------- ----- ------ ----- ---------- ----- ----------- ----- ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1993:
United States Government
and Agency Obligations... $ -- -- $ -- -- $ -- -- $ -- -- $ -- --
Mortgage-Backed Securities:
FHLMC certificates....... -- -- -- -- 1,577,174 9.66 % 10,234,289 8.24 % 11,811,463 8.30 %
GNMA certificates........ -- -- -- -- -- -- 10,165,637 8.29 % 10,165,637 8.29 %
FNMA certificates........ -- -- -- -- -- -- 7,247,585 7.87 % 7,247,585 7.87 %
Collateralized Mortgage
Obligations............ -- -- -- -- 1,264,920 6.75 % 8,181,812 4.34 % 9,446,732 4.66 %
REMIC.................... -- -- -- -- -- -- 1,481,951 4.44 % 1,481,951 4.44 %
Other mortgage-backed
securities............. -- -- -- -- -- -- 1,779,392 4.90 % 1,779,392 4.90 %
----------- ------ ---------- ----------- -----------
Total
mortgage-backed
securities
held-to-
maturity......... $ -- -- -- -- 2,842,094 7.81 % 39,090,666 7.07 % 41,932,760 7.12 %
========== ====== ========= ========== ==========
FHLMC certificates....... -- -- -- -- -- -- 1,737,726 8.00 % 1,737,726 8.00 %
GNMA certificates........ -- -- -- -- 67,521 8.00 % 20,213,759 8.00 % 20,281,280 8.00 %
----------- ------ ---------- ----------- -----------
Total mortgaged-
backed
certificates
available-for-sale... $ -- -- -- -- 67,521 8.00 % 21,951,485 8.00 % 22,019,006 8.00 %
========== ====== ========= ========== ==========
FNMA debentures.......... -- -- 5,080 8.60 % -- -- -- -- 5,080 8.60 %
FHLB debentures.......... -- -- -- -- 5,000 7.15 % -- -- 5,000 7.15 %
----------- ------ ---------- ----------- -----------
Total.............. $ -- -- 5,080 8.60 % 5,000 7.15 % -- -- 10,080 7.88 %
========== ====== ========= ========== ==========
Other Funds:
Interest-bearing
deposits............... 87,859,477 5.00 % -- -- -- -- -- -- 87,859,477 5.00 %
FHLP stock............... -- -- -- -- -- -- 4,325,800 -- 4,325,800 --
Other investments........ -- -- -- -- -- -- 1,320,424 -- 1,320,424 --
----------- ------ ---------- ----------- -----------
$87,859,477 -- -- -- -- -- 5,646,224 -- 93,505,701 --
========== ====== ========= ========== ==========
</TABLE>
60
<PAGE> 68
SOURCE OF FUNDS
GENERAL. Deposit accounts are FF Bancorp's primary source of funds for use
in lending and for other general business purposes. In addition to deposit
accounts, FF Bancorp obtains funds from normal loan amortization and prepayments
and from operations. Contractual loan payments are a relatively stable source of
funds, while deposit inflows and outflows and loan prepayments are significantly
influenced by general market interest rates and economic conditions. Borrowings
may be used on a short-term basis to compensate for seasonal or other reductions
in normal sources of funds. Borrowings may also be used on a longer term basis
to support expanded lending or investment activities. At September 30, 1994, FF
Bancorp had no borrowings outstanding.
DEPOSITS. Due to changes in regulatory and economic conditions in recent
years, FF Bancorp has increasingly emphasized deregulated fixed-rate certificate
accounts and other types of deposit accounts. A number of different programs
have been designed to attract both short-term and long-term deposits of the
general public by providing an assortment of accounts and rates. These programs
include passbook accounts, NOW accounts, MMDAs and certificates of deposit
currently ranging in terms from 91 days to 120 months. In the unlikely event of
liquidation, account holders will be entitled to full payment of their accounts
prior to payment to shareholders.
Deposit accounts are obtained primarily from customers residing in FF
Bancorp's primary market areas. The principal methods used to attract deposit
accounts include offering a wide variety of services and accounts, competitive
interest rates and convenient office locations, including access to automated
teller machines ("ATMs") through the HONOR shared ATM network. FF Bancorp does
not utilize brokered deposits or actively seek negotiated rate certificates of
deposit in excess of $100,000 ("jumbo certificates").
The following table shows the distribution of, and certain other
information relating to, FF Bancorp's deposit accounts by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------
1993 1992
------------------ ------------------
% OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest bearing commercial checking
accounts....................................... $ 6,200 1.3% $ 1,736 .3%
Regular savings account.......................... 89,299 18.2 86,185 17.2
MMDAs............................................ 39,723 8.1 39,419 7.9
NOW accounts..................................... 42,507 8.7 40,363 8.1
-------- ------- -------- -------
Subtotal............................... 177,729 36.3 167,703 33.5
-------- ------- -------- -------
Certificate of deposits:
2.00% - 2.99%................................. 3,091 .6 -- --
3.00% - 4.99%................................. 191,302 39.0 197,355 39.4
5.00% - 6.99%................................. 104,486 21.3 103,152 20.6
7.00% - 8.99%................................. 11,102 2.3 24,341 4.8
9.00% - 10.99%................................ 1,200 .3 7,129 1.4
11.00% - 12.99%................................ 1,131 .2 1,416 .3
-------- ------- -------- -------
Total certificates of deposit.................... 312,312 63.7 333,393 66.5
-------- ------- -------- -------
Total deposits......................... $490,041 100% $501,096 100%
======== ====== ======== ======
</TABLE>
61
<PAGE> 69
The following table shows the average amount of and the average rate paid
on each of the following deposit account categories during the years indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1993 1992 1991
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD BALANCE YIELD
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MMDA's, Now and noninterest
bearing commercial checking
accounts....................... $ 85,089 2.46% $ 68,642 3.23% $ 54,579 4.98%
Regular savings.................. 88,107 2.62 79,142 3.48 61,762 5.36
Certificates of deposits:........ 319,476 4.69 354,853 5.68 402,372 7.60
-------- -------- --------
Total deposits......... $492,672 3.93% $502,637 5.01% $518,713 7.06%
======== ====== ======== ====== ======== ======
</TABLE>
The following table sets forth the net deposit flows of FF Bancorp during
the years indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net (decrease) before interest credited................. $(28,760) $(38,938) $(7,782)
Interest credited....................................... 17,705 22,049 28,483
-------- -------- -------
Net deposit increase (decrease)............... $(11,055) $(16,889) $20,701
======== ======== =======
</TABLE>
BORROWINGS. FF Bancorp is permitted to obtain advances from the FHLB of
Atlanta upon the security of the capital stock owned in the FHLB of Atlanta and
certain home mortgage loans and other assets (principally, securities which are
obligations of, or guaranteed by, the U.S. government or agencies thereof),
provided certain standards related to credit worthiness have been met. Such
advances may be made pursuant to several different credit programs. Each credit
program has its own interest rate and range of maturities, and the FHLB of
Atlanta prescribes the acceptable uses to which the advances pursuant to each
program may be made, as well as limitations on the size of such advances.
Depending on the program, such limitations are based either on a fixed
percentage of FF Bancorp's thrift subsidiaries regulatory capital or their
liability for shares and deposits or on the FHLB's assessment of the credit
worthiness of FF Bancorp's thrift subsidiaries. The FHLB is required to review
their credit limitations and standards at least once every six months.
Prepayment of FHLB of Atlanta advances may incur prepayment penalties.
At December 31, 1993, FF Bancorp had $5.0 million in FHLB advances
outstanding and had no borrowings or advances outstanding at September 30, 1994.
AFFILIATES OF NEW SMYRNA BANK AND CITRUS BANK
At December 31, 1993, New Smyrna Bank and Citrus Bank each had one
affiliate (collectively "Affiliates"). New Smyrna Bank's affiliate, First
Florida Agency, Inc. ("FFA") was founded in 1985 but had not carried on any
business activities until 1993. Citrus Bank's affiliate, Home Assets, Inc.
("Home Assets"), was incorporated in 1972 and its last major activity prior to
1993 involved a joint venture agreement in 1986. Home Assets' only activity from
1986 until April 5, 1993 was the receipt of payments and the marketing of two
remaining lots from the joint venture.
In November, 1992 FF Bancorp expanded its financial services available to
customers to include mutual funds and fixed and variable rate annuities. Because
savings institutions are prohibited by law from the direct solicitation of
insurance and securities products on the savings institution's premises and from
entering directly into contracts with broker-dealers for such securities
services, the Affiliates entered into separate Service Agreements with a third
party, unaffiliated licensed broker-dealer, to sell mutual funds and variable
annuities to customers of unaffiliated licensed broker-dealer, to sell mutual
funds and variable annuities to customers of FF Bancorp. New Smyrna Bank and
Citrus Bank, in turn, entered into separate lease agreements with
62
<PAGE> 70
licensed insurance agency to lease a portion of space at each respective branch
office for the purpose of selling fixed and variable annuities. The Service
Agreements require the broker-dealer to pay the Affiliates a portion of
commissions received by the broker-dealer from the sale of securities. The lease
agreements require the insurance agency to pay fixed lease payments to New
Smyrna Bank and Citrus Bank for use of the leased premises to sell insurance.
The lease payment may be adjusted on a quarterly basis. The lease agreements
were entered into and effective November 30, 1992. The Service Agreements were
entered into in February, 1992, but brokerage activities did not commence until
April 5, 1993, after appropriate notices had been filed with the FDIC and OTS
and those agencies had indicated that they had no objection to the brokerage
activities.
63
<PAGE> 71
FF BANCORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
FF Bancorp is a Florida corporation which was established on May 12, 1992.
FF Bancorp is a multiple savings and loan holding company whose principal
activity is the operation of the its wholly-owned Thrift Subsidiaries, New
Smyrna Bank and Citrus Bank.
FF Bancorp became a multiple savings and loan holding company as a result
of two separate transactions which closed on July 8, 1992. The transactions
involved the reorganization of New Smyrna Bank, a federally chartered stock
savings bank, and the reorganization and acquisition of Citrus Bank, a federally
chartered mutual savings association. In the reorganization of New Smyrna Bank,
each of the outstanding shares of common stock of New Smyrna Bank were exchanged
for shares of FF Bancorp's common stock on a one for one basis. The acquisition
and reorganization of Citrus Bank resulted in Citrus Bank's conversion from a
federally chartered mutual savings association to a federally chartered stock
savings bank and involved an offering by FF Bancorp of its common stock in a
subscription and community offering in an aggregate amount equal to the
appraised value of Citrus Bank at the time of the conversion.
FF Bancorp, for the year ended December 31, 1993, had net consolidated
earnings of $7.8 million. FF Bancorp's main business, conducted through New
Smyrna Bank and Citrus Bank, is to attract deposits and to invest those funds in
mortgage loans for financing the purchase of real estate properties, primarily
secured by owner-occupied, single family (one to four units) residential
properties, including construction loans for such properties, and to a lesser
extent, the origination of loans secured by commercial and multi-family
residential real estate properties and consumer loans.
FF Bancorp's consolidated assets amounted to $544.9 million as of December
31, 1993, a decrease of 1% over total assets of $548.5 million as of December
31, 1992. During the year ended December 31, 1993 net loans receivable increased
$14.0 million or 4%. FF Bancorp's portfolio of mortgage-backed securities
decreased substantially to $63.9 million as of December 31, 1993 from $82.3
million as of December 31, 1992. The increase in loans and decrease in
mortgage-backed securities represents the reinvestment of principle repayments
on mortgage-backed securities into mortgage loans. FF Bancorp's deposit accounts
decreased to $490.0 million as of December 31, 1993 from $501.1 million as of
December 31, 1992, a decrease of 2.2%. The decrease in deposit accounts
reflected FF Bancorp's strategy of continuing to accept and retain only deposit
accounts for which funds can be prudently invested.
BANK ACQUISITION
On April 8, 1994 FF Bancorp acquired Key Bancshares for a combination of
$2.6 million in cash and 71,142 shares of common stock. Key Bancshares is the
parent company for Key Bank, a state-chartered commercial bank located in Tampa,
Florida with total assets at March 31, 1994 of $71 million. Key Bank operates as
a commercial bank subsidiary. As a result of this acquisition, FF Bancorp, in
addition to being a multiple savings and loan holding company, became a one-bank
holding company.
BANKING SUBSIDIARIES
New Smyrna Bank was founded in 1935 as a mutual savings association and
converted to a stock company format on July 1, 1991. Gross proceeds from the
sale of New Smyrna Bank's common stock totalled $11.5 million and after
deduction of offering expenses, net proceeds amounted to $10.7 million. At
December 31, 1993, New Smyrna Bank had total assets of $323.5 million, total
deposits of $296.2 million and equity capital of $23.2 million. New Smyrna
Bank's activities are conducted from its main office in New Smyrna Beach,
Florida and its two full service branch facilities in Edgewater and New Smyrna
Beach, Florida. New Smyrna Bank makes mortgage loans on real estate primarily
located in Volusia County.
Citrus Bank was founded in 1963 as a mutual savings association and
converted to a stock savings bank format on July 8, 1992. FF Bancorp issued
152,554 shares of its common stock in the acquisition of Citrus
64
<PAGE> 72
Bank. Gross proceeds from the offering totaled $2.4 million and, after deduction
of offering expenses, net proceeds from the offering amounted to $2.1 million.
At December 31, 1993, Citrus Bank had total assets of $221.3 million, total
deposits of $197.9 million and equity capital of $14.9 million. Citrus Bank
conducts its business through three full service branch facilities in Crystal
River, Homosassa Springs and Beverly Hills, Florida and its corporate
headquarters in Inverness, Florida. Citrus Bank's primary market area for making
mortgage loans on real estate is in Citrus, Hernando, and Marion Counties.
Key Bank was founded in 1973 as a state (Florida) chartered commercial
bank. Key Bank reorganized in 1992 as a subsidiary of Key Bancshares, Inc. At
December 31, 1994, Key Bank had total assets of $67.2 million, total deposits of
$61.8 million and equity of $4.8 million. Key Bank conducts its business through
2 full-service branch facilities in Hillsborough County. Key Bank's primary
market area is in Hillsborough and Pinellas Counties.
FF Bancorp's Thrift subsidiaries are members of the Federal Home Loan Bank
System and their deposit accounts are insured by the Savings Association
Insurance Fund of the FDIC. Key Bank's deposits are insured by the Bank
Insurance Fund of FDIC. FF Bancorp and its subsidiaries are Equal Opportunity
Employers and are Equal Housing Lenders.
AFFILIATES OF THRIFT SUBSIDIARIES
FF Bancorp expanded the financial services being offered to its customers
in April, 1993 to include limited brokerage services, offering variable rate
annuities and mutual funds rate annuities. These services are offered through
subsidiaries of FF Bancorp's Thrift subsidiaries.
REGULATION AND LEGISLATION
The operating results of FF Bancorp and its Thrift Subsidiaries, New Smyrna
Bank and Citrus Bank are affected by federal and state laws and federal
regulations. As a multiple savings and loan holding company, FF Bancorp is
subject to regulation and supervision by the Office of Thrift Supervision
("OTS") under the Savings and Loan Holding Company Act. In recent years,
measures have been taken to reform the banking industry and to strengthen the
insurance funds for depository institutions. The most significant of these
measures was the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA"), which in general has had a major impact on the operation and
regulation of savings associations. In 1991, a comprehensive deposit insurance
and banking reform plan, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), became law. Although the FDICIA's primary purpose is to
recapitalize the Bank Insurance Fund of the FDlC, which insures the deposits of
commercial banks, the FDICIA also affects the supervision and regulation of all
federally insured depository institutions, including federal savings banks such
as New Smyrna Bank and Citrus Bank.
New Smyrna Bank and Citrus Bank are subject to regulation and supervision
by the OTS and the FDIC and are restricted in their dealings with companies that
are affiliates of FF Bancorp under the Home Owners Loan Act and the Federal
Reserve Act which were made applicable to savings associations by the FIRREA.
Transactions with affiliates of savings associations are now subject to the
limitations of Sections 23A, 23B and 22(h) of the Federal Reserve Act. By
acquisition of Key Bancshares, FF Bancorp became a one-bank holding company with
Key Bancshares as its subsidiary. FF Bancorp will then also be subject to
regulation and supervision by the Federal Reserve Board under the Bank Holding
Company Act.
The FIRREA established new capital standards for savings associations which
have been codified in the OTS' capital regulations. All savings associations
must now meet three separate minimum capital-to-assets requirements: (i) a
leverage requirement of 3% core capital to adjusted total assets; (ii) a
tangible capital requirement of 1.5% tangible capital to adjusted total assets;
and (iii) a risk-based capital standard of 8.0% total capital (which is defined
as core and supplementary capital) to risk-weighted assets. The components of
supplementary capital include cumulative perpetual preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and allowance for loan and lease losses.
Allowance or loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25%. Overall, the amount of supplementary capital
counted toward total capital cannot exceed
65
<PAGE> 73
100% of core capital. In determining the amount of risk-weighted assets, all
assets, including certain off balance sheet assets, are multiplied by a risk
weight of 0% to 100%, as assigned by the OTS capital regulation based on the
risks OTS believes are inherent in the type of asset. The OTS has proposed to
modify the core capital requirement, whereby only savings associations rated
composite 1 under the OTS macro rating system would be permitted to operate with
a minimum regulatory leverage ratio of 3%. For all other savings associations,
the minimum core capital leverage ratio will be 3%, plus at least an additional
100 to 200 basis points.
In August 1993, the OTS issued a final rule which sets forth the
methodology for calculating an interest rate risk component. The final interest
rate risk rule which became effective January 1, 1994 and made part of the OTS'
capital regulations, adjusts the risk-weighting for certain mortgaged derivative
securities. The interest rate risk component is an amount equal to one-half of
the difference between the savings association's measured interest rate risk and
2%, multiplied by the estimated economic value of the savings association's
assets. The dollar amount is deducted from the savings association's total
capital in calculating compliance with its risk-based capital requirement. The
rule provides for a two quarter lag between the reporting date of a savings
institution's financial data and the effective date for new capital requirement
based on that data. Thus, the first date that the component will be deducted
from total capital under the final rule will be July 1, 1994, based on the
interest rate risk component calculated using data as of December 31, 1993. The
rule also provides that the Director of the OTS may waive or defer a savings
association's interest rate risk component on a case-by-case basis. At December
31, 1993, New Smyrna Bank and Citrus Bank met their respective capital
requirements.
The FDICIA adopted a number of new mandatory supervisory measures
applicable to savings associations, as well as banks, designed to reduce the
cost to the deposit funds in resolving problems presented by undercapitalized
financial institutions. In addition, the federal regulatory agencies are also
required to adopt and enforce final regulations prescribing standards relating
to a variety of operating matters such as internal controls, information systems
and external audit systems, loan documentation and credit underwriting, interest
rate exposure, asset growth and quality and employee compensation.
The FDICIA authorizes the FDIC to assess deposit insurance premiums based
on risk. The FDIC is mandated to establish a schedule to increase the reserve
ratio of the Savings Association Insurance Fund to 1.25% of insured deposits
within a "reasonable period of time." The FDIC may impose higher deposit
insurance premiums on SAIF members, if necessary, to achieve that ratio. The
FDIC's new risk-based premium structure became effective on January 1, 1993. The
deposit premiums for a savings association can range from $.23 to $.31 per $100
of deposits based upon a grouping of supervisors evaluations and capital ratios.
The savings association's primary regulator makes the initial decision as to
which category the savings association should come under. A savings association
with lower capital and supervisory problems will be charged more for insurance
with lower rates being the incentive for the savings institution to improve its
financial condition and operations. Risk-based premium assessments are reviewed
semi-annually. FF Bancorp's subsidiaries, New Smyrna Bank and Citrus Bank fell
into the lowest risk category for the 1993 calendar year.
CREDIT RISK
FF Bancorp's primary business is lending on residential real estate. That
activity entails potential loan losses, the magnitude of which depend on a
variety of economic factors affecting borrowers which are beyond the control of
FF Bancorp. While FF Bancorp has instituted underwriting guidelines and credit
review procedures to protect itself from avoidable credit losses, some losses
will inevitably occur.
RESULTS OF OPERATIONS
The operating results of FF Bancorp depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, primarily single-family residential loans, and interest expense on
interest-bearing liabilities, consisting primarily of deposits. Net interest
income is determined by (i) the difference between yields earned on
interest-earning assets and rates paid on interest-bearing liabilities
66
<PAGE> 74
("interest rate spread") and (ii) the relative amounts of interest-earning
assets and interest-bearing liabilities. FF Bancorp's interest rate spread is
affected by regulatory, economic and competitive factors that influence interest
rates, loan demand and deposit flows. In addition, FF Bancorp's net earnings are
also affected by the level of nonperforming loans and real estate owned, as well
as the level of its noninterest income, including loan related fees, and its
noninterest expenses, such as salaries and employee benefits, occupancy and
equipment costs and provisions for losses on real estate owned and income taxes.
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of FF
Bancorp from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average costs; (iii) net interest/dividend income; (iv) interest rate
spread; (v) net interest margin; and (vi) weighted average yields and rates at
December 31, 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1993 1992 1991
------------------------------ ------------------------------ ------------------------------
AT INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
DECEMBER 31, AVERAGE AND YIELD/ AVERAGE AND YIELD/ AVERAGE AND YIELD/
1993 BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------------ -------- --------- ------- -------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Interest-earning
assets:
Loans.......... 8.22% $345,037 $30,500 8.84% $346,550 $32,996 9.52% $359,726 $36,042 10.02%
Mortgage-backed
securities... 7.61 82,925 6,029 7.27 96,615 7,708 7.98 90,281 7,675 8.50
Investment
securities... 6.99 9,946 672 6.76 10,218 709 6.94 2,746 217 7.90
Other
interest-earning
assets(1).... 3.15 81,101 2,545 3.14 68,186 2,461 3.61 69,026 4,129 5.98
-------- --------- -------- --------- -------- ---------
Total
interest-
earning
assets... 7.25 519,009 39,746 7.66 521,569 43,874 8.41 521,779 48,063 9.21
--------- --------- ---------
Noninterest-earning
assets......... 27,587 26,525 27,059
-------- -------- --------
Total
assets... $546,596 $548,094 $548,838
======== ======== ========
Interest-bearing
liabilities:
NOW and money
market
accounts..... 2.22 85,089 2,094 2.46 68,642 2,219 3.23 54,579 2,716 4.98
Passbook....... 2.32 88,107 2,311 2.62 79,142 2,757 3.48 61,762 3,308 5.36
Certificates of
deposit...... 4.51 319,476 14,970 4.69 354,853 20,167 5.68 402,372 30,575 7.60
-------- --------- -------- --------- -------- ---------
Total
deposit
accounts... 3.68 492,672 19,375 3.93 502,637 25,143 5.00 518,713 36,599 7.06
Borrowed
funds........ 5.54 5,000 276 5.50 4,588 255 5.56 -- -- --
-------- --------- -------- --------- -------- --------- -------
Total
interest-
bearing
liabilities... 3.70 497,672 19,651 3.95 507,225 25,398 5.01 518,713 36,599 7.06
--------- --------- ---------
Noninterest-bearing
liabilities.... 10,856 9,711 7,742
Retained earnings
and
stockholders'
equity......... 38,068 31,158 22,383
-------- -------- --------
Total
liabilities
and
retained
earnings
and
stockholders'
equity... $546,596 $548,094 $548,838
======== ======== ========
Net
interest/dividend
income......... $20,095 $18,476 11,464
========= ========= =========
</TABLE>
67
<PAGE> 75
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1993 1992 1991
------------------------------ ------------------------------ ------------------------------
AT INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
DECEMBER 31, AVERAGE AND YIELD/ AVERAGE AND YIELD/ AVERAGE AND YIELD/
1993 BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------------ -------- --------- ------- -------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Interest rate
spread(2)...... 3.55% 3.71% 3.40% 2.15%
======== ======== ======== =======
Net interest
margin(3)...... 3.87% 3.54% 2.20%
======= ======= =======
Ratio of average
interest-earning
assets to
average
interest-
bearing
liabilities.... 1.04 1.03 1.01
======= ======= =======
</TABLE>
- ---------------
(1) Includes interest-bearing deposits and stock in FHLB of Atlanta.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is net income dividend by average interest-earning
assets.
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of FF
Bancorp from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest rate
spread; and (v) net interest margin.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1994 1993
------------------------------ ------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
-------- --------- ------- -------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans.................................. $393,630 24,920 8.44% $343,614 23,014 8.93%
Mortgage-backed securities............. 54,427 3,082 7.55 86,018 4,726 7.33
Investment securities.................. 20,185 882 5.83 9,894 489 6.59
Other interest-earning assets(1)....... 87,708 2,629 4.00 75,354 1,875 3.32
-------- --------- -------- ---------
Total interest-earning
assets....................... 555,950 31,513 7.56 514,880 30,104 7.80
--------- ---------
Noninterest-earning assets............. 26,756 31,762
-------- --------
Total assets................... $582,706 $546,642
======== ========
Interest-bearing liabilities:
Deposit accounts....................... 529,181 14,586 3.68 493,925 14,721 3.97
Borrowed funds......................... 556 21 5.04 5,000 207 5.52
-------- --------- -------- ---------
Total interest-bearing
liabilities.................. 529,737 14,607 3.68 498,925 14,928 3.99
--------- ---------
Noninterest-bearing liabilities........ 8,537 10,283
Stockholders' equity................... 44,432 37,434
-------- --------
Total liabilities and
stockholders' equity......... $582,706 $546,642
======== ========
Net interest/dividend income............. $16,906 $15,176
======= =======
Interest rate spread(2).................. 3.88% 3.81%
======= =======
Net average interest-earning assets, net
interest margin(3)..................... $ 26,213 4.05% $ 15,955 3.93%
======== ====== ======== ======
Ratio of average interest-earning assets
to average interest-bearing
liabilities............................ 1.05 1.03
====== ======
</TABLE>
68
<PAGE> 76
- ---------------
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.
The following table sets forth certain information regarding changes in
interest income and interest expense of FF Bancorp for the periods indicated.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
INCREASE (DECREASE) DUE TO
-----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
------- ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993 VS. 1992:
Interest-earning assets:
Loans receivable(1)....................................... $(2,362) (144) 10 (2,496)
Mortgage-backed securities................................ (684) (1,092) 97 (1,679)
Investment securities..................................... (19) (19) 1 (37)
Other interest-earning assets(2).......................... (321) 466 (61) 84
------- ------ ------ -------
Total............................................. (3,386) (789) 47 (4,128)
------- ------ ------ -------
Interest-bearing liabilities:
Deposit accounts:
NOW and money market................................... (530) 532 (127) (125)
Passbook............................................... (681) 312 (77) (446)
Certificates of deposit................................ (3,539) (2,011) 353 (5,197)
------- ------ ------ -------
Total deposit accounts............................ (4,750) (1,167) 149 (5,768)
Borrowed funds............................................ (2) 23 -- 21
------- ------ ------ -------
Total............................................. (4,752) (1,144) 149 (5,747)
------- ------ ------ -------
Net change in net interest income before provision
for loan losses................................. $ 1,366 355 (102) 1,619
======= ====== ====== =======
YEAR ENDED DECEMBER 31, 1992 VS. 1991:
Interest-earning assets:
Loans receivable(1)....................................... $(1,791) (1,320) 65 (3,046)
Mortgage-backed securities................................ (472) 538 (33) 33
Investment securities..................................... (26) 590 (72) 492
Other interest-earning assets(2).......................... (1,638) (50) 20 (1,668)
------- ------ ------ -------
Total............................................. (3,927) (242) (20) (4,189)
------- ------ ------ -------
Interest-bearing liabilities:
Deposit accounts:
NOW and money market deposit accounts.................. (952) 700 (245) (497)
Passbook accounts...................................... (1,156) 931 (326) (551)
Certificates accounts.................................. (7,707) (3,611) 910 (10,408)
------- ------ ------ -------
Total deposit accounts............................ (9,815) (1,980) 339 (11,456)
Borrowed funds............................................ -- -- 255 255
------- ------ ------ -------
Total............................................. (9,815) (1,980) 594 (11,201)
------- ------ ------ -------
Net change in net interest income before provision
for loan losses................................. $ 5,888 1,738 (614) 7,012
======= ====== ====== =======
</TABLE>
- ---------------
(1) Does not include interest on loans 90 days or more past due.
(2) Includes interest-bearing deposits and stock in the FHLB of Atlanta.
69
<PAGE> 77
LIQUIDITY AND CAPITAL RESOURCES
Comparison of December 31, 1993 and December 31, 1992
FF Bancorp's subsidiaries, New Smyrna Bank and Citrus Bank, are required by
OTS regulations to maintain average daily balances of liquid assets and
short-term liquid assets (as defined) in amounts equal to 5% and 1%,
respectively, of net withdrawable deposits and borrowings payable in one year or
less to assure its ability to meet demand for withdrawals and repayment of
short-term borrowings. The liquidity requirements may vary from time to time at
the direction of the OTS depending upon economic conditions and deposit flows.
New Smyrna Bank and Citrus Bank generally maintain a minimum liquidity ratio
significantly in excess of these requirements. New Smyrna Bank's and Citrus
Bank's average daily liquidity ratio for December, 1993 were 20.6% and 15.8%,
respectively, and their short-term liquidity ratio at December 31, 1993 were
approximately 20.6% and 15.8%, respectively. New Smyrna Bank and Citrus Bank
each maintains a liquidity ratio which is higher than required levels as part of
their asset and liability management strategy.
In connection with the insurance of deposit accounts, FF Bancorp's
subsidiaries are required to maintain certain minimum regulatory capital
requirements. New Smyrna Bank, Citrus Bank and Key Bank are all in compliance
with their required regulatory capital requirements at September 30, 1994.
During the year ended December 31, 1993, FF Bancorp's primary sources of
funds consisted of principal payments on loans, principal collected on
mortgage-backed securities, and net earnings. FF Bancorp used its capital
resources principally to fund existing and continuing loan commitments, the net
decrease in deposit accounts and to purchase mortgage-backed securities. At
December 31, 1993, FF Bancorp had commitments to originate loans totalling $8.2
million and had $6.4 million of undisbursed loans in process. Scheduled
maturities of certificates of deposit during the 12 months following December
31, 1993 totalled $192.2 million as of December 31, 1993. Management believes
that FF Bancorp has adequate resources to fund all its commitments, that
substantially all of its existing commitments will be funded in 1994 and, if so
desired, that it can adjust the rates on certificates of deposit to retain
deposits in a changing interest rate environment.
Comparison of September 30, 1994 and December 31, 1993
FF Bancorp's primary sources of cash were from loan and mortgage-backed
securities principal repayments and operating activities. During the nine-month
period ended September 30, 1994, loan principal repayments were $43.4 million,
mortgage-backed securities principal repayments were $14.1 million, and cash
flows from operating activities were $4.9 million. Cash was used primarily to
originate loans of $61.4 million, and fund deposit account outflows of $17.0
million. At September 30, 1994, FF Bancorp had outstanding commitments to
originate loans of $12.9 million and loans in process of $8.2 million. It is
expected that these requirements will be funded from the sources described
above. FF Bancorp's Florida Banking Subsidiaries exceed their regulatory
liquidity requirements.
REGULATORY CAPITAL REQUIREMENTS
Under OTS regulations FF Bancorp's subsidiaries, New Smyrna Bank and Citrus
Bank, are required to meet three minimum regulatory capital requirements. This
is not a valuation allowance and has not been created by charges against
earnings. It represents a restriction on stockholders' equity. FF Bancorp's
subsidiaries, New Smyrna Bank and Citrus Bank, exceeded all three of their
regulatory capital requirements
70
<PAGE> 78
as of December 31, 1993. The following is a summary of the capital requirements,
New Smyrna's and Citrus Bank's regulatory capital and the amounts in excess as
of December 31, 1993:
<TABLE>
<CAPTION>
RISK-BASED
TANGIBLE CORE -----------------------
---------------- ---------------- % OF
% OF % OF RISK-WEIGHTED
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------- ------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
NEW SMYRNA BANK:
Regulatory capital.............. $23,238 7.2% $23,238 7.2% $24,112 16.1%
Requirement..................... 4,862 1.5 9,724 3.0 12,006 8.0
------- ------ ------- ------ ------- -----
Excess................ $18,376 5.7% $13,514 4.2% $12,106 8.1%
======= ===== ======= ===== ======= ==========
CITRUS BANK:
Regulatory capital.............. $14,819 6.7% $14,819 6.7% $15,932 18.0%
Requirement..................... 3,319 1.5 6,637 3.0 7,068 8.0
------- ------ ------- ------ ------- -----
Excess................ $11,500 5.2% $ 8,182 3.7% $ 8,864 10.0%
======= ===== ======= ===== ======= ==========
</TABLE>
FF Bancorp's subsidiaries, New Smyrna Bank, Citrus Bank and Key Bank,
exceeded their regulatory capital requirements as of September 30, 1994.
ASSET AND LIABILITY MANAGEMENT
The lending activities of savings associations, have historically
emphasized the origination of long-term, fixed-rate loans secured by
single-family residences. The primary source of funds of such savings
associations to support such activities is deposits. The deposit accounts of
savings associations largely mature or are subject to repricing within a short
period of time. The principal determinant of the exposure of FF Bancorp's
earnings to interest rate risk is the timing difference between the repricing or
maturity of FF Bancorp's interest-earning assets and the repricing or maturity
of its interest-bearing liabilities.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds interest rate sensitive liabilities. A gap is considered negative when
the amount of interest rate sensitive liabilities exceeds interest rate
sensitive assets. During a period of rising interest rates, a negative gap would
adversely affect net interest income, while a positive gap would result in an
increase in net interest income. During a period of falling interest rates, a
negative gap would result in an increase in net interest income, while a
positive gap would adversely affect net interest income.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on FF Bancorp's results of operations, FF
Bancorp's management has implemented and continues to monitor asset and
liability management policies to better match the maturities and repricing terms
of FF Bancorp's interest-earning assets and interest-bearing liabilities. Such
policies have consisted primarily of: (i) emphasizing the origination of
single-family residential adjustable-rate mortgage loans ("ARMs"); (ii)
maintaining a stable core deposit base with a relatively high percentage of
low-cost deposits; and (iii) maintaining a significant portion of liquid assets
(cash and interest-bearing deposits).
Between 1984 and 1989, FF Bancorp successfully emphasized the origination
of single-family residential ARMs. However, due to the generally lower interest
rates which have prevailed during the past few years, FF Bancorp's originations
of ARMs has decreased since 1990, due to the preference of FF Bancorp's
customers for fixed-rate residential mortgage loans. Nevertheless, as a
consequence of management's efforts, $13.1 million or 19.9% of the single-family
residential mortgage loans originated by FF Bancorp during 1993 consisted of
ARMs. As a result, as of December 31, 1993, $95.6 million or 29.4% of FF
Bancorp's portfolio of
71
<PAGE> 79
one-to-four-family residential mortgage loans consisted of ARMs and 29.3% of FF
Bancorp's total loan portfolio had adjustable interest rates.
FF Bancorp has also maintained a relatively large portfolio of liquid
assets (cash and assets maturing in one year or less) in order to reduce its
vulnerability to shifts in market rates of interest. At December 31, 1993, 17.5%
of FF Bancorp's total assets consisted of cash and interest-bearing deposits.
Furthermore, as of such date, FF Bancorp's liquidity ratio was 18.6%.
FF Bancorp also seeks to maintain a large stable core deposit base by
providing quality service to its customers without significantly increasing its
cost of funds or operating expenses. The success of FF Bancorp's core deposit
strategy is demonstrated by the stability of its money market demand ("MMDA"),
savings accounts and negotiable order of withdrawal ("NOW") accounts, which
totalled $177.7 million or 36.3% of total deposits at December 31, 1993. These
accounts, bore a weighted average nominal rate of 2.28% at December 31, 1993.
Management anticipates that these accounts will continue to comprise a
significant portion of its deposit base.
Based upon strategies and policies described above and the assumptions set
forth below, FF Bancorp's one-year negative interest rate sensitivity gap
amounted to ($6.0) million or (1.11%) of total assets as of December 31, 1993.
At December 31, 1992, the one-year positive interest rate sensitivity gap was
$8.5 million or 1.55% of total assets. The decline in the gap position at
December 31, 1993 is primarily the result of the significant level of
residential mortgage originations during 1993, and customers, continued
preference for fixed rate residential loans. Although management believes that
the implementation of the foregoing strategies has reduced the potential adverse
effects of changes in interest rates on FF Bancorp's results of operations, any
substantial and prolonged increase in market rates of interest would have an
adverse impact on FF Bancorp's results of operations. Management of FF Bancorp
monitors FF Bancorp's interest rate sensitivity on a quarterly basis and
believes that its present gap position is appropriate for the current interest
rate environment.
The following table sets forth certain information relating to FF Bancorp's
interest-earning assets and interest-bearing liabilities at December 31, 1993
that are estimated to mature or are scheduled to reprice within the period shown
(1).
<TABLE>
<CAPTION>
MORE THAN MORE THAN MORE THAN MORE THAN MORE THAN
SIX MONTHS SIX MONTHS TO ONE YEAR TO THREE YEARS TO FIVE YEARS TO TEN YEARS TO MORE THAN
OR LESS 12 MONTHS THREE YEARS FIVE YEARS 10 YEARS 20 YEARS 20 YEARS TOTAL
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans and
mortgage-backed
securities:
First mortgage
loans -- Balloon
and adjustable rate
(all property
types)............. $ 53,745 $30,937 $ 9,481 $ 669 $ 9 $ -- $ -- 94,841
Fixed rate 1-4
dwelling units..... 36,517 27,104 87,360 61,782 68,901 10,181 377 292,222
Collateralized
mortgage
obligations and
REMICs............. -- 10,924 -- -- -- -- -- 10,924
Other residential and
all
nonresidential..... 4,796 1,137 2,518 8,942 9,127 487 147 27,154
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
Total mortgage
loans and
mortgage-backed
securities... 95,058 70,102 99,359 71,393 78,037 10,668 524 425,141
Consumer and other
loans................ 2,731 374 1,056 446 247 5 -- 4,859
Investments(2)......... 87,859 -- 10,080 -- -- -- 5,647 103,586
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
Total financial
assets....... 185,648 70,476 110,495 71,839 78,284 10,673 6,171 533,586
Unearned discounts and
deferred loan fees... (174) (176) (702) (704) (1,747) (602) (592) (4,697)
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
Total
rate-sensitive
assets....... 185,474 70,300 109,793 71,135 76,537 10,071 5,579 528,889
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
</TABLE>
72
<PAGE> 80
<TABLE>
<CAPTION>
MORE THAN MORE THAN MORE THAN MORE THAN MORE THAN
SIX MONTHS SIX MONTHS TO ONE YEAR TO THREE YEARS TO FIVE YEARS TO TEN YEARS TO MORE THAN
OR LESS 12 MONTHS THREE YEARS FIVE YEARS 10 YEARS 20 YEARS 20 YEARS TOTAL
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deposit accounts:
Fixed maturity
deposits........... 133,134 59,103 84,166 35,909 -- -- -- 312,312
NOW, Super NOW, and
other transaction
accounts........... 10,048 7,974 16,497 4,415 5,924 3,254 595 48,707
Money market deposit
accounts........... 21,519 9,860 4,371 2,081 1,596 290 6 39,723
Passbook accounts.... 7,944 7,237 23,059 15,031 19,079 13,199 3,750 89,299
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
Total deposit
accounts..... 172,645 84,174 128,093 57,436 26,599 16,743 4,351 490,041
Borrowed funds......... 5,000 -- -- -- -- -- -- 5,000
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
Total
rate-sensitive
liabilities... 177,645 84,174 128,093 57,436 26,599 16,743 4,351 495,041
----------- ------------- ----------- -------------- ------------- ------------ --------- --------
GAP (repricing
differences)......... $ 7,829 $(13,874) $ (18,300) $ 13,699 $49,938 $ (6,672) $ 1,228 $ 33,848
========== =========== ========= ============ ========== ========== ======== ========
Cumulative GAP......... $ 7,829 $ (6,045) $ (24,345) $(10,646) $39,292 $ 32,620 $33,848
========== =========== ========= ============ ========== ========== ========
Cumulative GAP/total
assets............... 1.44% (1.11)% (4.47)% (1.95)% 7.21% 5.99% 6.21%
========== =========== ========= ============ ========== ========== ========
</TABLE>
- ---------------
(1) In preparing the above table, it has been assumed the interest rate
sensitivity of savings associations, that: (i) adjustable-rate first
mortgage single-family residential loans will prepay at a rate of 15% per
year; (ii) fixed-rate first mortgage single family residential loans will
prepay annually as follows:
COMPARISON OF NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1993
General
Net earnings for the nine-month period ended September 30, 1994 were $6.5
million or $1.44 per share compared to earnings before the cumulative effect of
change in accounting principle for the comparable period in 1993 of $5.4 million
or $1.17 per share. Net earnings were $6.2 million or $1.35 per share for the
1993 period. Effective January 1, 1993, FF Bancorp adopted SFAS 109. The
cumulative effect on periods ending prior to January 1, 1993 amounted to
$824,000 or $.18 per share. The increase in earnings was primarily due to an
increase in net interest income and increased noninterest income both of which
were partially offset by increased noninterest expenses.
Income
Interest income on loans increased to $24.9 million for the nine-month
period ended September 30, 1994 from $23.0 million for the comparable 1993
period due to an increase in the average balance of the loan portfolio only
partially offset by a lower yield earned on the loan portfolio. The weighted
average yield earned on the loan portfolio decreased from 8.93% during the
nine-months ended September 30, 1993 to 8.44% during the nine-months ended
September 30, 1994.
Interest income on mortgage-backed securities decreased from $4.7 million
for the nine-month period ended September 30, 1993 to $3.1 million for the
nine-month period ended September 30, 1994. This decrease was due to a decrease
in the average balance of the mortgage-backed securities portfolio only
partially offset by a higher yield earned on the mortgage-backed securities
portfolio.
Interest and dividends on investment securities increased from $489,000 for
the nine-month period ended September 30, 1993 to $882,000 for the nine-month
period ended September 30, 1994 due to a higher average balance in the
securities portfolio only partially offset by a lower yield earned on the
investment securities portfolio.
Interest income on other interest-earning assets increased from $1.9
million for the nine-month period ended September 30, 1993 to $2.6 million for
the nine-month period ended September 30, 1994, due primarily to an increase in
the average balance of other interest-earning assets.
73
<PAGE> 81
Noninterest income increased to $1.5 million for the nine-month period
ended September 30, 1994 from $890,000 for the 1993 nine-month period primarily
from increased rental income received from the company who sells investment
securities in leased space at FF Bancorp's branch offices and fees and service
charges earned in 1994. The acquisition of Key Bank contributed to the increase
in fees and service charges.
Provision for Loan Losses
FF Bancorp recorded no provision for loan losses for the nine-month period
ended September 30, 1994 compared to a provision of $177,000 for the comparable
period in 1993.
Expense
Interest expense on deposit accounts decreased from $14.7 million for the
nine-month period ended September 30, 1993 to $14.6 million for the nine-month
period ended September 30, 1994. This decrease was the result of a decrease in
rates paid on deposit accounts which was only partially offset by a higher
average balance in deposits.
Noninterest expense increased to $8.5 million during the nine-month period
ended September 30, 1994 from $7.3 million for the comparable period in 1993.
That increase was primarily due to noninterest expenses relating to the
operation of Key Bank after acquisition.
Income Tax Provision
The income tax provision increased from $3.3 million for the nine-months
ended September 30, 1993 (an effective rate of 38%) to $3.5 million (an
effective rate of 35%) in the corresponding period in 1994. The decrease in the
effective rate resulted from a favorable outcome relating to certain items
previously provided for which were resolved in favor of FF Bancorp.
COMPARISON OF YEARS ENDED DECEMBER 1993 AND 1992
General
Net earnings for the year ended December 31, 1993 were $7.8 million or
$1.68 per share compared to net earnings of $5.5 million or $1.24 per share for
1992. Earnings before the cumulative effect of the change in accounting
principle were $7.0 million or $1.50 per share for 1993. The increase in
earnings was primarily due to an increase in net interest income and a decrease
in the provision for loan loss, partially offset by an increase in the provision
for income taxes. Effective January 1, 1993, FF Bancorp adopted SFAS 109
relating to the method of accounting for income taxes. The cumulative effect on
years ending prior to January 1, 1993 amounted to $824,000 or $.18 per share.
Interest Income and Expense
Interest income decreased $4.1 million or 9.4% during the year ended
December 31, 1993 from the amount earned in the year ended December 31, 1992.
Interest on loans decreased $2.5 million due to a decrease in the weighted
average yield from 9.52% during the year ended December 31, 1992 to 8.84% during
the year ended December 31, 1993 and a decrease in the average loan portfolio
balance. Interest on mortgage-backed securities decreased $1.7 million due
primarily to a decrease in the average amounts invested in these securities
during 1993 compared to 1992.
Interest expense on deposit accounts decreased from $25.1 million for the
year ended December 31, 1992 to $19.4 million for the year ended December 31,
1993. This decrease was the result of a decrease in rates paid on deposit
accounts and a decrease in the average balance of deposit accounts.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by FF Bancorp,
industry standards, the amount of nonperforming loans, general economic
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conditions, particularly as they relate to FF Bancorp's market areas, and other
factors related to the collectibility of FF Bancorp's loan portfolio. The
provision for loan losses decreased from $1.0 million for the year ended
December 31, 1992 to $.2 million during 1993. The allowance for loan losses
increased from $2.6 million at December 31, 1992 to $2.7 million at December 31,
1993. While management believes that its allowance for loan losses is adequate
as of December 31, 1993, future adjustments to FF Bancorp's allowance for loan
losses may be necessary if economic conditions differ substantially from the
assumptions used in making the initial determination.
Noninterest Expense
Total noninterest expense increased $.2 million for the year ended December
31, 1993 from the year ended December 31, 1992. Compensation increased $488,000
primarily as a result of regular merit salary increases and additional personnel
required to provide expanded services. This increase in compensation expense was
offset by decreases in professional fees as well as a decrease in the loss on
real estate operations.
Income Tax Provision
The income tax provision increased from $3,320,350 for the year ended
December 31, 1992 (an effective rate of 37.5%) to $4,257,815 (an effective rate
of 37.9%) for 1993.
COMPARISON OF YEARS ENDED DECEMBER 1992 AND 1991
General
FF Bancorp's consolidated net earnings for the year ended December 31, 1992
were $5.5 million compared to $1.9 million for the year ended December 31, 1991.
The increase in FF Bancorp's net earnings for 1992 was primarily due to an
increase in net interest income. Earnings per share were $1.24 in 1992 compared
to $.28 for 1991, however, the 1991 earnings per share have been calculated only
since July 1, 1991, the date New Smyrna Bank converted from a mutual association
to a stock savings bank.
Interest Income and Expense
Interest income decreased $4.2 million or 8.7% during the year ended
December 31, 1992 from the amount earned in the year ended December 31, 1991.
Interest on loans decreased $3.0 million due to a decrease in the weighted
average yield from 10.02% during the year ended December 31, 1991 to 9.52%
during the year ended December 31, 1992 and a decrease in the average loan
portfolio balance. Interest on mortgage-backed securities increased slightly due
primarily to an increase in the average amounts invested in these securities.
Interest on investment securities increased $492,000 due to the purchase of
additional investment securities during 1992. Interest on other interest-earning
assets decreased $1.7 millions due primarily to lower interest rates earned on
these assets.
Interest expense decreased to $25.4 million for the year ended December 31,
1992 from $36.6 million for the year ended December 31, 1991. Interest expense
on deposit accounts decreased because of lower rates paid on a lower average
balance of deposit accounts. The average cost of deposit accounts decreased 206
basis points from 7.06% during 1991 to 5.00% during 1992. Stated as of the close
of the year, the average cost of deposit accounts decreased to 4.19% at December
31, 1992 from 6.05% at December 31, 1991.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by FF Bancorp,
industry standards, the amount of nonperforming loans, general economic
conditions, particularly as they relate to FF Bancorp's market areas, and other
factors related to the collectibility of FF Bancorp's loan portfolio. The
provision for loan losses increased from $.9 million for the year ended December
31, 1991 to $1.0 million during 1992. The allowance for loan losses increased
from $1.7 million at December 31, 1991 to $2.6 million at December 31, 1992.
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Noninterest Income
Total noninterest income decreased $.3 million for the year ended December
31, 1992, principally due to a gain recorded on the sale of premises and
equipment in 1991 with no corresponding amount in 1992.
Noninterest Expense
Total noninterest expense increased $.8 million for the year ended December
31, 1992 from the year ended December 31, 1991. Compensation increased $125,000
primarily as a result of additional personnel required to provide expanded
services and regular merit salary increases. Professional fees and acquisition
expenses increased during the year ended December 31, 1992 compared to 1991
because of expenses relating to the acquisition of Citrus Bank and costs
relating to being a public company.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, substantially all of the assets and
liabilities of FF Bancorp are monetary in nature because of its Thrift
Subsidiaries. As a result, interest rates have a more significant impact on FF
Bancorp's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services, since such prices are affected by inflation to
a larger extent than interest rates.
Future Accounting Requirements
In November 1992, the FASB issued Statement No. 112, "Employers' Accounting
for Postemployment Benefits Other Than Pensions," which requires employers to
accrue the cost of certain benefits to former or inactive employees when it is
probable that a liability for such costs has been incurred and the amount can be
reasonably estimated. FF Bancorp expects to adopt this Statement in 1994.
FF Bancorp is still evaluating the standard to determine its impact on
annual operating expense and reviewing the appropriate method and timing for
implementation. However, based on preliminary assessment, FF Bancorp believes
adoption of the statement will not significantly affect future operating
expenses as FF Bancorp does not currently provide postemployment benefits.
In May 1993, FASB issued Statement of Financial Accounting Standards No.
114 which addresses the accounting by creditors for impairment of certain loans.
It requires that impaired loans that are within the scope of this Statement be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. This Statement applies to financial statements for fiscal
years beginning after December 15, 1994. Management does not anticipate this
Statement will have a material impact on FF Bancorp.
In May 1993, the FASB issued an Exposure Draft entitled "Accounting for
Stock-Based Compensation". The exposure draft would establish new financial
accounting and reporting standards for stock-based compensation paid to
employees. Employee stock compensation arrangements would be classified as
either an equity or liability instrument. The proposed statement would recognize
the fair value of an award of stock or stock options as additional equity on the
grant date. Amounts attributable to future services would be recognized as
prepaid compensation and amortized ratably over the period the employee services
are rendered. If the plan requires a cash payment or if the employee can compel
the employer to settle a stock award by cash payment, the plan would be
considered a compensatory liability and compensation expense would be recognized
based on the estimated liability. The effective date for the proposed statement
is for awards granted after December 31, 1996. FF Bancorp is unable to predict
whether or not the exposure draft will become a final statement in its present
form without major revisions. Management has not determined the effect this
proposed statement, if adopted in its present form, would have on FF Bancorp's
financial position or results of operations.
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FF BANCORP SHAREHOLDERS
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial owners of FF Bancorp's only
outstanding class of stock, (voting common stock, $.01 par value) who to FF
Bancorp's knowledge own beneficially more than five percent (5%) of FF Bancorp's
outstanding common stock as of October 31, 1994. The table also indicates the
number and percentage of total outstanding shares of First Bancorp common stock
which such persons would own if they receive .825 First Bancorp shares in the
merger in exchange for each share of their FF Bancorp stock, assuming 3,885,050
shares of First Bancorp common stock will be issued in exchange for 4,709,151.8
FF Bancorp shares, which includes 28,333.8 shares to be issued prior to the
merger pursuant to exercise of options.
<TABLE>
<CAPTION>
FF BANCORP FIRST BANCORP STOCK
COMMON STOCK AS RESULT OF MERGER
--------------------------- ------------------------
AMOUNT & AMOUNT &
NATURE OF NATURE OF
BENEFICIAL PERCENT BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP OF CLASS(1) OWNERSHIP OF CLASS
- ------------------------------------------ --------- ----------- --------- --------
<S> <C> <C> <C> <C>
Charles H. Byrd........................... 256,870 (2) 5.49% 211,917 1.04%
900 N. Dixie Freeway
New Smyrna Beach, FL 32168
First Manhattan Co.(3).................... 402,376 8.59 331,960 1.63
437 Madison Avenue
New York, New York 10022
Frances R. Ford........................... 286,215 (4) 6.11 236,127 1.16
900 N. Dixie Freeway
New Smyrna Beach, FL 32168
Keefe Managers, Inc.(5)................... 269,110 5.75 222,015 1.09
375 Park Avenue, 31st Floor
New York, New York 10152
Tildon W. Smith........................... 292,758.7(6) 6.18 241,525.6(6) 1.18
3217 Country Club Drive
Valdosta, Georgia 31602
</TABLE>
- ---------------
(1) Percentage based upon 4,680,818 shares of common stock outstanding, except
for Tildon W. Smith where 4,736,881.7 shares (as if outstanding) was used
which includes 56,063.7 shares subject to options held by Mr. Smith, which
options will be converted to First Bancorp options.
(2) Amount includes 12,939 shares of common stock awarded in 1991 pursuant to
the FF Bancorp Management Recognition Plan and Trust, which may be voted by
Mr. Byrd before the awarded shares are vested and distributed.
(3) First Manhattan Co. is the general partner of and investment adviser to
First Save Associates, L.P. and Second First Save Associates, L.P.
(4) Amount includes 12,939 shares of common stock awarded in 1991 pursuant to
the FF Bancorp Management Recognition Plan and Trust, which may be voted by
Mrs. Ford before the awarded shares are vested and distributed. Since the
table is as of October 31, 1994, the number of shares shown for Mrs. Ford
includes 20,000 shares sold by her in January, 1995 for personal financial
reasons. The shares were sold through a broker and purchased by the Vice
Chairman of the Board of Key Bank.
(5) Keefe Managers, Inc. is an investment company, which has sole voting and
shared dispositive power over 269,110 shares of common stock.
(6) Amount includes 56,063.7 shares subject to purchase by Mr. Smith pursuant to
stock options granted by FF Bancorp to Mr. Smith, which options will be
converted to options to purchase 46,252.6 shares of First Bancorp stock as
a result of the merger.
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<PAGE> 85
SHARES OF MANAGEMENT
The directors and officers of FF Bancorp and the common stock of FF Bancorp
beneficially owned by them as of October 31, 1994, are set forth in the
following table. The table also indicates the number and percentage of total
outstanding shares of First Bancorp common stock which such persons would own if
they receive .825 First Bancorp shares in the merger in exchange for each share
of their FF Bancorp stock, assuming 3,855,050 shares of First Bancorp common
stock will be issued.
<TABLE>
<CAPTION>
FF BANCORP FIRST BANCORP STOCK
COMMON STOCK AS A RESULT OF MERGER
---------------------------------- -------------------------------
NUMBER NUMBER
OF SHARES PERCENT OF SHARES PERCENT
NAME AND OFFICE BENEFICIALLY OWNED(1) OF CLASS BENEFICIALLY OWNED OF CLASS
- -------------------------------------- --------------------- -------- ------------------ --------
<S> <C> <C> <C> <C>
NOMINEES:
Frances R. Ford....................... 286,215 (2)(3) 6.11% 236,127 1.16%
Director, Chairman of the Board,
President and Chief Executive
Officer
Charles H. Byrd....................... 256,870 (2) 5.49 211,917 1.04
Director, Vice Chairman of the Board
and Vice President
James E. Tumblin...................... 33,000 .70 27,225 .13
Director
Fred J. Faust(4)...................... 640 .01 528 --
Director
Cyril Marchinton...................... 13,200 .28 10,890 .05
Director
Raymond H. Hester..................... 32,992 .70 27,218 .13
Director
Tildon W. Smith....................... 292,758.7(5) 6.18 241,525.6(5) 1.18
Executive Vice President
935,378 (5) 19.63% 771,686 (5) 3.78%
All Directors and Executive Officers
as a group (Nine individuals).......
================ =============
</TABLE>
- ---------------
(1) "Beneficial Ownership of Common Stock" includes: stock held in joint
tenancy; stock owned as tenants in common; stock owned or held by a spouse
or other member of the individual's household; and stock allocated through
the Management Recognition Plan and Trust (see footnote [2] below). Each
person or relative of such person whose shares are included herein,
exercises sole (or shared with spouse or other relative) voting and
dispositive power as to the shares reported.
(2) Includes 12,939 shares of Common Stock for Mrs. Ford and 12,939 shares of
Common Stock for Mr. Byrd held by the FF Bancorp Management Recognition
Plan and Trust which have been awarded to Mrs. Ford and Mr. Byrd,
respectively, and which may be voted by such person before the awarded
shares are vested and distributed.
(3) Since the table is as of October 31, 1994, the number of shares shown for
Mrs. Ford includes 20,000 shares sold by her in January, 1995 for personal
financial reasons. The shares were sold through a broker and purchased by
the Vice Chairman of the Board of Key Bank.
(4) Mr. Faust has resigned from the FF Bancorp Board of Directors in November
1994, due to his health.
(5) Amount includes 56,063.7 shares subject to purchase by Mr. Smith pursuant to
stock options granted by FF Bancorp to Mr. Smith, which options will be
converted to options to purchase 46,252.6 shares of First Bancorp stock as
a result of the merger.
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<PAGE> 86
MANAGEMENT OF FIRST BANCORP AND FNB SUBSIDIARY
Information, with respect to each person who will serve as a director or an
executive officer of First Bancorp after the consummation of the Merger Plan,
set forth in First Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1993, and also set forth in First Bancorp's 1994 Annual Meeting
Proxy Statement, is hereby incorporated herein by reference. A copy of First
Bancorp's 1994 Annual Meeting Proxy Statement accompanies this Proxy Statement.
Under the Merger Plan, First Bancorp has agreed to appoint Charles H. Byrd,
Vice Chairman of FF Bancorp, and Tildon W. Smith, Executive Vice President of FF
Bancorp, to the Board of Directors of First Bancorp at the first scheduled Board
Meeting following consummation of the merger.
Charles H. Byrd serves as Vice Chairman of the Board of Directors of FF
Bancorp and as President of New Smyrna Bank. He is 56 years of age and has
served as an officer and director of New Smyrna Bank since 1973 and as an
officer and director FF Bancorp since its formation in 1992.
Tildon W. Smith was appointed as Executive Vice President of FF Bancorp on
July 9, 1992. Mr. Smith oversees stockholder relations, corporate strategic
planning, development of new bank products and asset management for FF Bancorp.
Prior to his association and employment with FF Bancorp and New Smyrna Bank, Mr.
Smith served as Senior Financial Advisor for Synovus Securities, Inc., a wholly
owned subsidiary of Synovus Financial Corp. from August, 1990 to February, 1992.
From August, 1989 until August, 1990, Mr. Smith was President and Chief
Executive and Operating Officer of Nature Preserves of America, a Florida
resort. From 1981 to August 1989, Mr. Smith was a Vice President and Senior
Securities Trader with First Wachovia of Atlanta.
Upon consummation of the merger, the Board of Directors of FNB Subsidiary
will be comprised of Peter D. Miller, President of First Bancorp, Charles H.
Byrd, Vice Chairman of FF Bancorp and President of New Smyrna Bank, and Tildon
W. Smith, Executive Vice President of FF Bancorp. Peter D. Miller also serves as
President of FNB Subsidiary. C. Talmadge Garrison, Senior Vice President,
Secretary and Treasurer of First Bancorp, serves as Secretary and Treasurer of
FNB Subsidiary. Upon consummation of the merger, Tildon W. Smith will serve as
Vice President and Assistant Secretary of FNB Subsidiary.
DESCRIPTION OF STOCK
FIRST BANCORP
Under First Bancorp's articles of incorporation, it is authorized to issue
up to 30,000,000 shares of common stock, $1.00 par value per share. As of
October 31, 1994, there were 16,489,469 shares of common stock issued and
outstanding, all of which shares were duly authorized, validly issued, fully
paid and non-assessable. The shares of common stock which will be issued in
connection with the Merger Plan will be validly issued, fully paid and
non-assessable.
Holders of First Bancorp common stock are entitled to dividends when, as,
and if declared by the corporation's Board of Directors out of funds legally
available therefor.
All voting rights are vested in the holders of First Bancorp common stock,
each share being entitled to one vote except in the election of directors. The
shares of common stock of First Bancorp have cumulative voting rights in the
election of directors. The cumulative voting rights for the election of
directors of First Bancorp were derived from the articles of incorporation and
bylaws of The First National Bank of Gainesville, when First Bancorp was formed
as a one-bank holding company. Cumulative voting rights have the effect of
giving minority interests a greater chance to elect a director to the board of
directors of First Bancorp and might help preclude a takeover by spreading
control of the board among a greater number of shareholders. There are no other
provisions in First Bancorp's Articles of Incorporation or bylaws which have an
anti-takeover effect.
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<PAGE> 87
Holders of the common stock of First Bancorp do not have preemptive rights
to subscribe for additional shares of common stock issued by First Bancorp. The
common stock has no redemption, sinking fund or right of conversion provisions
applicable thereto.
For additional information see "EFFECT OF MERGER ON SHAREHOLDERS."
FF BANCORP
FF Bancorp is authorized by its articles of incorporation to issue up to
5,000,000 shares of common stock, $.01 par value per share, and 2,500,000 shares
of preferred stock, $.01 par value per share. As of October 31, 1994, there were
4,680,818 shares validly issued and outstanding and no shares of preferred stock
outstanding, and there were outstanding employee stock options to purchase
84,397.5 shares of common stock. The outstanding shares of common stock are
fully paid and non-assessable.
Holders of FF Bancorp common stock are entitled to dividends when, as, and
if, declared by the corporation's Board of Directors out of funds legally
available therefor.
All voting rights are vested in the holders of FF Bancorp common stock,
each share being entitled to one vote. The shares do not have cumulative voting
rights in the election of directors.
Holders of common stock of FF Bancorp do not have preemptive rights to
subscribe for additional shares of common stock issued by FF Bancorp. The common
stock has no redemption, sinking fund or right of conversion provisions
applicable thereto.
Certain provisions of FF Bancorp articles and FF Bancorp bylaws may have
the effect of preventing, discouraging or delaying any change in control of FF
Bancorp. The authority of the FF Bancorp Board to issue FF Bancorp preferred
stock with such rights and privileges, including voting rights, as it may deem
appropriate may enable the FF Bancorp Board to prevent a change in control
despite a shift in ownership of the FF Bancorp Common Stock. In addition, FF
Bancorp Board's power to issue additional shares of FF Bancorp common stock may
help delay or deter a change in control by increasing the number of shares
needed to gain control. The following provisions in FF Bancorp articles and FF
Bancorp bylaws also may deter any change in control of FF Bancorp.
The FF Bancorp Board is divided into three classes, each serving three-year
terms, so that approximately one-third of the directors of FF Bancorp are
elected at each annual meeting of the shareholders of FF Bancorp. Classification
of the FF Bancorp Board has the effect of decreasing the number of directors
that could be elected in a single year by any person who seeks to elect its
designees to a majority of the seats on the FF Bancorp Board and thereby could
impede a change in control of FF Bancorp.
The FF Bancorp bylaws provide that a director of FF Bancorp may be removed
from the Board of Directors prior to the expiration of his or her term only for
cause by the affirmative vote of the holders of 60% of the shares of FF Bancorp
common stock then entitled to vote at an election of directors. In the absence
of this provision, a simple majority of the holders of FF Bancorp common stock
could effect the director's removal.
The FF Bancorp articles prohibit any person (including any business entity
or group acting in concert) from offering to acquire or acquiring more than 10%
of the outstanding shares of any class of equity securities of FF Bancorp for
five years following incorporation. FF Bancorp articles also provide that all
equity securities beneficially owned by any person in excess of 10% of any class
of equity securities during the five-year period of the restriction shall be
considered "excess shares", and that excess shares shall not be counted as
voting shares in connection with any matters submitted to the stockholders for a
vote. The terms "person", "offer", "acquire" and "group acting in concert" are
broadly defined in FF Bancorp Articles to prevent circumvention of the 10%
restriction. This limitation, however, will not apply to the purchase of shares
by underwriters in connection with a public offering. As long as it is in
effect, such provision may have the effect of preventing a hostile acquisition
of FF Bancorp.
The FF Bancorp articles do not provide for cumulative voting for any
purpose. Moreover, special meetings of stockholders of FF Bancorp may be called
only by the Board of Directors of FF Bancorp. The
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<PAGE> 88
FF Bancorp articles also provides that any action required or permitted to be
taken by the stockholders of FF Bancorp may be taken only at an annual or
special meeting and prohibits stockholder action by written consent in lieu of a
meeting.
The FF Bancorp articles require the approval of the holders of at least 60%
of FF Bancorp's outstanding shares of voting stock to approve certain "Business
Combinations", as defined therein, and related transactions. Under the FF
Bancorp Articles, the approval of at least 60% of the outstanding voting stock
is required in connection with any transaction involving an Interested
Stockholder (as defined below), except approval by only a majority vote is
required (i) in cases where the proposed transaction has been approved in
advance by a majority of those members of FF Bancorp's Board who are
unaffiliated with the Interested Stockholder and were directors prior to the
time when the Interested Stockholder became an Interested Stockholder and (ii)
if the proposed transaction meets certain conditions set forth therein which are
designed to afford the shareholders a fair price in consideration for their
shares in which cases approval of only a majority of the outstanding shares of
voting stock is required. The term "Interested Stockholder" is defined to
include any individual, corporation, partnership or other entity (other than FF
Bancorp or its subsidiaries) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of FF Bancorp.
This provision of FF Bancorp articles applies to any "Business Combination",
which is defined to include (i) any merger or consolidation of FF Bancorp or any
of its subsidiaries with or into any Interested Stockholder or Affiliate (as
defined in the FF Bancorp articles) of an Interested Stockholder; (ii) any sale,
lease, exchange, mortgage, transfer, or other disposition to or with any
Interested Stockholder or Affiliate of 25% or more of the assets of FF Bancorp
or combined assets of FF Bancorp and its subsidiaries; (iii) the issuance or
transfer of any securities of FF Bancorp in exchange for any assets, cash or
securities the value of which equals or exceeds 25% of the fair market value of
the common stock; (iv) the adoption of any plan for the liquidation or
dissolution of FF Bancorp proposed by or on behalf of any Interested Stockholder
or Affiliate thereof; and (v) any reclassification of securities,
recapitalization, merger or consolidation of FF Bancorp which has the effect of
increasing the proportionate shares of FF Bancorp common stock or any class of
equity or convertible securities of FF Bancorp owned directly or indirectly, by
an Interested Stockholder or Affiliate thereof.
The FF Bancorp articles further provide that the Board of Directors of FF
Bancorp, when evaluating any offer of another "Person", as defined therein, to
(i) make a tender or exchange offer for any equity security of FF Bancorp, (ii)
merge or consolidate FF Bancorp with another corporation or entity or (iii)
purchase or otherwise acquire all or substantially all of the properties and
assets of FF Bancorp, may, in connection with the exercise of its judgment in
determining what is in the best interests of FF Bancorp, the FF Banking
Subsidiaries and the stockholders, give due consideration to all relevant
factors, including, without limitation, the social and economic effects of
acceptance of such offer on the FF Banking Subsidiaries' customers and the
present and future account holders, borrowers and employees; on the communities
in which FF Bancorp and the FF Banking Subsidiaries operate or are located; and
on the ability of FF Bancorp to fulfill its corporate objectives as a thrift
holding company and on the ability of the FF Banking Subsidiaries to fulfill the
objectives of federally chartered stock savings banks under applicable statutes
and regulations. By having these standards in FF Bancorp articles, the Board of
Directors may be in stronger position to oppose such a transaction if the Board
concludes that the transaction would not be in the best interests of FF Bancorp,
even if the price offered is significantly greater than the then market price of
any equity security of FF Bancorp.
Amendments to FF Bancorp articles must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of at least 60% of the
outstanding voting stock entitled to vote (after giving effect to the provision
limiting voting provisions) relating to approval of certain business
combinations, calling special meetings, the amendment of FF Bancorp bylaws and
FF Bancorp articles. FF Bancorp bylaws may be amended by the Board of Directors,
or by a vote of a majority of the total votes eligible to be voted at a duly
constituted meeting of stockholders.
The FF Bancorp bylaws also require a stockholder who intends to nominate a
candidate for election to the Board of Directors, or to raise new business at a
stockholder meeting to give not more than 60 days nor less than 10 days advance
notice to the Secretary of FF Bancorp. The notice provision requires a
stockholder who desires to raise new business to provide certain information to
FF Bancorp concerning the nature of the new
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business, the stockholder wishing to nominate any person for election as a
director must provide FF Bancorp with certain information concerning the nominee
and the proposing stockholder.
Certain provisions of FF Bancorp's 1992 Key Employee Stock Compensation
Program and Management Recognition Plan adopted by FF Bancorp provide or
accelerate benefits to participants in the event of a change in control of FF
Bancorp. In addition, FF Bancorp, New Smyrna Bank, Citrus Bank and Key Bank have
entered into agreements with certain key officers which provide such officers
with additional payments and benefits if such officers are terminated in
connection with a change in control of FF Bancorp or the FF Subsidiaries.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Proxy Statement the
following documents and information heretofore filed with the Securities and
Exchange Commission:
1. First Bancorp's annual report on Form 10-K for the year ended
December 31, 1993, filed pursuant to the Securities Exchange Act of 1934
(the "Exchange Act").
2. First Bancorp's quarterly reports on Form 10-Q for the quarters
ended March 31, 1994, June 30, 1994 and September 30, 1994, filed pursuant
to the Exchange Act.
3. First Bancorp's current reports dated January 14, 1994, February
28, 1994, March 15, 1994, July 31, 1994, October 27, 1994, and November 22,
1994, filed pursuant to the Exchange Act.
4. Consolidated financial statements (including related notes and
report of independent auditors), set forth at pages 37 through 56 of First
Bancorp's 1993 Annual Report to Shareholders.
5. Market, Stock Price and Dividend Information, Stock Price
Information, and Per Share Dividends and Net Income set forth at page 35 of
First Bancorp's 1993 Annual Report to Shareholders.
6. Selected Financial Data set forth at page 20 of First Bancorp's
1993 Annual Report to Shareholders.
7. Supplementary Financial Information set forth at Note 18 on page 56
of First Bancorp's 1993 Annual Report to Shareholders.
8. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Selected Statistical Information set forth at
pages 19 through 36 of First Bancorp's 1993 Annual Report to Shareholders.
9. Information concerning ownership of First Bancorp Stock by certain
beneficial owners and management set forth at Item 12 of First Bancorp's
annual report on Form 10-K for the year ended December 31, 1993 and also
set forth on pages 7 through 9 of First Bancorp's 1994 Annual Meeting Proxy
Statement.
10. Information concerning First Bancorp directors and executive
officers set forth at Item 10 of First Bancorp's annual report on Form 10-K
for the year ended December 31, 1993 and also set forth on pages 2 through
6 of First Bancorp's 1994 Annual Meeting Proxy Statement.
11. Information concerning First Bancorp executive officer and
director compensation set forth at Item 11 of First Bancorp's annual report
on Form 10-K for the year ended December 31, 1993 and also set forth on
pages 9 through 18 of First Bancorp's 1994 Annual Meeting Proxy Statement.
12. Information concerning certain relationships and related
transactions relating to First Bancorp set forth at Item 13 of First
Bancorp's annual report on Form 10-K for the year ended December 31, 1993
and also set forth on page 19 of First Bancorp's 1994 Annual Meeting Proxy
Statement.
THIS PROXY STATEMENT IS ACCOMPANIED BY FIRST BANCORP'S 1993 ANNUAL REPORT
TO SHAREHOLDERS, FIRST BANCORP'S 1994 ANNUAL MEETING PROXY STATE-
82
<PAGE> 90
MENT, AND FIRST BANCORP'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1994.
EXPERTS
The consolidated financial statements of First National Bancorp and
subsidiaries (collectively, "First Bancorp") as of December 31, 1993 and 1992,
and for each of the years in the three-year period ended December 31, 1993,
incorporated by reference herein, have been so incorporated by reference herein
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing. The report of KPMG Peat Marwick
LLP covering the December 31, 1993 consolidated financial statements of First
Bancorp refers to a change in the accounting for income taxes in 1993 to adopt
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," refers to a change in the accounting for
investment securities at December 31, 1993 to adopt the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," and also refers to a change in the accounting
for post-retirement benefits other than pensions in 1993 to adopt the provisions
of Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Post-Retirement Benefits Other than Pensions."
The consolidated financial statements of FF Bancorp, Inc. and subsidiaries
as of December 31, 1993 and 1992, and for each of the years in the three-year
period ended December 31, 1993, included herein have been included herein in
reliance upon the report of Hacker, Johnson, Cohen & Grieb, independent
auditors, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINION
The legality of the shares of common stock of First Bancorp to be issued in
the merger and certain other legal matters in connection with the merger will be
passed upon by Stewart, Melvin & Frost, Attorneys-at-Law, Sixth Floor, Hunt
Tower, 200 Main Street, Gainesville, Georgia 30501. W. Woodrow Stewart is a
partner in said firm and is a stockholder and director of First Bancorp and a
director of The First National Bank of Gainesville. J. Kenneth Nix is also a
partner in said firm and is a stockholder and director of First Bancorp and a
director of First National Bank of White County. In addition, certain partners
and associates of Stewart, Melvin & Frost, including those attorneys in the firm
who have participated in this matter, own substantial shares in First Bancorp.
Stewart, Melvin & Frost serves as general counsel to First Bancorp, The First
National Bank of Gainesville and First National Bank of White County.
INDEMNIFICATION
The bylaws of First Bancorp provide for the indemnification of officers and
directors of First Bancorp under certain circumstances. In addition, Georgia law
provides broad discretion to directors and shareholders of corporations to
indemnify officers, directors and employees against liabilities and expenses of
defending civil (and in some cases criminal) matters. See O.C.G.A. Section
14-2-851 and Section 14-2-857. See "EFFECT OF MERGER ON
SHAREHOLDERS -- Limitations of Liability and Indemnification of Officers,
Directors and Employees."
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING FIRST
BANCORP PURSUANT TO THE FOREGOING PROVISIONS, FIRST BANCORP HAS BEEN INFORMED
THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.
83
<PAGE> 91
SHAREHOLDER PROPOSALS
Any proposal that a shareholder of First Bancorp intends to present at the
annual meeting of shareholders of First Bancorp to be held in April 1996 must be
received at First Bancorp's principal executive offices (please address to the
attention of C. Talmadge Garrison, Secretary) not later than November 30, 1995.
Any such proposal must comply with Rule 14a-8 of Regulation 14A of the proxy
rules of the Securities and Exchange Commission. If the merger is not approved
by the shareholders, any proposal that a shareholder of FF Bancorp intends to
present at the annual meeting of shareholders of FF Bancorp to be held in
1996 must be received at FF Bancorp's principal executive offices not
later than , 1995.
OTHER BUSINESS
Action will be taken on whatever other business may properly come before
the special meeting of FF Bancorp shareholders. Management is not aware of any
other business matters to be considered at the special meeting. If any other
matters properly come before the meeting, the persons named in the enclosed form
of proxy will have discretionary authority to vote all proxies with respect to
such matters and in accordance with the recommendations of management.
ADDITIONAL INFORMATION
First Bancorp has filed a Registration Statement (herein together with all
amendments thereto called the "Registration Statement") with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933, as
amended, with respect to First Bancorp common stock to be issued in the merger.
This document does not contain all of the information set forth in the
Registration Statement. For further information, reference is made to the
Registration Statement including the exhibits filed or incorporated by reference
as a part thereof. The Registration Statement is available for inspection at no
fee at the Commission's public reference room in Washington, D.C. Copies of the
material contained in the Registration Statement may be obtained from the
Commission upon payment of the fees prescribed in its rules and regulations.
<TABLE>
<S> <C>
FF BANCORP, INC.
New Smyrna Beach, Florida By:
-----------------------------------------
- ------------------------------------, 1995 Frances R. Ford,
Chairman of the Board, President and C.E.O.
FIRST NATIONAL BANCORP
Gainesville, Georgia By:
-----------------------------------------
- ------------------------------------, 1995 Peter D. Miller,
President, C.A.O. and C.F.O.
</TABLE>
84
<PAGE> 92
------------------------
FF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED YEAR END FINANCIAL STATEMENTS
Independent Auditors' Report.......................................................... F-
Consolidated Balance Sheets -- December 31, 1993 and 1992............................. F-
Consolidated Statements of Earnings for each of the Years and the Three Year Period
Ended December 31, 1993............................................................. F-
Consolidated Statements of Stockholders' Equity for each of the Years in the Three
Year Period Ended December 31, 1993................................................. F-
Consolidated Statements of Cash Flows for each of the Years in the Three Year Period
Ended December 31, 1993............................................................. F-
Notes to Consolidated Financial Statements for each of the Years in the Three Year
Period Ended December 31, 1993...................................................... F-
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -- September 30, 1994 (unaudited)............... F-
Condensed Consolidated Statements of Earnings for the Nine Months ended September 30,
1994 and 1993 (unaudited)........................................................... F-
Condensed Consolidated Statements of Cash Flows -- for the Nine Months ended September
30, 1994 and 1993 (unaudited)....................................................... F-
Condensed Consolidated Statement of Stockholders' Equity.............................. F-
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-
</TABLE>
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
Financial Statements and related Notes.
F-1
<PAGE> 93
INDEPENDENT AUDITORS' REPORT
The Board of Directors
FF Bancorp, Inc.
New Smyrna Beach, Florida:
We have audited the accompanying consolidated balance sheets of FF Bancorp,
Inc. and Subsidiaries (the "Company") as of December 31, 1993 and 1992 and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1993 and 1992 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial statements, the
Company changed its method of accounting for investment securities as of
December 31, 1993, to conform with Statement of Financial Accounting Standards
No. 115. Also, as discussed in Notes 1 and 10 to the consolidated financial
statements, the Company changed its method of accounting for income taxes as of
January 1, 1993, to conform with Statement of Financial Accounting Standards No.
109.
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
January 14, 1994, except Note 21,
which is dated July 18, 1995
F-2
<PAGE> 94
FF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Cash.............................................................. $ 7,644,367 $ 7,535,809
Interest-bearing deposits......................................... 87,859,447 83,280,339
------------ ------------
Cash and cash equivalents......................................... 95,503,814 90,816,148
Investment securities available-for-sale, at market............... 1,320,424 --
Investment securities held-to-maturity (market value of $9,669,687
in 1993 and $11,647,640 in 1992)................................ 10,080,360 10,275,241
Mortgage-backed securities available-for-sale, at market.......... 22,019,006 --
Mortgage-backed securities held-to-maturity (market value of
$43,479,779 in 1993 and $85,369,762 in 1992).................... 41,932,760 82,329,026
Loans receivable, net............................................. 353,755,875 339,756,888
Accrued interest receivable:
Investment securities........................................... 182,140 191,739
Mortgage-backed securities...................................... 446,893 671,723
Loans receivable................................................ 1,639,043 1,623,113
Real estate owned (less allowance for losses in 1993 and 1992 of
$764,240 and $1,032,784, respectively).......................... 4,768,699 10,099,645
Premises and equipment, net....................................... 8,091,065 7,703,517
Federal Home Loan Bank stock, at cost............................. 4,325,800 4,337,200
Prepaid expenses and other assets................................. 794,681 677,994
------------ ------------
Total................................................... $544,860,560 $548,482,234
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts.................................................. $490,041,067 $501,095,637
Accrued interest on deposit accounts.............................. 248,527 254,114
Borrowed funds.................................................... 5,000,000 5,000,000
Official checks................................................... 2,914,669 3,045,199
Advance payments by borrowers for taxes and insurance............. 1,208,870 1,320,959
Current income taxes.............................................. 364,769 719,277
Deferred income taxes............................................. 1,805,288 1,624,000
Other liabilities and accrued expenses............................ 1,000,424 707,003
------------ ------------
Total liabilities....................................... 502,583,614 513,766,189
------------ ------------
Commitments and contingencies (notes 12 and 13)
Stockholders' equity:
Preferred stock, 2,500,000 shares authorized, issued none....... -- --
Common stock, $ .01 par value, 5,000,000 shares authorized,
3,970,662 in 1993 and 3,946,656 in 1992 shares issued and
outstanding.................................................. 39,707 39,467
Additional paid-in capital...................................... 12,830,213 12,808,066
Retained earnings, substantially restricted..................... 27,906,708 22,127,272
Unrealized gain on securities available-for-sale................ 1,672,838 --
Stock held by Management Recognition Plan....................... (172,520) (258,760)
------------ ------------
Total stockholders' equity.............................. 42,276,946 34,716,045
------------ ------------
Total................................................... $544,860,560 $548,482,234
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 95
FF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Interest income:
Interest on loans receivable.................................... $30,500,438 $32,995,827 $36,041,568
Interest on mortgage-backed securities.......................... 6,029,416 7,708,529 7,675,501
Interest and dividends on investment securities................. 671,775 709,009 217,277
Other interest-earning assets................................... 2,544,790 2,460,536 4,129,023
----------- ----------- -----------
Total interest income.................................... 39,746,419 43,873,901 48,063,369
----------- ----------- -----------
Interest expense:
Deposit accounts................................................ 19,375,754 25,142,768 36,599,041
Borrowed funds.................................................. 275,613 255,052 --
----------- ----------- -----------
Total interest expense................................... 19,651,367 25,397,820 36,599,041
----------- ----------- -----------
Net interest income...................................... 20,095,052 18,476,081 11,464,328
Provision for loan losses......................................... 176,898 1,011,196 859,050
----------- ----------- -----------
Net interest income after provision for loan losses...... 19,918,154 17,464,885 10,605,278
----------- ----------- -----------
Noninterest income:
Fees and service charges........................................ 862,557 843,159 811,537
Gain on sale of mortgage-backed securities...................... -- -- 21,591
Gain (loss) on sale of loans.................................... -- (38,870) 76,640
Gain on sale of premises and equipment.......................... -- 4,573 274,834
Other........................................................... 335,713 250,636 196,507
----------- ----------- -----------
Total noninterest income................................. 1,198,270 1,059,498 1,381,109
----------- ----------- -----------
Noninterest expense:
Employee compensation and benefits.............................. 4,210,870 3,723,095 3,597,924
Occupancy and equipment......................................... 1,684,377 1,489,596 1,415,559
Federal insurance premiums...................................... 1,325,034 1,250,121 1,220,125
Data processing................................................. 673,643 604,566 567,999
Professional fees............................................... 345,394 556,109 454,369
Loss on real estate operations.................................. 271,996 710,540 530,942
Acquisition expenses............................................ -- 174,869 --
Other........................................................... 1,366,031 1,166,720 1,120,813
----------- ----------- -----------
Total noninterest expense................................ 9,877,345 9,675,616 8,907,731
----------- ----------- -----------
Earnings before provision for income taxes and cumulative
effect of change in accounting principle............... 11,239,079 8,848,767 3,078,656
Provision for income taxes........................................ 4,257,815 3,320,350 1,172,610
----------- ----------- -----------
Earnings before cumulative effect of change in accounting
principle.............................................. 6,981,264 5,528,417 1,906,046
Cumulative effect of change in accounting principle............... 824,000 -- --
----------- ----------- -----------
Net earnings............................................. $ 7,805,264 $ 5,528,417 $ 1,906,046
============ ============ ============
Earnings per share:
Earnings before cumulative effect of change in accounting
principle..................................................... $ 1.50 $ 1.24 $ .28
Cumulative effect of change in accounting principle............. .18 -- --
----------- ----------- -----------
Net earnings.................................................... $ 1.68 $ 1.24 $ .28
============ ============ ============
Proforma amounts assuming the new accounting method for income
taxes is applied retroactively:
Net earnings.................................................... $ 6,981,264 $ 5,530,417 $ 1,924,046
============ ============ ============
Earnings per share.............................................. $ 1.50 $ 1.24 $ .28
============ ============ ============
Weighted average number of shares outstanding (Note 21)........... 4,637,287 4,445,862 3,795,000
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 96
FF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED STOCK
RETAINED GAIN ON HELD BY
ADDITIONAL EARNINGS, SECURITIES MANAGEMENT TOTAL
NUMBER OF COMMON PAID-IN SUBSTANTIALLY AVAILABLE- RECOGNITION STOCKHOLDERS'
SHARES STOCK CAPITAL RESTRICTED FOR-SALE PLAN EQUITY
--------- ------- ----------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990.......... -- -- -- $16,062,263 -- -- $16,062,263
Net proceeds from the sale of common
stock in the conversion of New
Smyrna from a federally-chartered
mutual institution to a
federally-chartered capital stock
institution....................... 3,450,000 $34,500 $10,622,365 -- -- -- 10,656,865
Purchase of 103,500 shares of common
stock by Management Recognition
Plan Trust........................ -- -- -- -- -- $(345,000 ) $ (345,000)
Net earnings for the year ended
December 31, 1991................. -- -- -- 1,906,046 -- -- 1,906,046
Dividends at $.06 per share......... -- -- -- (207,000) -- -- (207,000)
--------- ------- ----------- ------------- ---------- ---------- -------------
BALANCE, DECEMBER 31, 1991.......... 3,450,000 34,500 10,622,365 17,761,309 -- (345,000 ) 28,073,174
Net proceeds from the sale of common
stock............................. 457,662 4,577 2,056,111 -- -- -- 2,060,688
Issuance of 25,872 shares of common
stock held by Management
Recognition Plan Trust............ -- -- -- -- -- 86,240 86,240
Proceeds from common stock issued
under the employee stock option
plan.............................. 38,994 390 129,590 -- -- -- 129,980
Dividends at $.33 per share......... -- -- -- (1,162,454) -- -- (1,162,454)
Net earnings for the year ended
December 31, 1992................. -- -- -- 5,528,417 -- -- 5,528,417
--------- ------- ----------- ------------- ---------- ---------- -------------
BALANCE, DECEMBER 31, 1992.......... 3,946,656 39,467 12,808,066 22,127,272 -- (258,760 ) 34,716,045
Issuance of 25,872 shares of common
stock held by Management
Recognition Plan Trust............ -- -- 148,764 -- -- 86,240 235,004
Proceeds from common stock issued
under the employee stock option
plan.............................. 48,006 480 168,893 -- -- -- 169,373
Retire common stock................. (24,000 ) (240 ) (295,510) -- -- -- (295,750)
Dividends at $.50 per share......... -- -- -- (2,025,828) -- -- (2,025,828)
Net earnings for the year ended
December 31, 1993................. -- -- -- 7,805,264 -- -- 7,805,264
Unrealized gain on securities
available-for-sale................ -- -- -- -- 1,672,838 -- -- 1,672,838
--------- ------- ----------- ------------- ---------- ---------- -------------
BALANCE, DECEMBER 31, 1993.......... 3,970,662 $39,707 $12,830,213 $27,906,708 $1,672,838 $(172,520 ) $42,276,946
========== ======== ========== =========== ========== =========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 97
FF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net earnings............................................................. $ 7,805,264 $ 5,528,417 $ 1,906,046
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation of premises and equipment................................. 633,696 574,072 588,150
Depreciation of real estate owned...................................... -- -- 33,498
Provision for losses on real estate owned.............................. 311,711 538,624 395,288
Provision for loan losses.............................................. 176,898 1,011,196 859,050
Decrease (increase) in refundable income taxes......................... -- 574,390 (232,390)
Increase (decrease) in current income taxes............................ (354,508) 680,820 26,517
Provision (credit) for deferred income taxes........................... (20,000) (58,000) 105,000
Cumulative effect of change in accounting principle.................... (824,000) -- --
Decrease (increase) in accrued interest receivable..................... 218,499 485,479 (86,608)
Amortization of deferred loan fees, net................................ (1,189,838) (1,113,570) (1,123,130)
Decrease (increase) in other assets.................................... (116,687) 19,978 102,848
Decrease in accrued interest payable................................... (5,587) (85,647) (64,808)
Increase (decrease) in other liabilities............................... 162,890 (49,564) 1,680,661
Origination of loans held for sale..................................... -- (3,263,739) (2,392,284)
Proceeds from loan sales............................................... -- 3,224,869 2,468,924
Gain on sale of mortgage-backed securities............................. -- -- (21,591)
Gain on sale of premises and equipment................................. -- (4,573) (274,834)
Amortization of premium on investment securities....................... 91,199 59,242 5,918
Amortization of discount on mortgage-backed securities................. (151,895) (260,474) (116,640)
Net gain on sale of real estate owned.................................. (308,565) (316,524) (82,735)
Issuance of common stock held by Management Recognition Plan Trust..... 235,004 86,240 --
Other.................................................................. -- -- (63,181)
------------ ------------ ------------
Net cash provided by operating activities.......................... 6,664,081 7,631,236 3,713,699
------------ ------------ ------------
Investing activities:
Principal collected on loans............................................. 50,152,372 57,894,613 47,666,903
Loans originated......................................................... (57,506,784) (46,998,149) (37,354,404)
Purchases of loans....................................................... (2,389,321) -- (1,378,786)
Loan origination fees received........................................... 1,368,430 1,381,322 1,055,432
Loan origination costs paid.............................................. (378,534) (318,342) (223,041)
Proceeds from maturity of investment securities.......................... 5,000,000 -- --
Purchases of investment securities....................................... (5,000,000) -- (10,236,719)
Proceeds from sale of mortgage-backed securities......................... -- -- 13,560,543
Purchases of mortgage-backed securities.................................. (20,007,501) (14,998,760) (52,699,492)
Principal collected on mortgage-backed securities........................ 40,018,040 40,572,889 7,354,500
Proceeds from sale of real estate owned.................................. 1,467,940 3,264,867 2,442,302
Payments capitalized to real estate owned................................ (372,349) (55,664) (372,132)
Purchases of premises and equipment...................................... (1,022,939) (612,980) (714,224)
Sale of premises and equipment........................................... 1,695 5,895 286,338
Redemption of FHLB stock................................................. 251,000 246,600 126,000
Purchases of FHLB stock.................................................. (239,600) (284,300) (163,500)
------------ ------------ ------------
Net cash provided by (used in) investing activities................ 11,342,449 40,097,991 (30,650,280)
------------ ------------ ------------
Financing activities:
Net increase (decrease) in deposit accounts.............................. (11,054,570) (16,889,739) 20,700,997
Net increase (decrease) in advance payments by borrowers for taxes and
insurance.............................................................. (112,089) 668,683 (183,790)
Proceeds from FHLB advances.............................................. -- 5,000,000 --
Payment of cash dividends................................................ (2,025,828) (1,162,454) (207,000)
Proceeds from issuance of common stock, net.............................. -- 2,060,688 10,311,865
Purchase of treasury stock, retired...................................... (295,750) -- --
Proceeds from stock options exercised.................................... 169,373 129,980 --
------------ ------------ ------------
Net cash provided by (used in) financing activities................ (13,318,864) (10,192,842) 30,622,072
------------ ------------ ------------
Net increase in cash and cash equivalents.................................. 4,687,666 37,536,385 3,685,491
Cash and cash equivalents at beginning of year............................. 90,816,148 53,279,763 49,594,272
------------ ------------ ------------
Cash and cash equivalents at end of year................................... $ 95,503,814 $ 90,816,148 $ 53,279,763
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes........................................................... $ 4,632,323 $ 2,123,140 $ 1,273,483
=========== =========== ===========
Interest expense....................................................... $ 19,381,340 $ 25,483,167 $ 36,663,529
=========== =========== ===========
Noncash investing and financing activities:
Transfers of mortgage loans receivable to real estate owned............ $ 962,547 $ 6,005,493 $ 8,279,082
=========== =========== ===========
Loans originated for the sale of real estate owned..................... $ 5,194,757 $ 3,321,500 $ 5,395,750
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 98
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND: HOLDING COMPANY FORMATION, CONVERSION, AND ACQUISITION. FF
Bancorp, Inc. (the "Holding Company") a Florida Corporation is organized as a
multiple thrift holding company. On July 8, 1992, the Holding Company, in two
separate transactions, acquired all the outstanding capital stock of First
Federal Savings Bank of New Smyrna ("New Smyrna") and First Federal Savings Bank
of Citrus County ("Citrus"). Both New Smyrna and Citrus are federally chartered,
SAIF-insured savings associations.
New Smyrna conducts business from its headquarters and main office in New
Smyrna Beach, Florida and from offices located in Edgewater and New Smyrna
Beach. New Smyrna was founded as First Federal Savings and Loan Association of
New Smyrna in 1935 as a mutual institution. On July 1, 1991, New Smyrna
consummated its conversion to a federally-chartered stock savings bank by
issuing 3,450,000 shares of common stock, $.01 par value per share, at $3.33 per
share (adjusted for stock split). Conversion costs of approximately $843,000
were deducted from the gross proceeds of $11.5 million.
New Smyrna entered into a Reorganization/Acquisition Agreement
("Reorganization Agreement") whereby New Smyrna reorganized into a wholly-owned
subsidiary of the Holding Company by exchanging 3,450,000 shares (adjusted for
stock split) of $.01 par value common stock for all the outstanding shares of
the Holding Company.
Citrus conducts business from its headquarters and main office in
Inverness, Florida and from branch offices located in Beverly Hills, Crystal
River and Homosassa Springs. Citrus was founded as First Federal Savings and
Loan Association of Citrus County in 1963 as a mutual institution. In accordance
with the Reorganization Agreement, Citrus consummated its conversion to a
federally-chartered stock savings bank on July 8, 1992 and was acquired by the
Holding Company through the issuance of 457,662 shares of $.01 par value Holding
Company common stock at $5.29 per share (adjusted for stock split). In
connection with the conversion Citrus changed its name to First Federal Savings
Bank of Citrus County. The Holding Company's common stock was offered to the
account holders and other members of Citrus, and stockholders of New Smyrna in a
Subscription Offering and to the general public in a Community Offering.
Conversion costs of $361,107 were deducted from the gross proceeds of
$2,421,795.
The Holding Company formation and acquisition of Citrus has been accounted
for as a pooling of interest and all amounts prior to the acquisition have been
restated to include the results of operations, financial positions and cash
flows of Citrus and New Smyrna. Net interest income and net earnings for the
individual entities were as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1992 YEAR ENDED
THROUGH JUNE 30, DECEMBER 31,
1992 1991
---------------- ------------
<S> <C> <C>
Interest and other income:
New Smyrna.............................................. $ 13,091,725 $ 26,823,630
Citrus.................................................. 10,132,398 22,620,848
---------------- ------------
Combined........................................ $ 23,224,123 $ 49,444,478
============ ==========
Net earnings:
New Smyrna.............................................. 1,497,629 1,851,816
Citrus.................................................. 1,043,589 54,230
---------------- ------------
Combined........................................ $ 2,541,218 $ 1,906,046
============ ==========
</TABLE>
Expenses of approximately $175,000 related to the acquisition of Citrus
were charged to expense during 1992.
F-7
<PAGE> 99
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GENERAL. The accounting and reporting policies of FF Bancorp, Inc. and
subsidiaries (the "Company") conform to generally accepted accounting principles
and to general practices within the thrift industry. The following summarizes
the significant accounting policies of the Company:
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Holding Company and its thrift subsidiaries, New Smyrna and
Citrus, and their subsidiaries, First Florida Agency, Inc. and Home Assets, Inc.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND DUE FROM BANKS. The Holding Company's subsidiaries are required
to maintain certain average reserve balances pursuant to regulations of the
Federal Reserve Board. These balances must be maintained in the form of vault
cash or noninterest bearing deposits at a Federal Reserve Bank. New Smyrna
exceeded this requirement, which was $986,000 and $745,000 at December 31, 1993
and 1992, respectively. Citrus exceeded this requirement which was $411,000 and
$388,000 at December 31, 1993 and 1992, respectively.
CASH EQUIVALENTS. Cash equivalents include cash and interest bearing
deposits. For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments, with original maturities when purchased of
three months or less, to be cash equivalents.
INVESTMENT AND MORTGAGE-BACKED SECURITIES. On December 31, 1993, the
Company adopted Statement of Financial Accounting Standards No. 115. This
Statement requires securities that the Company has the positive intent and
ability to hold to maturity to be classified as held-to-maturity securities and
reported at amortized cost. Securities that are held principally for selling
them in the near term are to be classified as trading securities and reported at
fair value, with unrealized gains and losses included in income. Securities not
classified as either held-to-maturity securities or trading securities are to be
classified as available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders' equity.
Prior to December 31, 1993 investment and mortgage-backed securities were
carried at cost, adjusted for amortization of premiums and accretion of
discounts and were not adjusted to the lower of cost or market because
management had the intent and ability to hold them to maturity. Premiums were
amortized and discounts accreted to income using the interest method over the
estimated remaining life of the securities. Gains or losses were recognized
based on the specific identification method.
ALLOWANCE FOR POSSIBLE LOAN LOSSES. A provision for loan losses is charged
to operations based on management's evaluation of the potential loss in its loan
portfolio. Such evaluation, which includes a review of all loans of which full
collectibility may not be reasonably assured, considers, among other matters,
the estimated net realizable value of the underlying collateral and the
Company's historical charge-offs, net of recoveries. Such provisions also
consider the current and currently anticipated future operating conditions,
thereby causing these estimates to be susceptible to changes that could result
in a material adjustment to results of operations in the near term. Recovery of
the carrying value of such loans is dependent to a great extent on economic,
operating and other conditions that may be beyond the Company's control.
Therefore, actual losses in future periods could differ materially from amounts
provided in the current period and could result in a material adjustment to
future results of operations.
LOAN ORIGINATION FEES AND PREMIUMS AND DISCOUNTS. Loan origination fees,
net of certain direct costs associated with loan originations, are deferred and
amortized over the life of the loan using the interest method as an adjustment
of yield. Premiums and discounts on loans purchased are amortized to income over
the remaining life of the loan, using the interest method as an adjustment of
yield.
UNCOLLECTED INTEREST. The Company provides an allowance for the loss of
uncollected interest on mortgage loans which are more than 90 days past due and
on other loans when management believes the
F-8
<PAGE> 100
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
collection of interest is doubtful. If the ultimate collectibility of principal,
either in whole or in part, is in doubt, any payment received on a loan for
which the accrual of interest has been discontinued is applied to reduce
principal to the extent necessary to eliminate such doubt. If the ultimate
collectibility of principal is not in doubt interest is credited to income in
the period of recovery.
REAL ESTATE OWNED. In-substance foreclosures are recorded at the lower of
the loan balance or fair value. Real estate acquired through foreclosure or by
deed in lieu of foreclosure, is initially recorded at the lower of cost or fair
value at the time of acquisition. Costs relating to development and improvement
are capitalized, whereas cost relating to holding the property are charged to
expense. Accrued interest receivable on loans foreclosed is charged against the
reserve for uncollected interest at date of foreclosure.
Valuations are periodically performed by management, and an allowance for
losses is established by a charge to operations if the carrying value of a
property exceeds its estimated fair value.
PREMISES AND EQUIPMENT. Premises and equipment are carried at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
RETIREMENT BENEFITS. The Company has a noncontributory defined benefit
pension plan covering all employees who meet certain eligibility requirements.
Pension costs are computed based on the provisions of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions", ("SFAS No.
87").
INCOME TAXES. In February 1992, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 109 ("SFAS 109")
relating to the method of accounting for income taxes. SFAS 109 requires
companies to take into account changes in tax rates when valuing the deferred
income tax amounts they carry on their balance sheets (the "Liability Method").
SFAS 109 also requires that deferred income taxes be provided for all temporary
differences between financial statement income and taxable income, however, a
deferred tax liability is not recognized for bad debt reserves of savings
associations that arose in tax years beginning before December 31, 1987 (base
year reserves). Effective January 1, 1993, the Company adopted SFAS 109 and has
reported the cumulative effect of that change in the method of accounting for
income taxes in the 1993 consolidated statement of earnings.
In 1992 and 1991, deferred income taxes were provided for all temporary
differences between financial statement income and taxable income in accordance
with Statement of Financial Accounting Standards No. 96 ("SFAS 96").
The Holding Company and its subsidiaries file a consolidated income tax
return. Income taxes are allocated proportionately to the Holding Company and
its subsidiaries as though separate income tax returns were filed.
FUTURE ACCOUNTING REQUIREMENTS. In November 1992, the FASB issued
Statement No. 112, "Employers' Accounting for Postemployment Benefits Other Than
Pensions," which requires employers to accrue the cost of certain benefits to
former or inactive employees when it is probable that a liability for such costs
has been incurred and the amount can be reasonably estimated. The Company
expects to adopt this Statement in 1994. The Company is still evaluating the
standard to determine its impact on annual operating expense and reviewing the
appropriate method and timing for implementation. However, based on preliminary
assessment, the Company believes adoption of the statement will not
significantly affect future operating expenses as the Company does not currently
provide postemployment benefits.
In May 1993, FASB issued Statement of Financial Accounting Standards No.
114 which addresses the accounting by creditors for impairment of certain loans.
It requires that impaired loans that are within the scope of this Statement be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. This Statement applies to financial statements for
F-9
<PAGE> 101
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fiscal years beginning after December 15, 1994. Management does not anticipate
this Statement will have a material impact on the Company.
In May 1993, the FASB issued an Exposure Draft entitled "Accounting for
Stock-Based Compensation". The exposure draft would establish new financial
accounting and reporting standards for stock-based compensation paid to
employees. Employee stock compensation arrangements would be classified as
either an equity or liability instrument. The proposed statement would recognize
the fair value of an award of stock or stock options as additional equity on the
grant date. Amounts attributable to future services would be recognized as
prepaid compensation and amortized ratably over the period the employee services
are rendered. If the plan requires a cash payment or if the employee can compel
the employer to settle a stock award by cash payment, the plan would be
considered a compensatory liability and compensation expense would be recognized
based on the estimated liability. The effective date for the proposed statement
is for awards granted after December 31, 1996. The Company is unable to predict
whether or not the exposure draft will become a final statement in its present
form without major revisions. Management has not determined the effect this
proposed statement, if adopted in its present form, would have on the Company's
financial position or results of operations.
EARNINGS PER SHARE. The Board of Directors approved a three-for-one stock
effective July 26, 1993 and as described in Note 21 to the consolidate financial
statements, on July 18, 1994 declared a 10% stock dividend to stockholders of
record September 13, 1994. All per share amounts including the average number of
shares outstanding and the stock option information in Note 15 to the
consolidated financial statements reflect both the three-for-one split and the
10% stock dividend. Earnings per share have been computed since the beginning of
the first quarter following the date of conversion from a mutual to a capital
stock company.
Earnings per share for the year ended December 31, 1992 have been computed
by dividing net earnings by the weighted average number of shares outstanding,
including common stock equivalents, assuming the 457,662 shares issued in
connection with the conversion of Citrus were outstanding since January 1, 1992.
Shares issuable upon exercise of the stock options granted in connection with
the conversion are common stock equivalents. Earnings per share for the year
ended December 31, 1991 have been computed by dividing the net earnings of New
Smyrna, since July 1, 1991, of $1,068,713 by the weighted average number of New
Smyrna shares outstanding.
The following table presents the information necessary to calculate
earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Average common shares outstanding..................... 4,366,804 4,308,902 3,795,000
Common shares assumed outstanding to reflect the
dilutive effect of common stock options............. 270,483 136,960 --
--------- --------- ---------
Weighted average shares..................... 4,637,287 4,445,862 3,795,000
======== ======== ========
</TABLE>
F-10
<PAGE> 102
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993:
FNMA Debentures........................ $ 5,080,360 $ 214,327 -- $ 5,294,687
FHLB Debentures........................ 5,000,000 -- $ 625,000 4,375,000
----------- ---------- ---------- -----------
Investment securities
held-to-maturity........... $10,080,360 $ 214,327 $ 625,000 $ 9,669,687
========== ========= ======== ==========
FHLMC common stock,
available-for-sale................... $ 103,703 $1,216,741 -- $ 1,320,444
========== ========= ======== ==========
AT DECEMBER 31, 1992:
FHLMC Common Stock..................... $ 103,682 $1,176,770 -- $ 1,280,452
FNMA Debentures........................ 5,160,719 114,281 -- 5,275,000
United States Treasury Notes........... 5,010,840 81,348 -- 5,092,188
----------- ---------- ---------- -----------
Total........................ $10,275,241 $1,372,399 -- $11,647,640
========== ========= ======== ==========
</TABLE>
All investment securities at December 31, 1992 were considered
held-to-maturity and recorded at amortized cost. On December 31, 1993, the
Company adopted Statement of Financial Accounting Standards No. 115 and
classified certain investment securities as available-for-sale. This resulted in
a net increase in the recorded amount of investment securities by $1,217,000 and
stockholders' equity by $754,000 net of the estimated tax effect of the
unrealized gains.
The amortized cost and estimated market value of debt securities by
contractual maturity are shown below.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
------------------------
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------- ----------
<S> <C> <C>
Due after one year through five years........................ $ 5,080,360 $5,294,687
Due after five years through ten years....................... 5,000,000 4,375,000
----------- ----------
Total.............................................. $10,080,360 $9,669,687
========== =========
</TABLE>
There were no sales of investment securities during the years ended
December 31, 1993, 1992 and 1991.
F-11
<PAGE> 103
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. MORTGAGE-BACKED SECURITIES
The carrying values and estimated market values of mortgage-backed
securities are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
PRINCIPAL UNAMORTIZED UNEARNED CARRYING MARKET
BALANCE PREMIUMS DISCOUNTS VALUE VALUE
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1993:
FHLMC certificates.......... $11,811,463 -- -- $11,811,463 $12,454,204
GNMA certificates........... 10,115,698 $ 84,979 $ (35,040) 10,165,637 10,789,200
FNMA certificates........... 7,218,808 57,223 (28,446) 7,247,585 7,534,895
Collateralized Mortgage
Obligations............... 9,444,075 2,657 -- 9,446,732 9,435,687
REMIC....................... 1,479,961 1,990 -- 1,481,951 1,485,211
Other mortgage-backed
securities................ 1,757,038 22,354 -- 1,779,392 1,780,582
----------- ----------- --------- ----------- -----------
Securities
held-to-
maturity........ $41,827,043 169,203 (63,486) 41,932,760 43,479,779
========== ========= ========= ========== ==========
FHLMC certificates.......... $ 1,676,937 -- -- $ 1,676,937 $ 1,737,726
GNMA certificates........... 19,263,905 -- (403,220) 18,860,685 20,281,280
----------- ----------- --------- ----------- -----------
Securities
available-
for-sale........ $20,940,842 -- $(403,220) $20,537,622 $22,019,006
========== ========= ========= ========== ==========
AT DECEMBER 31, 1992:
FHLMC certificates.......... $20,374,037 -- -- $20,374,037 $21,132,044
GNMA certificates........... 36,629,588 $ 112,918 $(585,929) 36,156,577 37,795,073
FNMA certificates........... 13,586,996 74,917 (47,834) 13,614,079 14,245,397
REMIC....................... 1,532,003 -- (7,700) 1,524,303 1,527,216
Collateralized Mortgage
Obligations............... 8,657,038 -- (21,023) 8,636,015 8,636,295
Other mortgage-backed
securities................ 1,998,759 25,256 -- 2,024,015 2,033,737
----------- ----------- --------- ----------- -----------
$82,778,421 $ 213,091 $(662,486) $82,329,026 $85,369,762
========== ========= ========= ========== ==========
</TABLE>
F-12
<PAGE> 104
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated market values of mortgage-backed
securities are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993:
FHLMC certificates..................... $11,811,463 $ 642,741 -- $12,454,204
GNMA certificates...................... 10,165,637 623,563 -- 10,789,200
FNMA certificates...................... 7,247,585 287,310 -- 7,534,895
Collateralized mortgage obligations.... 9,446,732 -- $ 11,045 9,435,687
REMIC.................................. 1,481,951 3,260 -- 1,485,211
Other mortgage-backed securities....... 1,779,392 1,190 -- 1,780,582
----------- ---------- ---------- -----------
Securities
held-to-maturity........... $41,932,760 $1,558,064 $ 11,045 $43,479,779
========== ========= ======== ==========
FHLMC certificates..................... $ 1,676,937 $ 60,789 -- $ 1,737,726
GNMA certificates...................... 18,860,685 1,420,595 -- 20,281,280
----------- ---------- ---------- -----------
Securities
available-for-sale......... $20,537,622 $1,481,384 -- $22,019,006
========== ========= ======== ==========
AT DECEMBER 31, 1992:
FHLMC certificates..................... $20,374,037 $ 758,007 -- $21,132,044
GNMA certificates...................... 36,156,577 1,646,463 $ (7,967) 37,795,073
FNMA certificates...................... 13,614,079 644,479 (13,161) 14,245,397
REMIC.................................. 1,524,303 2,913 -- 1,527,216
Collateralized Mortgage Obligations.... 8,636,015 280 -- 8,636,295
Other mortgage-backed securities....... 2,024,015 9,722 -- 2,033,737
----------- ---------- ---------- -----------
$82,329,026 $3,061,864 $ (21,128) $85,369,762
========== ========= ======== ==========
</TABLE>
All mortgage-backed securities at December 31, 1992 were considered
held-to-maturity and recorded at amortized cost. On December 31, 1993, the
Company adopted Statement of Financial Accounting Standards No. 115 and
reclassified certain of its mortgage-backed securities as available-for-sale.
This resulted in an increase in the recorded amount of mortgage-backed
securities by $1,481,000 and increase in stockholders' equity of $918,000 which
is net of the income tax effect of $563,000.
Proceeds from sales of mortgage-backed securities during 1991 were
$13,560,543. Gross gains of $70,702 and gross losses of $49,111 were realized on
the sales of mortgage-backed securities during 1991. There were no sales of
mortgage-backed securities during the years ended December 31, 1993 and 1992.
F-13
<PAGE> 105
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LOANS RECEIVABLE, NET
THE PORTFOLIO. Loans receivable consists of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------
1993 1992
------------ ------------
<S> <C> <C>
First mortgage loans:
Secured by one-to-four-family residences................ $324,902,189 $311,808,698
Secured by other properties............................. 22,830,764 24,158,655
Construction loans...................................... 10,317,106 7,818,433
Other................................................... 4,323,395 2,657,460
------------ ------------
362,373,454 346,443,246
------------ ------------
Consumer and other loans:
Automobile.............................................. 297,005 379,295
Mobile homes............................................ -- 17,169
Home equity and second mortgage......................... 1,766,899 1,724,516
Consumer................................................ 43,364 116,511
Loans on deposit accounts............................... 2,197,437 2,175,634
Other................................................... 554,588 14,551
------------ ------------
4,859,293 4,427,676
------------ ------------
367,232,747 350,870,922
Less:
Allowance for loan losses............................... (2,726,364) (2,582,604)
Undisbursed portion of loans in process................. (6,350,438) (4,375,610)
Unearned discounts...................................... (6,493) (22,049)
Deferred origination fees and costs..................... (4,393,577) (4,133,771)
------------ ------------
Loans receivable, net........................... $353,755,875 $339,756,888
=========== ===========
</TABLE>
CREDIT RISK AND LOAN LOSSES. The Company grants primarily long-term real
estate loans collateralized by single-family residences and other residential
properties and installment loans throughout the state. The majority of the
Company's loans are in the Citrus, Hernando, Marion and Volusia Counties.
Although, the Company has a diversified loan portfolio, a significant portion of
its debtors' ability to honor their contracts is dependent upon the economy of
these counties. The activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Balance, beginning of year........................ $2,582,604 $1,708,359 $ 2,151,438
Provision charged against earnings................ 176,898 1,011,196 859,050
Charge-offs....................................... (33,138) (136,951) (1,302,129)
---------- ---------- -----------
Balance, end of year.................... $2,726,364 $2,582,604 $ 1,708,359
========= ========= ==========
</TABLE>
Nonaccrual loans for which interest has been reduced totaled approximately
$2,035,000, $2,506,000 and $5,114,000 at December 31, 1993, 1992 and 1991,
respectively. Interest income that would have been
F-14
<PAGE> 106
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded under the original terms of such loans and the interest income actually
recognized are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Interest income that would have been recorded........ $169,428 $ 231,378 $ 528,492
Interest income recognized........................... (52,399) (117,661) (103,224)
-------- --------- ---------
Interest income foregone............................. $117,029 $ 113,717 $ 425,268
======== ========= =========
</TABLE>
5. LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of these mortgage
loans are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Mortgage loan portfolios serviced for:
FHLMC......................................... $27,117,255 $47,760,603 $61,502,486
FNMA.......................................... 4,270,778 5,217,247 2,388,950
Other investors............................... 840,671 1,114,861 1,497,742
----------- ----------- -----------
$32,228,704 $54,092,711 $65,389,178
========== ========== ==========
</TABLE>
Custodial escrow balances maintained in connection with the foregoing loans
serviced were approximately $205,000 and $352,000 at December 31, 1993 and 1992,
respectively.
6. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1993 1992
----------- -----------
<S> <C> <C>
Land........................................................ $ 1,520,626 $ 1,115,575
Buildings and improvements.................................. 7,662,055 7,512,315
Leasehold improvements...................................... 249,643 249,643
Furniture and equipment..................................... 3,407,250 3,171,868
----------- -----------
Total............................................. 12,839,574 12,049,401
Less accumulated depreciation............................... (4,748,509) (4,345,884)
----------- -----------
Premises and equipment, net................................. $ 8,091,065 $ 7,703,517
========== ==========
</TABLE>
F-15
<PAGE> 107
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. REAL ESTATE OWNED
Real estate owned consists of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------
1993 1992
---------- -----------
<S> <C> <C>
In-substance foreclosures.................................... $3,949,338 $ 5,617,763
Real estate acquired by foreclosure or deed in lieu of
foreclosure................................................ 1,562,605 5,472,674
Real estate held for investment.............................. 20,996 41,992
---------- -----------
5,532,939 11,132,429
Allowance for loss........................................... (764,240) (1,032,784)
---------- -----------
Total real estate owned, net....................... $4,768,699 $10,099,645
---------- -----------
</TABLE>
Loss on real estate operations consists of the following:
<TABLE>
<CAPTION>
YEAR END DECEMBER 31,
--------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Net loss (gain) on sale.............................. $(308,565) $(316,524) $(82,735)
Operating costs...................................... 268,850 488,440 218,389
Provision for loss................................... 311,711 538,624 395,288
--------- --------- --------
Net loss on real estate operations......... $ 271,996 $ 710,540 $530,942
========= ========= ========
</TABLE>
The following is an analysis of the activity in the allowance for loss on
real estate acquired by foreclosure or deed in lieu of foreclosure and real
estate held for investment:
<TABLE>
<CAPTION>
REAL ESTATE REAL ESTATE
ACQUIRED BY HELD FOR
FORECLOSURE INVESTMENT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990...................... $ 1,440,814 $ 98,910 $ 1,539,724
Provision charged to earnings..................... 387,010 8,278 395,288
Charge-offs....................................... (98,045) (77,831) (175,876)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1991...................... 1,729,779 29,357 1,759,136
Provision charged to earnings..................... 532,773 5,851 538,624
Charge-offs....................................... (1,246,560) (18,416) (1,264,976)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1992...................... 1,015,992 16,792 1,032,784
Provision charged to earnings..................... 307,711 4,000 311,711
Charge-offs....................................... (571,859) (8,396) (580,255)
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1993...................... $ 751,844 $ 12,396 $ 764,240
========== ======== ==========
</TABLE>
F-16
<PAGE> 108
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. DEPOSIT ACCOUNTS
Deposit accounts consist of the following:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE RATE AT AT DECEMBER 31,
DECEMBER 31, ---------------------------
1993 1993 1992
--------------- ------------ ------------
<S> <C> <C> <C>
NOW accounts, including noninterest bearing
deposits of $6.2 million in 1993 and $1.7
million in 1992............................ 1.95% $ 48,706,754 $ 42,099,291
Money market deposit accounts................ 2.55 39,723,390 39,419,217
Passbook accounts............................ 2.35 89,298,698 86,184,062
------------ ------------
Subtotal........................... 2.28 177,728,842 167,702,570
------------ ------------
Certificate accounts by interest rates:
2.50% - 2.99%............................ 2.87% 3,091,062 --
3.00% - 4.99%............................ 3.61 191,302,113 197,355,412
5.00% - 6.99%............................ 5.71 104,485,556 103,151,551
7.00% - 8.99%............................ 7.82 11,102,400 24,341,204
9.00% - 10.99%............................ 9.54 1,200,206 7,128,525
11.00% - 12.99%............................ 11.98 1,130,888 1,416,375
------------ ------------
Total certificates................. 4.51 312,312,225 333,393,067
------------ ------------
3.68% $490,041,067 $501,095,637
=========== =========== ===========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposits with a
minimum denomination of $100,000 was approximately $42.4 million and $45.8
million at December 31, 1993 and 1992, respectively.
The following table presents, by various interest rate categories, the
amounts of certificate accounts at December 31, 1993 maturing during the periods
reflected below:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------
1994 1995 1996 1997 1998 TOTAL
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
2.00% - 2.99%.... $ 3,091,062 -- -- -- -- $ 3,091,062
3.00% - 4.99%.... 150,274,759 $30,389,237 $ 9,278,570 $ 973,440 $ 386,107 $191,302,113
5.00% - 6.99%.... 29,048,487 26,548,013 6,397,668 15,026,878 27,464,510 104,485,556
7.00% - 8.99%.... 8,307,458 1,764,811 1,030,131 -- -- 11,102,400
9.00% - 10.99%.... 383,566 418,792 397,848 -- -- 1,200,206
11.00% - 12.99%.... 1,130,888 -- -- -- -- 1,130,888
------------ ----------- ----------- ----------- ----------- ------------
$192,236,220 $59,120,853 $17,104,217 $16,000,318 $27,850,617 $312,312,225
=========== ========== ========== ========== ========== ===========
</TABLE>
Interest expense on deposit accounts is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
NOW and money market deposit accounts........... $ 2,094,345 $ 2,219,218 $ 2,715,529
Passbook accounts............................... 2,311,408 2,756,905 3,308,025
Certificate accounts............................ 15,052,335 20,259,544 30,695,329
Less early withdrawal penalties................. (82,334) (92,899) (119,842)
----------- ----------- -----------
$19,375,754 $25,142,768 $36,599,041
========== ========== ==========
</TABLE>
F-17
<PAGE> 109
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. BORROWED FUNDS
The Federal Home Loan Bank advance outstanding at December 31, 1993 and
1992 of $5,000,000 will mature in 1995 and bears interest at 5.54%. At December
31, 1993, the advance was collateralized by certain mortgage-backed securities
with a book value of $5,963,567 and a market value of approximately $6,330,000.
The Federal Home Loan Bank stock is also pledged as collateral for the advance.
10. INCOME TAXES
As discussed in Note 1, the Company adopted SFAS 109 as of January 1, 1993.
The cumulative effect of this change in accounting for income taxes increased
net earnings by $824,000 and earnings per share by $.19 and is reported
separately in the consolidated statement of earnings for the year ended December
31, 1993. The effect of applying SFAS 109 on earnings before the cumulative
effect of the change in accounting principle for the year ended December 31,
1993 was not significant.
Total income taxes for the year ended December 31, 1993 was allocated as
follows:
<TABLE>
<S> <C>
Charged against earnings................................................. $4,257,815
Stockholders' equity, for the tax effect on the unrealized gain on
securities available-for-sale.......................................... 1,025,288
----------
$5,283,103
=========
</TABLE>
The Company's effective tax rate is different than the statutory federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1993 1992 1991
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
---------- --- ---------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate..... $3,821,287 34% $3,008,580 34% $1,046,525 34%
Increase (decrease) resulting from:
Bad debt deduction............... -- -- (62,000) (1) 66,085 2
State income tax................. 345,140 3 195,000 3 119,000 4
Other, net....................... 91,388 1 178,770 2 (59,000) (2)
---------- --- ---------- --- ---------- ---
Total.................... $4,257,815 38% $3,320,350 38% $1,172,610 38%
========= == ========= == ========= ==
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.......................................... $3,753,815 $3,083,350 $ 904,610
State............................................ 524,000 295,000 163,000
---------- ---------- ----------
Total.................................... 4,277,815 3,378,350 1,067,610
---------- ---------- ----------
Deferred:
Federal.......................................... (19,000) (33,000) 88,000
State............................................ (1,000) (25,000) 17,000
---------- ---------- ----------
Total.................................... (20,000) (58,000) 105,000
---------- ---------- ----------
$4,257,815 $3,320,350 $1,172,610
========= ========= =========
</TABLE>
F-18
<PAGE> 110
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1993 are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Unearned profit on other real estate owned............................ $ 110,000
Allowance for loan losses............................................. 818,000
-----------
Total gross deferred tax assets............................... 928,000
Less valuation allowance.............................................. --
-----------
Net deferred tax assets....................................... 928,000
-----------
Deferred tax liabilities:
Premises and equipment................................................ (187,000)
Deferred origination fees and costs................................... (693,000)
Federal Home Loan Bank stock.......................................... (548,000)
Loans and mortgage-backed securities.................................. (150,000)
Accrued pension liability............................................. (83,000)
Unrealized gain on securities available-for-sale...................... (1,025,288)
Other................................................................. (47,000)
-----------
Total gross deferred tax liabilities.......................... (2,733,288)
-----------
Net deferred tax liability.................................... $(1,805,288)
==========
</TABLE>
The provision for deferred income taxes relates to the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1991
--------- ---------
<S> <C> <C>
Increase in the bad debt reserve for tax purposes over the
base year reserve........................................ $ 55,000 $ 217,000
Allowance for losses on securities and other real estate
investments.............................................. -- 39,600
Stock dividend............................................. 83,000 56,100
Loan origination costs..................................... 35,000 22,000
Loan origination fees...................................... (118,000) (120,800)
Conversion from accrual basis for the financial statements
to the cash basis for tax purposes....................... (122,000) (68,000)
Depreciation............................................... (10,000) (64,900)
Other, net................................................. 19,000 24,000
--------- ---------
Total............................................ $ (58,000) $ 105,000
========= =========
</TABLE>
If certain conditions are met in determining taxable income, the Company is
allowed a special bad debt deduction based on a percentage of taxable income
(presently 8 percent) or on specified experience formulas. The 1987 base year
bad debt reserves are included in taxable income of later years only if they are
used for purposes other than to absorb bad debt losses. Because the Company does
not intend to use the base year reserves for purposes other than to absorb
losses, no deferred income taxes have been provided. The unrecorded deferred
income tax liability on the base year bad debt reserves of $4,088,000 was
approximately $1,533,000 at December 31, 1993.
Earnings appropriated to bad debt reserves and deducted for federal income
tax purposes are not available for payment of cash dividends or other
distributions to stockholders, including distributions on redemption,
dissolution, or liquidation without payment of taxes by the Company on the
amount of earnings removed from the reserves for such distribution at the then
current tax rate. Under applicable Code provisions, the amount
F-19
<PAGE> 111
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which would be deemed removed from such reserves by the Company, in the event of
any such distribution to stockholders, and which would be subject to taxation at
the Company level at the normal tax rate would approximate one hundred and fifty
percent (150%) of the net amount actually distributed to the stockholders. At
December 31, 1993, the Company had approximately $22,526,000 in tax earnings and
profits available for dividend distribution to its stockholders without the
imposition of any tax at the Company level. During the year ended December 31,
1993, cash dividends of $.50 per share totaling $2,025,828 were paid to
stockholders.
11. PENSION PLAN
New Smyrna has a noncontributory defined pension plan covering all
full-time employees who have met certain age and length of service requirements.
The benefits are based on years of service and average monthly compensation. New
Smyrna's current funding policy is to make an annual contribution that will not
be less than the minimum required contribution nor greater than the maximum
federal income tax deductible limit. Net periodic pension expense included the
following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Service cost........................................ $ 137,612 $ 98,930 $ 75,128
Interest cost....................................... 163,386 136,440 109,799
Return on plan assets............................... (139,305) (117,634) (126,168)
Net amortization and deferral....................... 37,716 20,322 47,889
--------- --------- ---------
Net periodic pension expense.............. $ 199,409 $ 138,058 $ 106,648
========= ========= =========
</TABLE>
The status of the plan at October 1 as determined by consulting actuaries
is as follows:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $ 1,596,053 $ 1,231,032
Non-vested................................................ 87,618 79,684
----------- -----------
Total............................................. $ 1,683,671 $ 1,310,716
========== ==========
Accrued pension liability:
Projected benefit obligation.............................. (2,748,346) (2,253,596)
Fair value of plan assets................................. 1,665,877 1,440,680
----------- -----------
Projected benefit obligation in excess of plan assets....... (1,082,469) (812,916)
Unrecognized net transition liability....................... 1,111,482 870,342
----------- -----------
Prepaid pension costs..................................... $ 29,013 $ 57,426
========== ==========
</TABLE>
In 1993 and 1992, the expected long-term rate of return on plan assets was
9% and the discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the accumulated benefit obligation
were 7.25% and 6.50%, and 8.25% and 6.50% in 1993 and 1992, respectively. Plan
assets are invested primarily in guaranteed accumulation contracts.
Citrus has a noncontributory pension plan covering substantially all of its
employees. Benefits under the plan are provided by a multi-employer defined
benefit plan. Actuarial present value of accumulated plan benefits and net
assets available for benefits are not available on an individual employer basis.
No amounts were required to be contributed to the plan during the years ended
December 31, 1993, 1992 and 1991.
F-20
<PAGE> 112
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND LOAN COMMITMENTS
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its borrowers.
These financial instruments consist of loan commitments to extend credit. These
instruments may, but not necessarily, involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Company has in these financial instruments. 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 is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments as it does for on-balance-sheet loans receivable.
Loan commitments whose contract amounts represent credit and interest rate risk
are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1993 1992
------ ------
(IN THOUSANDS)
<S> <C> <C>
Outstanding mortgage loan commitments, exclusive of loans in process:
At fixed rates..................................................... $5,620 $4,270
At variable rates.................................................. 2,580 252
------ ------
Total mortgage loan commitments............................ $8,200 $4,522
====== ======
</TABLE>
Commitments to extend credit are agreements to lend monies to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on management's
credit evaluation of the borrower.
13. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying financial statements. In addition, the Company is a defendant in
certain claims and legal actions arising in the ordinary course of business. In
the opinion of management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material adverse effect
on the financial position of the Company. The principal commitments of the
Company are as follows:
LEASE COMMITMENTS. At December 31, 1993, the Company was operating one
branch office under a month-to-month lease. Net rent expense under operating
leases, included in occupancy and equipment expense, was approximately $74,000,
$61,000 and $57,000 for the years ended December 31, 1993, 1992 and 1991,
respectively.
14. REGULATORY MATTERS
In connection with the insurance of deposit accounts, the Holding Company's
thrift subsidiaries are required to maintain certain minimum regulatory capital
requirements. This is not a valuation allowance and has not been created by
charges against earnings. It represents a restriction on stockholders' equity.
The
F-21
<PAGE> 113
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
following is a summary of the regulatory capital requirements, as well as, the
Holding Company's thrift subsidiaries regulatory capital and the amounts in
excess of such required capital as of December 31, 1993:
<TABLE>
<CAPTION>
RISK-BASED
TANGIBLE CORE --------------------
---------------- ---------------- % OF RISK-
% OF % OF WEIGHTED
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------- ------ ------- ------ ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NEW SMYRNA:
Regulatory capital.................. $23,238 7.2% $23,238 7.2% $24,112 16.1%
Requirement......................... 4,862 1.5 9,724 3.0 12,006 8.0
------- ------ ------- ------ ------- -----
Excess.................... $18,376 5.7% $13,514 4.2% $12,106 8.1%
======= ===== ======= ===== ======= ========
CITRUS:
Regulatory capital.................. $14,819 6.7% $14,819 6.7% $15,932 18.0%
Requirement......................... 3,319 1.5 6,637 3.0 7,068 8.0
------- ------ ------- ------ ------- -----
Excess.................... $11,500 5.2% $ 8,182 3.7% $ 8,864 10.0%
======= ===== ======= ===== ======= ========
</TABLE>
At the time of the conversions of New Smyrna and Citrus, liquidation
accounts were established for each institution in amounts equal to the total
regulatory capital as of July 30, 1990 and December 31, 1991, respectively. Each
eligible deposit account holder, as described in the respective plans of
conversion, is entitled to a proportionate share of such liquidation account in
the event of a complete liquidation of the institution in which such account is
held, but only in such event. This share cannot be increased but will be reduced
if the account holder's deposit falls below the amount on the dates of record,
and will cease to exist if the account is closed. The liquidation accounts will
never be increased despite any increase after the conversions in the related
deposit of an account holder. This account is reduced annually in proportion to
the reduction of eligible savings account balances measured on December 31 of
each year.
New Smyrna and Citrus may not declare or pay a cash dividend on, or
repurchase any of its capital stock, if the effect thereof would cause the
stockholders' equity of either institution to be reduced below either, the
amount required for their respective liquidation accounts or the regulatory
capital requirements, imposed by the regulatory authorities.
F-22
<PAGE> 114
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. STOCK OPTION PLANS (SEE NOTE 21, SUBSEQUENT EVENT 10% STOCK DIVIDEND)
Certain directors, officers and employees have options to purchase shares
of the Company's common stock, under its stock option plans. The option price is
the fair market value at date of grant. The options are exercisable in one or
more installments until 2001. Under the option plans, 56 shares remain available
for grant to directors, officers and employees on a merit basis. A summary of
transactions follows:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF OPTION
SHARES PRICE
--------- ----------
<S> <C> <C>
Options granted July 1, 1991 at $3.03 per share................ 329,918 $ 999,750
Options exercised.............................................. -- --
Options forfeited.............................................. -- --
--------- ----------
OUTSTANDING AT DECEMBER 31, 1991............................... 329,918 999,750
Options granted February 11, 1992 at $3.79 per share........... 82,500 312,500
Options granted July 8, 1992 at $4.81 per share................ 54,136 260,429
Options granted August 24, 1992 at $6.44 per share............. 60,591 390,171
Options exercised at $3.03 per share........................... (42,893) (129,980)
Options forfeited at $3.03 per share........................... (3,920) (11,880)
--------- ----------
OUTSTANDING AT DECEMBER 31, 1992............................... 480,332 1,820,990
Option exercised at $3.03 per share............................ (52,807) (169,373)
--------- ----------
OUTSTANDING AT DECEMBER 31, 1993............................... 427,525 $1,651,617
======== =========
</TABLE>
16. MANAGEMENT RECOGNITION PLAN
The Board of Directors of the Company has adopted a Management Recognition
Plan (the "MRP"), the objective of which is to enable the Company to retain its
corporate officers who have the experience and ability necessary to manage the
Company. Those eligible to receive benefits under the MRP will include certain
officers as determined by members of a committee appointed by the Board of
Directors of the Company.
The MRP is managed by trustees who are directors of the Company who have
the responsibility to invest all funds contributed by the Company to the trust
created for the MRP (the "Trust"). The Company contributed $345,000 to the Trust
at the time the Trust was established. The Trust purchased 34,500 shares of
Common Stock issued in the Conversion. On July 1, 1991, the Committee granted
one-half of the MRP shares to Frances Ford and one-half to Charles Byrd. The
shares granted are in the form of restricted stock to be earned and payable over
a four-year period at the rate of 25% of such shares per year beginning January
1, 1992. Compensation expense in the amount of the fair market value of the
Common Stock at the date of the grant to the officer or employee is being
recognized pro rata over the four years during which the shares are earned and
payable.
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS. For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES. For securities
held-to-maturity, fair value equals market price, if available. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities.
F-23
<PAGE> 115
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LOANS RECEIVABLE. The fair value of loans is estimated by discounting
the future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit rating and for the same remaining
maturities.
DEPOSIT ACCOUNTS. The fair value of NOW accounts, savings accounts,
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of deposit
accounts is estimated using the rates currently offered for deposits of
similar remaining maturities.
BORROWED FUNDS. Rates currently available to the Company for debt
with similar terms and remaining maturities are used to estimate fair value
of existing debt.
COMMITMENTS TO EXTEND CREDIT. The fair value of commitments is
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between current
levels of interest rates and the committed rates.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
---------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and cash equivalents.................................... $ 95,504 $ 95,504
======== ========
Investment securities........................................ $ 11,401 $ 10,990
======== ========
Mortgage-backed and related securities....................... $ 63,952 $ 65,499
======== ========
Loans receivable............................................. 356,482
Less -- allowance for loan losses............................ 2,726
--------
$353,756 $371,000
======== ========
Financial liabilities:
Deposit accounts............................................. $490,041 $497,000
======== ========
Borrowed funds............................................... $ 5,000 $ 5,000
======== ========
Unrecognized financial instruments -- Commitments to extend
credit....................................................... $ 8,200 $ 8,200
======== ========
</TABLE>
F-24
<PAGE> 116
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. PARENT COMPANY FINANCIAL INFORMATION
The parent company financial information is as follows (in thousands):
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1993 1992
------- -------
<S> <C> <C>
ASSETS
Cash, deposited with subsidiaries.................................. $ 4,091 $ 738
Investment in subsidiaries......................................... 38,107 34,005
Other assets....................................................... 129 52
------- -------
Total assets............................................. $42,327 $34,795
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable to subsidiaries................................... 50 79
Stockholders' equity............................................... 42,277 34,716
------- -------
Total liabilities and stockholders' equity............... $42,327 $34,795
======= =======
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Revenues..................................................... $ 5 --
Expenses..................................................... 378 $ 307
------------ ------------
Loss before earnings of subsidiaries....................... (373) (307)
Earnings of subsidiaries................................... 8,178 3,294
------------ ------------
Net earnings....................................... $ 7,805 $ 2,987
========== ==========
CONDENSED STATEMENTS OF CASH FLOWS
Operating activities:
Net earnings............................................... $ 7,805 $ 2,987
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in undistributed earnings of subsidiaries........ (8,178) (3,294)
Increase (decrease) in accounts payable................. (29) 79
Issuance of common stock held by management recognition
plan trust............................................ 235 --
Increase in other assets................................ (77) (51)
------------ ------------
Net cash used in operating activities.............. (244) (279)
------------ ------------
Investing activities:
Dividend from Subsidiaries................................. 5,750 3,855
Investment in Citrus....................................... -- (4,739)
------------ ------------
Net cash provided by (used in) investing
activities....................................... 5,750 (884)
------------ ------------
</TABLE>
F-25
<PAGE> 117
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Financing activities:
Sale (retirement) of common stock.......................... (296) 2,060
Proceeds from stock option exercised....................... 169 130
Payment of cash dividends.................................. (2,026) (289)
------------ ------------
Net cash provided by (used in) financing
activities....................................... (2,153) 1,901
------------ ------------
Net increase in cash......................................... 3,353 738
Cash at beginning of the period.............................. 738 --
------------ ------------
Cash at end of period........................................ $ 4,091 $ 738
========== ==========
</TABLE>
19. PENDING ACQUISITION
On August 17, 1993 FF Bancorp entered into a Stock Purchase Agreement with
Key Bancshares, Inc., whereby FF Bancorp agreed to purchase all of the
outstanding shares of Key Bancshares in a combination cash and stock
transaction. The Agreement has been approved by the shareholders of Key
Bancshares. Management expects the transaction to close during the first quarter
of 1994. Key Bancshares is the parent company for The Key Bank of Florida, a
state-chartered commercial bank with total assets at December 31, 1993 of $73
million located in Tampa, Florida. After the acquisition is consummated, The Key
Bank of Florida will operate as commercial bank subsidiary.
F-26
<PAGE> 118
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follows ($ in thousands, except per
share figures):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income..................................... $10,219 $10,065 $ 9,821 $ 9,641
Interest expense.................................... 5,145 4,964 4,821 4,722
------- ------- ------- -------
Net interest income................................. 5,074 5,101 5,000 4,919
Provision for loan losses........................... 79 76 22 --
------- ------- ------- -------
Net interest income after provision for loan
losses............................................ 4,995 5,025 4,978 4,919
Noninterest income.................................. 271 323 297 308
Noninterest expense................................. 2,317 2,509 2,431 2,620
------- ------- ------- -------
Earnings before income taxes and cumulative effect
of change in accounting principle................. 2,949 2,839 2,844 2,607
Provision for income taxes.......................... 1,090 1,089 1,073 1,007
------- ------- ------- -------
Earnings before cumulative effect of change in
accounting principle.............................. 1,859 1,750 1,771 1,600
Cumulative effect of change in accounting
principle......................................... 824 -- -- --
------- ------- ------- -------
Net earnings.............................. $ 2,683 $ 1,750 $ 1,771 $ 1,600
======= ======= ====== ======
Earnings per share:
Earnings before cumulative effect of change in
accounting principle........................... $ .40 $ .38 $ .38 $ .34
Cumulative effect of change in accounting
principle...................................... .18 -- -- --
------- ------- ------- -------
Net earnings.............................. $ .58 $ .38 $ .38 $ .34
======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income................................... $11,596 $11,083 $10,725 $10,470
Interest expense.................................. 7,339 6,509 6,015 5,535
------- ------- ------- -------
Net interest income............................... 4,257 4,574 4,710 4,935
Provision for loan losses......................... 304 249 228 230
------- ------- ------- -------
Net interest income after provision for loan
losses.......................................... 3,953 4,325 4,482 4,705
Gain (loss) on sale of assets..................... (19) (17) -- 2
Noninterest income................................ 306 275 314 198
Noninterest expense............................... 2,514 2,442 2,322 2,398
------- ------- ------- -------
Earnings before income tax expense................ 1,726 2,141 2,474 2,507
Provision for income taxes........................ 677 824 982 837
------- ------- ------- -------
Net earnings............................ $ 1,049 $ 1,317 $ 1,492 $ 1,670
======= ======= ======= =======
Earnings per share...................... $ .24 $ .30 $ .33 $ .37
======= ======= ======= =======
</TABLE>
F-27
<PAGE> 119
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1991
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income............................... $11,735 $11,971 $12,352 $12,005
Interest expense.............................. 9,364 9,470 9,254 8,511
------- ------- ------- -------
Net interest income........................... 2,371 2,501 3,098 3,494
Provision for loan losses..................... 175 175 239 270
------- ------- ------- -------
Net interest income after provision for loan
losses...................................... 2,196 2,326 2,859 3,224
Gain on sale of assets........................ 21 46 243 64
Noninterest income............................ 250 268 245 245
Noninterest expense........................... 1,987 2,029 2,303 2,589
------- ------- ------- -------
Earnings before income tax expense............ 480 611 1,044 944
Provision for income taxes.................... 144 217 369 443
------- ------- ------- -------
Net earnings.................................. $ 336 $ 394 $ 675 $ 501
======= ======= ======= =======
Earnings per share(1)......................... $ NA(2) NA(2) .15 .13
======= ======= ======= =======
</TABLE>
- ---------------
(1) Earnings per share during 1991 include only the earnings of New Smyrna from
July 1, 1991, the date of their conversion from a mutual to a stock
institution.
(2) The Holding Company's Thrift Subsidiaries were mutual institutions until
July 1, 1991, therefore per share amounts are not applicable.
21. SUBSEQUENT EVENT -- 10% STOCK DIVIDEND
On July 18, 1994, the Board of Directors declared a 10% stock dividend to
stockholders of record September 13, 1994. The following have been restated to
reflect this stock dividend:
- Weighted average number of shares outstanding and earnings per share
during each of the three years presented, see Note 1 Summary of
Significant Accounting Policies, Earnings Per Share.
- The number of shares and per share amounts in Note 15 Stock Option Plans.
F-28
<PAGE> 120
FF BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
(IN
THOUSANDS)
(UNAUDITED)
<S> <C>
ASSETS
Cash............................................................................ $ 9,003
Interest-bearing deposits....................................................... 72,023
Federal funds sold.............................................................. 1,100
-------------
Cash and cash equivalents............................................. 82,126
Investment securities available-for-sale, at market............................. 1,413
Investment securities held-to-maturity, at cost................................. 21,259
Mortgage-backed securities available-for-sale, at market........................ 16,677
Mortgage-backed securities held-to-maturity, at cost............................ 31,616
Loans receivable, net........................................................... 417,318
Accrued interest receivable:
Investment securities......................................................... 392
Mortgage-backed securities.................................................... 347
Loans receivable.............................................................. 2,048
Real estate owned............................................................... 6,333
Premises and equipment, net..................................................... 10,066
Federal Home Loan Bank stock, at cost........................................... 4,265
Prepaid expenses and other assets............................................... 1,652
Deferred income taxes........................................................... 1,913
-------------
Total................................................................. $ 597,425
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts................................................................ $ 539,183
Accrued interest on deposit accounts............................................ 321
Borrowed funds.................................................................. --
Official checks................................................................. 1,582
Advance payments by borrowers for taxes and insurance........................... 5,048
Current and deferred income taxes............................................... 1,739
Other liabilities and accrued expenses.......................................... 2,228
-------------
Total liabilities..................................................... 550,101
-------------
Stockholders' equity:
Common stock.................................................................. 47
Additional paid-in capital.................................................... 20,197
Retained earnings, substantially restricted................................... 26,470
Unrealized gain on securities available-for-sale.............................. 696
Stock held by Management Recognition Plan Trust............................... (86)
-------------
Total stockholders' equity............................................ 47,324
-------------
Total................................................................. $ 597,425
==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-29
<PAGE> 121
FF BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1994 1993
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE FIGURES)
(UNAUDITED)
<S> <C> <C>
Interest income:
Interest and fees on loans................................................ $ 24,920 $ 23,014
Mortgage-backed and related securities.................................... 3,082 4,726
Interest and dividends on investment securities........................... 882 489
Other interest-earning assets............................................. 2,629 1,875
---------- ----------
Total interest income.............................................. 31,513 30,104
---------- ----------
Interest expense:
Deposit accounts.......................................................... 14,586 14,721
Borrowed funds............................................................ 21 207
---------- ----------
Total interest expense............................................. 14,607 14,928
---------- ----------
Net interest income......................................................... 16,906 15,176
Provision for loan losses................................................... -- 177
---------- ----------
Net interest income after provision for loan losses......................... 16,906 14,999
---------- ----------
Noninterest income:
Fees and service charges.................................................. 989 736
Other..................................................................... 533 154
---------- ----------
Total noninterest income........................................... 1,522 890
---------- ----------
Noninterest expenses:
Employee compensation and benefits........................................ 4,095 2,981
Occupancy and equipment................................................... 1,346 1,237
Federal insurance premiums................................................ 1,028 1,002
Data processing........................................................... 592 509
Professional fees......................................................... 305 291
Net (gain) loss on real estate operations................................. (66) 163
Other..................................................................... 1,201 1,074
---------- ----------
Total noninterest expenses......................................... 8,501 7,257
---------- ----------
Earnings before provision for income taxes and cumulative effect of change
in accounting principle................................................... 9,927 8,632
Provision for income taxes.................................................. 3,463 3,252
---------- ----------
Earnings before cumulative effect of change in accounting principle......... 6,464 5,380
Cumulative effect of change in accounting principle......................... -- 824
---------- ----------
Net earnings................................................................ $ 6,464 $ 6,204
========== ==========
Earning per share:
Earning before cumulative effect of change in accounting principle........ $ 1.44 $ 1.17
Cumulative effect of change in accounting principle....................... -- .18
---------- ----------
Net earnings....................................................... $ 1.44 $ 1.35
========== ==========
Proforma amounts assuming the new accounting method for income taxes is
applied retroactively:
Net earnings.............................................................. $ 6,464 $ 5,380
========== ==========
Earning per share......................................................... $ 1.44 $ 1.17
========== ==========
Dividends per share......................................................... $ .39 $ .35
========== ==========
Weighted average number of shares outstanding............................... 4,478,957 4,605,160
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-30
<PAGE> 122
FF BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1994 1993
-------- --------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Operating activities:
Net earnings................................................................. $ 6,464 $ 6,204
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation of premises and equipment..................................... 541 468
Provision for losses on real estate owned.................................. 91 276
Provision for loan losses.................................................. -- 177
Increase (decrease) in current and deferred income taxes................... 222 (940)
Decrease (increase) in accrued interest receivable......................... (75) 68
Amortization of deferred loan fees, net.................................... (915) (860)
Increase in other assets................................................... (104) (380)
Decrease in accrued interest payable....................................... (20) (22)
Decrease in other liabilities and official checks.......................... (1,228) (174)
Amortization of premiums on investment securities.......................... 81 70
Amortization of discount on mortgage-backed and related securities......... (97) (92)
Gain on sale of real estate owned.......................................... (348) (226)
Issuance of common stock held by Management Recognition Plan Trust......... 311 235
-------- --------
Net cash provided by operating activities............................. 4,923 4,804
-------- --------
Investing activities:
Principal collected on loans................................................. 43,390 34,284
Loans originated............................................................. (61,372) (43,637)
Purchase of premises and equipment........................................... (1,393) (843)
Loan origination fees received............................................... 819 973
Loan origination costs paid.................................................. (315) (272)
Proceeds from maturities of investment securities............................ 4,000 5,000
Purchase of mortgage-backed and related securities........................... -- (20,007)
Principal collected on mortgage-backed and related securities................ 14,089 24,353
Purchase of investments securities........................................... (1,981) (5,000)
Proceeds from sales of real estate owned..................................... 1,540 1,032
Payments capitalized to real estate owned.................................... (339) (482)
Sale of Federal Home Loan Bank stock......................................... 115 219
Purchase of Federal Home Loan Bank stock..................................... (54) (284)
Purchase of Key Bancshares, Inc. net cash acquired........................... 2,952 --
-------- --------
Net cash provided by (used in) investing activities................... 1,451 (4,664)
-------- --------
Financing activities:
Net decrease in deposit accounts............................................. (16,951) (14,112)
Net increase in advance payments by borrowers for taxes and insurance........ 3,839 3,355
Proceeds from stock options exercised........................................ 1,335 159
Purchase of treasury stock, retired.......................................... (1,184) --
Repayment of borrowed funds.................................................. (5,000) --
Payment of cash dividends.................................................... (1,791) (1,546)
-------- --------
Net cash used in financing activities................................. (19,752) (12,144)
-------- --------
Net decrease in cash and cash equivalents...................................... (13,378) (12,004)
Cash and cash equivalents at beginning of period............................... 95,504 90,816
-------- --------
Cash and cash equivalents at end of period..................................... $ 82,126 $ 78,812
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes............................................................... $ 3,291 $ 3,345
========= =========
Interest................................................................... $ 14,535 $ 14,794
========= =========
Supplemental disclosures of noncash investing and financing activities:
Transfers of mortgage loans receivable to real estate owned.................. $ 947 $ 1,188
========= =========
Loans originated for the sale of real estate owned........................... $ 2,862 $ 4,043
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-31
<PAGE> 123
FF BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
STOCK
UNREALIZED HELD BY
RETAINED GAIN ON MANAGEMENT
ADDITIONAL EARNINGS, SECURITIES RECOGNITION TOTAL
NUMBER OF COMMON PAID-IN SUBSTANTIALLY AVAILABLE- PLAN STOCKHOLDERS'
SHARES STOCK CAPITAL RESTRICTED FOR-SALE TRUST EQUITY
--------- ------ ---------- ------------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993....... 3,970,662 $ 40 $ 12,830 $27,907 $1,673 $ (173) $42,277
Issuance of 25,878 shares of
common stock held by Management
Recognition Plan Trust
(unaudited).................... -- -- 224 -- -- 87 311
Issuance of 71,142 shares of
common stock for purchase of
Key Bancshares, Inc.
(unaudited).................... 71,142 1 888 -- -- -- 889
Proceeds from common stock issued
under the employee stock option
plan (unaudited)............... 311,862 3 1,332 -- -- -- 1,335
Net earnings for the nine months
ended September 30, 1994
(unaudited).................... -- -- -- 6,464 -- -- 6,464
Change in unrealized gain on
securities available-for-sale
for the nine-months ended
September 30, 1994
(unaudited).................... -- -- -- -- (977) -- (977)
Retire common stock
(unaudited).................... (97,900) (1) (1,183) -- -- -- (1,184)
Dividends at $.39 per share
(unaudited).................... -- -- -- (1,791) -- -- (1,791)
10% stock dividend declared July
18, 1994 (unaudited)........... 425,052 4 6,106 (6,110) -- -- --
--------- ------ ---------- ------------- ---------- ---------- -------------
BALANCE, SEPTEMBER 30, 1994
(UNAUDITED).................... 4,680,818 $ 47 $ 20,197 $26,470 $ 696 $ (86) $47,324
========= ======== ========= =========== ========= =========== ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-32
<PAGE> 124
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
In the opinion of the management of FF Bancorp, Inc. ("FF Bancorp" or the
"Company"), the accompanying condensed consolidated financial statements contain
all adjustments (consisting principally of normal recurring accruals) necessary
to present fairly the financial position at September 30, 1994, and the results
of operations for the three and nine-months periods ended September 30, 1994 and
1993 and the cash flows for the nine-month periods ended September 30, 1994 and
1993. The results of operations for the three and nine months ended September
30, 1994 are not necessarily indicative of the results to be expected for the
full year.
On July 18, 1994, the Board of Directors declared a 10% stock dividend to
stockholders of record September 13, 1994. The per share amounts and
stockholders' equity have been retroactively adjusted to reflect this dividend.
The Company is organized as a multiple thrift and one bank holding company.
The Company's condensed consolidated financial statements include the accounts
of First Federal Savings Bank of New Smyrna ("New Smyrna"), First Federal
Savings Bank of Citrus County ("Citrus") and Key Bancshares, Inc. and its
subsidiary The Key Bank of Tampa ("Key"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
On April 8, 1994 FF Bancorp acquired Key Bancshares, Inc., for a
combination of $2.6 million in cash and 71,142 shares of common stock. Key
Bancshares is the parent company for The Key Bank of Florida, a state-chartered
commercial bank with total assets at March 31, 1994 of $71 million located in
Tampa, Florida. The Key Bank of Florida operates as a commercial bank
subsidiary. The acquisition has been accounted for using the purchase method of
accounting. Negative goodwill of $771,000 resulted from this transaction. The
negative goodwill was applied to reduce premises and equipment and will be
amortized over the lives of these assets.
Consolidated results of operations on a proforma basis as though Key had
been purchased January 1, 1993 follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1994 1993
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Interest income.................................................. $32,672 $34,181
Interest expense................................................. 15,170 17,046
Noninterest income............................................... 1,916 1,509
Noninterest expense.............................................. 9,368 9,115
Earnings before cumulative effect of change in accounting
principle...................................................... 6,253 5,372
Net earnings..................................................... 6,253 6,196
Per share amounts:
Earnings before cumulative effect of change in accounting
principle................................................... 1.39 1.15
======= =======
Net earnings................................................... 1.39 1.32
======= =======
</TABLE>
F-33
<PAGE> 125
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. LOAN LOSSES
The activity in the allowance for loan losses is as follows (unaudited):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
-----------------
1994 1993
------ ------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period....................................... $2,726 $2,583
Allowance of Key at time of acquisition............................ 1,858 --
Provision charged to earnings...................................... -- 177
Charge-offs........................................................ (262) (24)
------ ------
Balance, end of period................................... $4,322 $2,736
====== ======
</TABLE>
3. REAL ESTATE OWNED
The activity in the allowance for losses on real estate owned and the
details of (gain) loss from real estate operations are as follows (unaudited):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
----------------
1994 1993
----- ------
(IN THOUSANDS)
<S> <C> <C>
ALLOWANCE:
Balance, beginning of period....................................... $ 764 $1,032
Provision charged to earnings...................................... 91 276
Charge-offs........................................................ (239) (348)
----- ------
Balance, end of period................................... $ 616 $ 960
===== ======
OPERATIONS:
Gain on sale of real estate owned.................................. $(348) $ (226)
Operating costs.................................................... 191 113
Provision for loss on real estate owned............................ 91 276
----- ------
Net (gain) loss on real estate operations................ $ (66) $ 163
===== ======
</TABLE>
4. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In February 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires companies to take into account changes in
tax rates when valuing the deferred income tax amounts they carry on their
balance sheets. SFAS 109 also requires that deferred income taxes be provided
for all temporary differences between financial statement income and taxable
income, however, a deferred tax liability is not recognized for bad debt
reserves of savings institutions that arose in tax years beginning before
December 31, 1987 (base year reserves). The effective date for SFAS 109 was for
fiscal years beginning after December 15, 1992, however, earlier application was
encouraged.
Effective January 1, 1993, the Company adopted SFAS 109. The cumulative
effect on years ending prior to January 1, 1993 of adopting SFAS 109 is
reflected in the quarter ending March 31, 1993 net earnings as the effect of a
change in accounting principle and amounted to $824,000 or $.18 per share. Prior
periods' financial statements have not been restated to apply the provisions of
SFAS 109.
F-34
<PAGE> 126
FF BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. EARNINGS PER SHARE
On July 18, 1994, the Board of Directors approved a 10% stock dividend to
stockholders of record on September 13, 1994. On June 22, 1993, the Company's
Board of Directors approved a three-for-one stock split effective July 26, 1993;
accordingly, all per share amounts have been adjusted to include the effects of
both of these transactions. Fully-diluted and primary earnings per share are not
materially different. The following table presents information necessary to
calculate earnings per share:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDING SEPTEMBER 30,
-----------------------
1994 1993
--------- ---------
(UNAUDITED)
<S> <C> <C>
Average common shares outstanding............................. 4,478,957 4,338,408
Common shares assumed outstanding to reflect the dilutive
effect of common stock options.............................. -- 266,752
--------- ---------
Weighted average shares....................................... 4,478,957 4,605,160
======== ========
</TABLE>
6. PENDING MERGER
The Board of Directors has entered into an agreement whereby the Company
will be acquired by First National Bancorp, Gainesville, Georgia (First
Bancorp). Under the terms of the agreement each share of the Company's common
stock will be exchanged for .825 shares of First Bancorp's common shares. The
merger is subject to approval by the Company's stockholders and various
regulatory authorities.
F-35
<PAGE> 127
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter referred to as the
"Agreement"), dated as of November 22, 1994, between FIRST NATIONAL BANCORP, a
Georgia corporation (hereinafter referred to as "Bancorp"), and FF BANCORP, INC.
(hereinafter referred to as "FF"), a Florida corporation.
W I T N E S S E T H:
WHEREAS, Bancorp is a multiple bank holding company duly organized and in
good standing under the laws of the State of Georgia which as of October 31,
1994, had 30,000,000 shares of common stock, $1.00 par value per share ("Bancorp
Common Stock"), with 16,489,469 shares of common stock outstanding; and
WHEREAS, FF is a multiple thrift and one bank holding company operating in
the State of Florida which as of October 31, 1994, had 5,0000,000 authorized
shares of common stock, $.01 par value per share, and 2,500,000 shares of
preferred stock, $.,01 par value per share; 4,680,818 shares of common stock
were issued and outstanding ("FF Common Stock") and no shares of preferred stock
were issued and outstanding; and
WHEREAS, FF owns all of the outstanding stock of First Federal Savings Bank
of New Smyrna, a federal savings bank located in New Smyrna Beach, Florida
(hereinafter sometimes referred to as "New Smyrna Bank"), all of the outstanding
stock of First Federal Savings Bank of Citrus County, a federal savings bank
located in Citrus County, Florida (hereinafter sometimes referred to as "Citrus
Bank"), and 97.3% of the outstanding stock of Key Bancshares, Inc. (hereinafter
sometimes referred to as "Key Bancshares"), which owns all of the outstanding
stock of The Key Bank of Florida, a state-chartered commercial bank located in
Tampa, Florida (hereinafter sometimes referred to as "Key Bank," and together
with New Smyrna Bank, Citrus Bank and Key Bancshares, collectively referred to
as "FF Subsidiaries"); and
WHEREAS, the respective Boards of Directors of Bancorp and FF deem it
desirable to enter into this Agreement providing for FF to be merged into
Bancorp, with Bancorp being the surviving corporation and with the result that
the FF Subsidiaries shall thereafter be the subsidiaries of Bancorp, with
shareholders of FF receiving shares of Bancorp in exchange for their FF shares;
and
WHEREAS, the parties believe that the merger will broaden the capital
markets available to FF Subsidiaries and Bancorp, enable the parties to compete
more effectively with other banks in the FF market area, and give the
shareholders of FF an interest in a more diversified enterprise and securities
in a more widely held company; and
WHEREAS, in adopting this Agreement, the Board of Directors of FF has given
due consideration to the relevant factors for determining what is in the best
interest of FF and its shareholders, including the social and economic effect of
this Agreement on FF's present and future customers and its employees and those
of the FF subsidiaries, as well as on the communities served by FF Subsidiaries.
In addition to the above, the Directors of FF have considered the effect of the
merger on the ability of FF to fulfill its corporate objectives as a savings and
loan and one bank holding company and on the ability of the FF Subsidiaries to
fulfill the objectives of federally chartered stock savings banks under
applicable statutes and regulations.
NOW, THEREFORE, in consideration of their mutual promises, the parties
enter into this Agreement. Paragraphs I through III herein shall constitute the
"Plan of Merger" between FF and Bancorp as contemplated by the Georgia Business
Corporation Code, O.C.G.A. sec. 14-2-1101 et seq., (the "Georgia Code") and the
Florida Business Corporation Act, Chapter 607, Florida Statutes (1993) (the
"Florida Act").
I. AGREEMENT TO MERGE.
(A) On the date designated as such in "Articles of Merger" to be filed by
Bancorp with the Georgia Secretary of State pursuant to the Georgia Code and
with the Florida Secretary of State pursuant to the
A-1
<PAGE> 128
Florida Act, the "Merger Date", FF shall be merged into Bancorp, which shall be
the survivor (hereinafter sometimes referred to as the "Surviving Corporation").
Such merger shall be pursuant to the applicable provisions of the Georgia Code
and Florida Act.
(B) The articles of incorporation of Bancorp shall be the articles of
incorporation of the Surviving Corporation. The bylaws of Bancorp shall be the
bylaws of the Surviving Corporation. The name "First National Bancorp" shall be
the name of the Surviving Corporation.
(C) The board of directors and officers of Bancorp shall continue to be the
board of directors and officers of the Surviving Corporation.
(D) Bancorp agrees to appoint Mr. Charles H. Byrd, Vice Chairman of FF, and
Mr. Tildon W. Smith, Executive Vice President of FF, to the Board of Directors
of Bancorp at the next scheduled Board meeting following consummation of the
Merger.
(E) FF shall receive a fairness opinion and confirmation regarding the
stock conversion in the Merger as contemplated by subparagraph VIII(B) hereof.
(F) The corporate existence of FF and Bancorp shall be merged into and
continued in Bancorp as the Surviving Corporation. The established offices and
facilities of Bancorp immediately prior to the merger shall remain the offices
and facilities of the Surviving Corporation.
(G) All rights, properties and privileges of every kind or character of FF
and Bancorp shall be transferred to or vested in Bancorp as the Surviving
Corporation by virtue of such merger without any deed, assignment or other
transfer. Bancorp, as the Surviving Corporation, shall by virtue of the merger
be responsible and liable for all of the liabilities and obligations of both FF
and Bancorp.
(H) The "Closing Date" shall not be later than the close of business on
August 31, 1995, unless extended by the mutual consent of FF and Bancorp.
II. CONSIDERATION FOR MERGER
(A) On the Merger Date, FF Common Stock shall be converted into the
following rights:
(i) At the time of the merger described in subparagraph I(A), each
share of outstanding FF Common Stock shall be converted into the right to
receive .825 shares of Bancorp Common Stock (the "Conversion Ratio");
provided, however, that the foregoing Conversion Ratio may be subject to
adjustment pursuant to subparagraph II(B).
(ii) Fractional shares of Bancorp Common Stock will not be issued in
the merger. Any FF shareholder who would be entitled to a fraction of a
Bancorp share shall receive cash payment in lieu of such fractional share
in an amount determined by multiplying the fraction of a share he would
otherwise be entitled to receive by $20.50; provided, however, that the
foregoing amount shall be subject to adjustment pursuant to the provisions
of subparagraph II(B).
(B) In the event that prior to the Merger Date, Bancorp or FF declares any
stock split or stock dividend, any reverse stock split or combination, or any
similar transaction where the record date for such transaction precedes the
Merger Date (or such later date that the holders of record of shares of FF
Common Stock would be deemed to be the holders of record of shares of Bancorp
Common Stock as a result of the Merger) the number of shares of Bancorp stock to
be received by shareholders of FF and the amount to be paid for fractional
shares shall be proportionately adjusted.
III. MANNER OF SURRENDERING FF STOCK.
Following consummation of the Merger, each FF shareholder shall receive in
exchange for his or her shares of FF Common Stock a certificate representing the
number of shares of Bancorp Common Stock into which FF shares have been
converted at the Conversion Ratio and a Bancorp check in settlement for a
fractional share of Bancorp Common Stock, if any. After the Merger Date and
until surrendered as provided herein, each FF certificate shall be deemed for
all corporate purposes to evidence the number of whole shares
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of Bancorp Common Stock into which the FF Common Stock represented by such
certificate shall have been converted as provided in Paragraph II, and such
certificates, as between the holders and Bancorp, shall evidence the holder's
right to receive Bancorp Common Stock certificates and cash in accordance with
this Agreement; provided, however, that Bancorp stock certificates will not be
issued to shareholders until their certificates have been surrendered to Mellon
Securities Trust Company, as the exchange agent. Dividends, interest or other
distributions payable to shareholders in respect of Bancorp Common Stock into
which FF Common Stock has been converted shall be retained, without interest, in
an escrow account at Mellon Securities Trust Company, for the account of such
shareholders and shall not be paid until their certificates have been
surrendered in exchange for Bancorp certificates.
IV. REPRESENTATIONS AND WARRANTIES OF BANCORP.
As an inducement to FF to enter into this Agreement, Bancorp hereby
represents and warrants to FF as follows:
(A) Bancorp is a Georgia corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia. Bancorp has
the corporate power and authority to carry on its business as now conducted
and to own, lease and operate its assets, properties and businesses.
Bancorp has in effect all material federal, state and local governmental
authorizations necessary for it to own or lease its properties and assets
and to carry on its business as now conducted.
(B) Exhibit 21.1 of Bancorp's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, lists all active Bancorp subsidiaries
as of the date of this Agreement(except The Community Bank, Douglasville,
Georgia, which was acquired on February 28, 1994, and Barrow Bank & Trust
Company, which was acquired on July 31, 1994) (together with The Community
Bank and Barrow Bank & Trust Company, the "Bancorp Subsidiaries"). Each of
the Bancorp Subsidiaries:
(i) is either a national banking association or a state banking
corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction in which it is organized or incorporated;
(ii) has the corporate power and authority necessary for it to own
or lease its properties and assets and to carry on its business as now
being conducted; and
(iii) has all material federal, state and local governmental
authorizations necessary for it to own or lease its properties and
assets and to carry on its business as now conducted.
(C) Bancorp owns 100% of the issued and outstanding equity securities
of each of Bancorp Subsidiaries, free and clear of any liens, encumbrances
or restrictions whatsoever, except for the pledge of First National Bank of
Habersham stock, Granite City Bank stock, and a portion of The First
National Bank of Gainesville stock to secure a loan from Trust Company
Bank. Neither Bancorp nor any of the Bancorp Subsidiaries has outstanding
any subscriptions, warrants, rights, options or other agreements or
commitments obligating any of the Bancorp Subsidiaries to issue any
additional shares of equity securities or obligating Bancorp to sell any
shares of the equity securities of any Bancorp Subsidiaries.
(D) Bancorp has 30,000,000 authorized shares of Common Stock, $1.00
par value each, of which 16,489,469 shares were outstanding as of October
31, 1994. No outstanding shares of Bancorp Common Stock have been issued in
violation of the preemptive rights of any person, or in violation of any
federal or state securities laws such that it would have a material adverse
effect on the business, properties, operations, prospects, or assets, or on
the condition, financial or otherwise, of Bancorp.
(E) As of the date of this Agreement, Bancorp does not have
outstanding any subscriptions, warrants, rights, options or other
agreements or commitments obligating Bancorp to issue shares of its capital
stock except the following:
(i) Any shares of Bancorp which may be issued from time to time by
Bancorp pursuant to any of its employee stock option plans and incentive
stock option agreements providing for the potential grant of options for
selected key employees of Bancorp and/or any subsidiary thereof;
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(ii) Any shares of Bancorp which may be issued from time to time
pursuant to the First National Bancorp Dividend Reinvestment Plan which
allows shareholders of Bancorp to elect to receive shares of Bancorp in
lieu of cash dividends; and
(iii) Any shares of Bancorp which may be issued from time to time
by Bancorp pursuant to the First National Bancorp Performance-Based
Restricted Stock Plan.
(F) The execution of this Agreement and the transactions contemplated
hereby have been authorized by all necessary corporate action of Bancorp,
and this Agreement is a valid and legally binding obligation of Bancorp
enforceable in accordance with its terms, subject to any bankruptcy or
moratorium laws now or hereafter in effect. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
provided for herein in the manner herein provided will violate any material
agreement to which Bancorp or any of the Bancorp Subsidiaries is a party or
is bound; nor will the actions described violate any law, order or decree
or any provision of the articles of incorporation or bylaws of Bancorp or
any of the Bancorp Subsidiaries. Bancorp has full power, authority and
legal right to enter into this Agreement and, upon receipt of approval by
the appropriate regulatory authorities governing Florida State chartered
banks, federally chartered savings associations and savings and loan and
bank holding companies, to consummate the transactions provided for herein.
There is no pending or, to the best of Bancorp's knowledge, threatened
litigation which would in any way impair the ability of Bancorp to fulfill
its obligations under this Agreement.
(G) Bancorp Common Stock is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and Bancorp
has delivered to FF copies of:
(i) its Annual Report on Form 10-K for its fiscal year ended
December 31, 1993 (and those portions of its 1993 Annual Report to
Shareholders incorporated therein by reference), filed pursuant to
Section 13 of the 1934 Act;
(ii) the Proxy Statement for its Annual Meeting of Shareholders
held April 20, 1994, filed pursuant to Section 14 of the 1934 Act;
(iii) its Current Reports on Form 8-K dated January 14, 1994,
February 28, 1994, March 15, 1994, July 31, 1994, and October 28, 1994
filed pursuant to Section 13 of the 1934 Act; and
(iv) its Quarterly Reports on Form 10-Q for the periods ended March
31, 1994, June 30, 1994 and September 30, 1994 filed pursuant to Section
13 of the 1934 Act. These reports and proxy statement include all
regular and periodic reports and proxy statements required to be filed
by Bancorp with the Securities and Exchange Commission ("SEC") since
January 1, 1994 and are herein collectively called the "Bancorp SEC
Reports". The Bancorp SEC Reports taken together correctly describe,
among other things, the business, operations and principal properties of
Bancorp and its Subsidiaries in accordance with the requirements of the
applicable report form. As of the respective dates of filing, none of
the Bancorp SEC Reports contained any untrue statement of material fact
or omitted to state any material fact necessary to make the statements
therein not misleading. The financial statements contained in the
Bancorp SEC Reports have been prepared in accordance with generally
accepted accounting principles consistently applied and present fairly
the consolidated financial condition of Bancorp and its Subsidiaries as
of the dates thereof and the consolidated results of their operations
for the periods covered thereby.
(H) Since the date of its latest published financial statements
included in the Bancorp SEC Reports, there have not been any changes in the
condition of Bancorp or any of the Bancorp Subsidiaries, any contracts
entered into by Bancorp or any of its Subsidiaries, or other changes in the
operations of Bancorp or any of its Subsidiaries which, in either case,
would have a material adverse effect on the condition or results of
operations of Bancorp and its Subsidiaries, taken as a whole.
(I) The shares of Bancorp Common Stock to be issued to shareholders of
FF pursuant to this Agreement and the merger will, when issued according to
the terms of this Agreement, be registered with the SEC and be validly
issued, fully paid, and non-assessable.
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V. COVENANTS OF BANCORP.
(A) From the date of this Agreement until the Merger Date or until this
Agreement is terminated by the parties as herein provided, Bancorp covenants as
follows:
(i) Except as otherwise provided herein or consented to in writing by
FF (which consent will not be unreasonably withheld), Bancorp will conduct
its operations and will cause each of the Bancorp Subsidiaries to conduct
operations in accordance with its ordinary course of business consistent
with past practice, and shall use and shall cause each of the Bancorp
Subsidiaries to use, its best efforts to maintain and preserve its
business, organization, employees and good relationships with its
shareholders and its customers and others having business dealings with it.
(ii) Bancorp shall cause its officers and employees to furnish FF such
information and operating data and other information as to Bancorp's
business and properties, as FF shall from time to time reasonably request
to facilitate the filing of regulatory applications, preparation of
documents and investigations made necessary or appropriate by this
Agreement.
(iii) Except as otherwise provided herein, Bancorp will assure that
neither Bancorp nor any of the Bancorp Subsidiaries will take any of the
following actions without the written consent of FF (which consent will not
be unreasonably withheld):
(1) amend its articles of incorporation or bylaws to change in any
manner the rights of its Common Stock or other securities or the
character of its business;
(2) incur any obligation or liability, direct or indirect, absolute
or contingent, other than those incurred in the ordinary course of
business on reasonable terms;
(3) issue or sell or commit to issue or sell any additional shares
of Bancorp Common Stock or securities convertible into shares of Bancorp
Common Stock for consideration (in the case of convertible securities on
a fully converted basis) of less than $19.00 per share of Bancorp Common
Stock, except pursuant to existing options issued under its employee
stock option plans, or except pursuant to its existing dividend
reinvestment plan, or except pursuant to its restricted stock plan, or
except pursuant to a stock dividend or a stock split referred to in
subparagraph II(B).
(4) except in the ordinary course of business, mortgage pledge or
otherwise encumber any of its properties or assets;
(5) sell or transfer any of its properties or assets, or cancel,
release or assign any indebtedness owed to it or any claim held by it,
except in the ordinary course of business; or
(6) pay any dividends or make other distributions or payments in
respect of capital stock of Bancorp, except for dividends at times and
in amounts consistent with past practice.
(B) Bancorp agrees to promptly take such action as may reasonably be
requested by FF to timely carry out the terms of this Agreement in accordance
with its terms and in accordance with all applicable laws, rules and regulations
relating to banks, savings and loans, bank or savings and loan holding companies
or securities regulations.
(C) Without limiting the generality of subparagraph V(B), Bancorp shall
assist FF in the preparation of a proxy statement (hereinafter sometimes
referred to as the "Proxy Statement") to be contained in a registration
statement of Bancorp (the "Registration Statement") which shall be prepared by
Bancorp, with the assistance of FF, covering the registration of Common Stock of
Bancorp to be issued in the transaction contemplated by this Agreement. The
Proxy Statement shall relate to the meeting of FF shareholders called to
consider and vote upon this Agreement as required by the Florida Act. Such Proxy
Statement and Registration Statements shall be filed on Form S-4 of the 1934 Act
and shall comply with all applicable state and federal securities laws, rules
or regulations, all applicable regulations of the Federal Reserve Board, the
Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the
Comptroller of the Currency, the Georgia Department of Banking and Finance, and
the Florida Department of Banking and Finance, and any other laws, rules or
regulations applicable to the transactions contemplated by this Agreement.
Bancorp
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covenants that all information relating to Bancorp and the Bancorp Subsidiaries
furnished by it for inclusion in the Proxy Statement and the Registration
Statement, taken as a whole, shall be true, complete and correct, and shall not
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading. In addition, Bancorp shall promptly furnish such additional data and
information as may be required for the timely preparation of the Proxy
Statement.
(D) Upon the required approvals by regulatory authorities and upon the
approval of this Agreement by holders of a majority of the outstanding shares of
FF Common Stock, FF will execute in duplicate and return to Bancorp for filing
with the Georgia Secretary of State and the Florida Secretary of State Articles
of Merger prepared by Bancorp containing such information as may be required by
the Georgia Code and the Florida Act, and as may be consistent with this
Agreement.
(E) Upon the required approvals by regulatory authorities and upon the
approval of this Agreement by the holders of a majority of the outstanding
shares of FF Common Stock, Bancorp will execute and file with the Georgia
Secretary of State and the Florida Secretary of State Articles of Merger
prepared by Bancorp containing such information as may be required by the
Georgia Code and the Florida Act, and as may be consistent with this Agreement.
(F) Bancorp shall take such action and shall use its best efforts to cause
the officers, directors and other affiliates of Bancorp to take such action, as
may be necessary to assure that the transactions contemplated by this Agreement
may be accounted for by Bancorp using the "pooling of interests" method of
accounting.
(G) Bancorp's securities have been registered pursuant to Section 12 of the
1934 Act. Bancorp has been subject to the reporting requirements of Section 13
of the 1934 Act for a period of at least twelve (12) months, and has filed all
the reports required to be filed thereunder during the twelve months preceding
the date of this Agreement. Bancorp covenants that it will continue to be
subject to the reporting requirements of Section 13 of the 1934 Act and file all
reports required to be filed thereunder for the period beginning on the date of
this Agreement and ending three years following the Merger Date.
(H) Within 30 days following the end of the first full calendar month after
the Merger Date, Bancorp shall prepare and file with the SEC a Current Report on
Form 8-K containing the financial results of post-Merger combined operations of
Bancorp, FF and FF Subsidiaries meeting the requirements of SEC Accounting
Series Releases Nos. 130 and 135.
(I) Bancorp will use its best efforts to prepare and file all regulatory
applications and securities registrations required to consummate the transaction
as soon as possible.
(J) Bancorp agrees to request that Bancorp's independent accountants make
available to FF all accounting and auditing workpapers of the independent
accountants pertaining to Bancorp that are reasonably requested by FF. Bancorp
shall use its best efforts to make such information reasonably available to FF
during the pendency of the Merger.
(K) Bancorp agrees to cause substantially all of the employees of FF and FF
Subsidiaries to be retained as employees of FF Subsidiaries in their present
positions, subject to such terminations of employment as are necessary in the
ordinary course of business, and except as otherwise provided herein.
(L) Bancorp agrees to cause FF Subsidiaries after the Merger Date to comply
with the terms of the written employment agreements of FF Subsidiaries,
including but not limited to those described on Exhibit "A" attached hereto. The
employment agreements described on Exhibit "A" provide for termination payments
to become payable upon the occurrence of certain events (including consummation
of the Merger contemplated hereunder), coupled with the occurrence of a change
in the employment terms for the particular officer. Bancorp specifically
acknowledges and agrees that the termination payment provisions of the
employment agreements described on Exhibit "A" will be triggered upon
consummation of the Merger due to the Merger and the simultaneous changes which
Bancorp will require to be made in the employment terms for the officers under
said agreements.
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(M) Bancorp agrees not to terminate or cause to be terminated any Employee
Pension Benefit Plan (as that term is defined in subparagraph VI(N) hereof)
until after the expiration of one year from the Merger Date, except if any such
plan will no longer be qualified at an earlier date under Section 401(a) of the
Internal Revenue Code. Bancorp agrees that all assets of any such Plan will be
allocated to the participants upon any termination. Bancorp agrees to cause,
after the Merger, FF Subsidiaries to provide to employees of FF Subsidiaries
substantially similar employee benefits as presently being received by such
employees, subject to such changes in benefits required in the ordinary course
of business.
VI. REPRESENTATIONS AND WARRANTIES OF FF.
As an inducement to Bancorp to enter into this Agreement, FF hereby
represents and warrants to Bancorp as follows:
(A) New Smyrna Bank is a federally chartered savings bank duly
organized and validly existing under the laws of the United States. New
Smyrna Bank has been in existence and continuously operating as a federal
savings and loan association for a period in excess of five years. The
authorized capital stock of New Smyrna Bank consists of 5,000,000 shares of
Common Stock, $1.00 par value per share, of which 1,150,000 shares are
validly issued and outstanding, fully paid and non-assessable and 2,500,000
shares of preferred stock, none of which are outstanding. New Smyrna Bank
does not have any other class of equity securities outstanding nor are
there any outstanding subscriptions, warrants, rights, options or other
agreements or commitments obligating New Smyrna Bank to issue shares of its
Common Stock or any other equity security. One hundred percent (100%) of
the outstanding shares of Common Stock of New Smyrna Bank are owned by FF
free and clear of any liens, encumbrances or restrictions whatsoever.
(B) Citrus Bank is a federally chartered savings bank duly organized
and validly existing under the laws of the United States. Citrus Bank has
been in existence and continuously operating or incorporated as a federal
savings and loan association for a period of five years or more. The
authorized capital stock of Citrus Bank consists of 5,000,000 shares of
common stock, $1.00 par value per share, of which 152,554 shares are
validly issued and outstanding, fully paid and non-assessable and 2,500,000
shares of preferred stock, none of which are outstanding. Citrus Bank does
not have any other class of equity securities outstanding nor are there any
outstanding subscriptions, warrants, rights, options or other agreements or
commitments obligating Citrus Bank to issue shares of its common stock or
any other equity security. One hundred percent (100%) of the outstanding
shares of common stock of Citrus Bank are owned by FF free and clear of any
liens, encumbrances or restrictions whatsoever.
(C) Key Bank is a state commercial bank duly organized and validly
existing under the laws of Florida. Key Bank has been in existence and
continuously operating or incorporated as a state commercial bank for a
period in excess of five (5) years. The authorized capital stock of Key
Bank consists solely of 250,000 shares of common stock, $5.00 par value per
share, of which 217,800 shares are validly issued and outstanding, fully
paid and nonassessable. Key Bank does not have any other class of equity
securities outstanding nor are there any outstanding subscriptions,
warrants, rights, options or other agreements or commitments obligating Key
Bank to issue shares of its common stock or any other equity security. One
hundred percent (100%) of the outstanding shares of common stock of Key
Bank are owned by Key Bancshares free and clear of any liens, encumbrances
or restrictions whatsoever.
(D) Key Bancshares is a one-bank holding company duly organized and
validly existing under the laws of Florida. Key Bancshares has been in
existence and continuously duly operating as a Florida business corporation
and a bank holding company for a period of five years or more. The
authorized capital stock of Key Bancshares consists solely of 3,976,107
shares of common stock, $.10 par value per share, of which 550,000 shares
are validly issued and outstanding, fully paid and non-assessable. Key
Bancshares does not have any other class of equity securities outstanding
nor are there any outstanding subscriptions, warrants, rights, options or
other agreements or commitments obligating Key Bancshares to issue shares
of its common stock or any other equity security. FF owns 97.3% of the
outstanding shares of common stock of Key Bancshares free and clear of any
liens, encumbrances or restrictions whatsoever.
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(E) FF is a Florida corporation duly organized, validly existing and
in good standing under the laws of the State of Florida, and: (i) is duly
authorized by all applicable federal, state and local laws, rules and
regulations; and (ii) has proper power and authority under its articles of
incorporation, bylaws and other corporate documents to operate as a
one-bank holding company and a multiple savings and loan holding company
and to own 100% of the equity securities of the FF Subsidiaries. The
authorized capital stock of FF consists of 5,000,000 shares of common
stock, $.01 par value, of which 4,680,818 shares are validly issued and
outstanding, fully paid and non-assessable as of October 31, 1994, and
2,500,000 shares of preferred stock, $.01 par value, none of which are
outstanding. Also, there are presently exercisable options outstanding for
the purchase of 28,333.8 shares of FF Common Stock and outstanding options
for the purchase of 56,063.7 shares of FF Common Stock which are not
presently exercisable. No outstanding shares of FF Common Stock have been
issued in violation of any federal or state securities laws such that it
would have a material adverse effect on the business, properties,
operations, prospects, or assets, or in the condition, financial or
otherwise, of FF and FF Subsidiaries. FF does not have any outstanding
subscriptions, warrants, rights, options or other agreements or commitments
obligating FF to issue shares of FF Common Stock or any other equity
securities, except for stock options to purchase 84,397.5 shares of FF
Common Stock.
(F) The execution and delivery of this Agreement and the consummation
of the Merger have been duly and validly authorized by all necessary
corporate action on the part of the board of directors of FF, having been
approved by the affirmative, unanimous vote of the members of the board of
directors of FF. The Merger must be submitted to the FF shareholders for
their approval in order for the Merger to be consummated. This Agreement is
a valid and legally binding obligation of FF, enforceable according to its
terms, subject to any bankruptcy or moratorium laws now or hereafter in
effect. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions provided for herein in the manner herein
provided will violate any material agreement to which FF or any of the FF
Subsidiaries is a party or is bound; nor will the actions described violate
any law, order or decree or any provision of the articles of incorporation
or bylaws of FF or any of the FF Subsidiaries. FF has full power, authority
and legal right to enter into this Agreement and, upon the receipt of
approval by the appropriate regulatory authorities governing Florida
chartered commercial banks, bank holding companies, federal savings and
loan associations , and multiple savings and loan holding companies and
upon the affirmative vote of a majority of the total outstanding capital
stock of FF, to consummate the transactions provided for herein. There is
no pending or, to the best of FF's knowledge, threatened litigation which
would in any way impair the ability of FF to fulfill its obligations under
this Agreement.
(G) FF Common Stock is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and FF has
delivered to Bancorp copies of:
(i) its Annual Report on Form 10-K for its fiscal year ended
December 31, 1993 (and those portions of its 1993 Annual Report to
Shareholders incorporated therein by reference), filed pursuant to
Section 13 of the 1934 Act;
(ii) the Proxy Statement for its Annual Meeting of Shareholders
held April 25, 1994, filed pursuant to Section 14 of the 1934 Act;
(iii) its Current Reports on Form 8-K dated April 25, 1994, and
October 19, 1994, filed pursuant to Section 13 of the 1934 Act; and
(iv) its Quarterly Reports on Form 10-Q for the periods ended March
31, 1994, June 30, 1994 and September 30, 1994 filed pursuant to Section
13 of the 1934 Act. These reports and proxy statement include all
regular and periodic reports and proxy statements required to be filed
by FF with the SEC since January 1, 1994 and are herein collectively
called the "FF SEC Reports". The FF SEC Reports taken together correctly
describe, among other things, the business, operations and principal
properties of FF and FF Subsidiaries in accordance with the requirements
of the applicable report form. As of the respective dates of filing,
none of the FF SEC Reports contained any untrue statement of material
fact or omitted to state any material fact necessary to make the
statements therein not misleading. The financial statements contained in
the FF SEC Reports have been
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prepared in accordance with generally accepted accounting principles
consistently applied and present fairly the consolidated financial
condition of FF and FF Subsidiaries as of the dates thereof and the
consolidated results of their operations for the periods covered
thereby.
(H) Except as reflected or referred to in the consolidated financial
statements of FF and FF Subsidiaries (including the notes thereto) at
September 30, 1994, there were no material liabilities or obligations of FF
or any of the FF Subsidiaries whether liquidated or unliquidated, accrued,
absolute, contingent or otherwise, which were required to be reflected in
the consolidated financial statements of FF and the FF Subsidiaries as of
September 30, 1994, in accordance with generally accepted accounting
principles.
(I) Since September 30, 1994, there have not been: (i) any changes in
the assets, liabilities, or business of FF or the FF Subsidiaries other
than changes in the ordinary course of business, none of which has been,
individually or in the aggregate, materially adverse to the financial
condition and results of operations of FF and FF Subsidiaries taken as a
whole; (ii) any increase in the compensation payable or to become payable
by FF or the FF Subsidiaries to any of its directors, officers, employees,
or agents, or any bonus payment, except normal and customary increases or
bonus payments made in the ordinary course of business; (iii) any labor
dispute, or any event or condition of any character specific to FF and FF
Subsidiaries materially adversely affecting the business or prospects of FF
and the FF Subsidiaries, taken as a whole; or (iv) any redemption, purchase
or other transaction involving shares of FF or FF Subsidiaries to which FF
or FF Subsidiaries or, to the best of FF's knowledge, any "affiliate" of FF
or any of FF Subsidiaries has been a party except in the ordinary course of
business. For purposes of this Agreement, the term "affiliate" shall mean
any "affiliated person" included within the definition of that term under
the 1934 Act.
(J) Neither this Agreement nor any of the documents furnished pursuant
to this Agreement by FF to Bancorp or any of its representatives, taken as
a whole, is or will be false or misleading, or contains or will contain any
material misstatement of fact, or omits or will omit to state any material
fact required to be stated to make the statements therein not misleading.
(K) FF and FF Subsidiaries have prepared and filed, or will prepare
and file with the appropriate government authorities, all federal, state
and local tax returns (including, without limitation, income, franchise,
sales and use, property, payroll and withholding tax returns and
information returns) required to be filed by them on or prior to the
Closing Date. To the best of the knowledge of FF, such returns reflect all
tax liabilities of FF and/or each of the FF Subsidiaries for the periods in
question, and FF and/or any of the FF Subsidiaries has paid or caused to be
paid all taxes shown to be due on such tax returns and on all assessments
received by them to the extent that such assessments have become due.
(L) FF and FF Subsidiaries have good and marketable title to the
properties (real and personal) and assets reflected in the consolidated
September 30, 1994, financial statement (except as sold or otherwise
disposed of in the ordinary course of business for a fair consideration
since the date of said statement), free and clear of all liens, claims and
encumbrances, except: (i) liens for taxes not yet due and payable; and (ii)
easements, rights of way and restrictions which are of record and which do
not materially affect the present use and occupancy of the property by FF
and FF Subsidiaries.
(M) There is no litigation, proceeding or governmental investigation
pending, or to the best of FF's knowledge, threatened, against or relating
to FF or any of the FF Subsidiaries, or their properties or business, or
the transactions contemplated by this Agreement, which will have any
material adverse effect on the business, properties, operations, prospects,
or assets, or on the condition, financial or otherwise of FF or any of the
FF Subsidiaries, taken as a whole.
(N) With respect to any "Employee Pension Benefit Plan," as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which is contributed to, maintained or administered by
FF or any of the FF Subsidiaries, such Employee Pension Benefit Plan
complies, to the extent applicable, with the requirements of ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), and has been
determined by the Internal Revenue Service (the "IRS")
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to be qualified under Section 401(a) of the Code. Each of the Employee
Pension Benefit Plans has been maintained and administered in accordance
with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations including, but not limited to,
ERISA and the Code. There are no pending or anticipated claims against or
otherwise involving any of the Employee Pension Benefit Plans, and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of plan activities) has been brought against or with
respect to any of the Employee Pension Benefit Plans. All contributions,
reserves or premium payments required to be made as of the date hereof have
been made or are reflected in the consolidated September 30, 1994,
financial statements of FF. Further, each of the Employee Pension Benefit
Plans which is subject to the plan termination insurance provisions of
Title IV of ERISA could be terminated as of the date hereof or as of the
Merger Date as a standard termination with the Pension Benefit Guaranty
Corporation.
(O) To the best of their knowledge, FF and FF Subsidiaries are in
compliance with all federal, state and local laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice; there is no unfair
labor practice complaint against FF or any of the FF Subsidiaries pending
or threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission or the United States Department of Labor;
and no grievance or arbitration proceedings are pending.
VII. COVENANTS OF FF.
(A) From the date of this Agreement until the Merger Date, or until this
Agreement is terminated by the parties as herein provided, FF covenants as
follows:
(i) Except as otherwise provided herein or consented to in writing by
Bancorp (which consent will not be unreasonably withheld), FF and the FF
Subsidiaries will each conduct their operations in accordance with their
ordinary course of business, consistent with past practice and shall use
its best efforts to maintain and preserve its business, organization, and
employees. FF further agrees to maintain good relationships with its
shareholders and with its customers and others having business dealings
with it.
(ii) FF and FF Subsidiaries shall each cause its officers and
employees to furnish to Bancorp such financial and operating data and other
information as to FF's business and properties as Bancorp shall from time
to time reasonably request to facilitate the filing of regulatory
applications, preparation of documents and investigations made necessary or
appropriate by this Agreement.
(iii) Except as otherwise provided herein, FF will assure that neither
FF nor any of the FF Subsidiaries will take any of the following actions
without the written consent of Bancorp (which consent will not be
unreasonably withheld):
(1) amend its articles of incorporation or bylaws, or merge or
consolidate with or into any other corporation or permit any other
corporation to merge into it, or change in any manner the rights of its
Common Stock or other securities or the character of its business;
(2) incur any obligation or liability, direct or indirect, absolute
or contingent, other than those incurred in the ordinary course of
business on reasonable terms;
(3) except in the ordinary course of business, incur any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise become responsible for the obligations of any other
individual, firm or corporation, or make any loans or advances to any
other individual, firm or corporation;
(4) issue or sell any additional shares of Common Stock (including
treasury shares), securities convertible into shares of Common Stock or
any other equity securities or options or other commitments for the
issuance of shares of stock or such securities, except pursuant to
presently outstanding stock options to purchase FF shares or except
pursuant to a stock dividend or a stock split referred to in
subparagraph II(B);
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(5) except in the ordinary course of business, mortgage, pledge or
otherwise encumber any of its properties or assets;
(6) sell or transfer any of its properties or assets, or cancel,
release or assign any indebtedness owed to it or any claim held by it;,
(7) make or commit to make any investments in Building, Furniture
and Equipment which individually or in the aggregate exceed $100,000;
(8) except in the ordinary course of business, enter into or
terminate or amend any material contract or agreement or make any
material change in any of its material leases, contracts, arrangements,
plans or other legally binding arrangements;
(9) except for normal and customary actions in the ordinary course
of business, increase in any manner the compensation of any of its
directors, officers or employees, or pay or agree to pay any pension or
retirement allowance not required by any existing plan or agreement to
any such persons, or commit itself to any pension, retirement or
profit-sharing plan or agreement or employment agreement with or for the
benefit of any officer, employee or other person;
(10) cancel or terminate any of its current insurance policies or
any of the coverage thereunder unless simultaneously with such
termination or cancellation, replacement policies substantially similar
to those cancelled or terminated are in full force and effect; or
(11) pay any dividends or make other distributions or payments in
respect of its stock, except FF and the FF Subsidiaries may pay their
normal and customary dividends.
(iv) FF shall use its best efforts to assure that FF, the FF
Subsidiaries, and the members of the boards of directors and executive
officers of FF and each of the FF Subsidiaries shall actively support the
Merger, shall recommend the Merger to the shareholders of FF, shall
actively solicit proxies of shareholders of FF to be voted in favor of the
Merger, and shall urge all shareholders of FF to vote in favor of the
Merger.
(v) FF shall use its best efforts to assure that FF, each of the FF
Subsidiaries, each member of the board of directors of FF and each of the
FF Subsidiaries and each of the officers of FF and each of the FF
Subsidiaries shall take such action as is necessary or appropriate to cause
the Merger to be timely consummated in accordance with the terms of this
Agreement.
(vi) Each of the FF shareholders listed on Exhibit B commits to
publicly support the Merger and FF commits that it will obtain, within ten
(10) days after the date of this Agreement, a Voting Agreement from each
shareholder so listed substantially in the form set forth in Exhibit C.
(vii) In addition, FF will obtain an agreement from each member of the
board of directors of FF and each of the FF Subsidiaries and their
affiliates that such person or entity shall not sell, transfer or dispose
of any FF stock from the date hereof through the date of consummation of
the Merger without Bancorp's consent, which consent shall not be
unreasonably withheld, and that such person or entity shall not sell,
transfer or dispose of Bancorp Common Stock received in the Merger until
after the date on which Bancorp publishes financial results covering at
least thirty (30) days of post Merger combined operations.
(viii) FF will obtain an agreement as described below (the "Agreement
of Affiliates") from each affiliated shareholder of FF (the "Affiliated
Shareholders") prior to the Closing Date. The Affiliated Shareholders shall
be those shareholders of FF who may, in the opinion of counsel for FF and
counsel for Bancorp, be deemed to be "affiliates" of FF within the meaning
of Rule 145 of the 1933 Act, and who may, in the opinion of such counsels,
be deemed, pursuant to the provisions of Rule 145, to be "underwriters", as
such term is defined in the 1933 Act, on resale of the Bancorp Common Stock
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acquired hereunder (herein referred to as the "Acquired Securities"). The
Agreement of Affiliates shall be in a form satisfactory to Bancorp and its
counsel and shall provide that:
(1) the Acquired Securities will not be acquired with a view to the
distribution thereof except as permitted by Rule 145;
(2) the Acquired Securities will not be disposed of in such a
manner as to violate Rule 145 under the 1933 Act or the Agreement of
Affiliates and without Bancorp having received an opinion of counsel
satisfactory to it, to the foregoing effect, or other evidence of
compliance with Rule 145 and the Agreement of Affiliates satisfactory to
Bancorp;
(3) Bancorp may issue appropriate stop transfer instructions to its
transfer agent with respect to the Acquired Securities;
(4) each Affiliated Shareholder will obtain an agreement (a copy of
which will be delivered to Bancorp) similar to that entered into by him
or her from each transferee of Acquired Securities, unless such
transferee may, as evidenced by an opinion of counsel or other evidence,
in each case satisfactory to Bancorp, dispose of the Acquired Securities
transferred to him or her without registration under the 1933 Act; and
(5) the certificates representing Acquired Securities may bear the
following or a substantially similar legend:
"The securities represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended (the "1933 Act") applies, are held subject to the
terms of an agreement between the holder hereof and First National
Bancorp and may be sold or otherwise transferred only upon receipt by
First National Bancorp of an opinion of counsel (or other evidence)
satisfactory to such corporation and its counsel as to satisfactory
compliance with the limitations of such Rule 145 and such agreement,
or of an opinion of counsel (or other evidence) satisfactory to First
National Bancorp and its counsel that some other exemption from
registration under the Act is available, or pursuant to a
registration statement under the 1933 Act."
(ix) Neither FF, nor any officers of FF, nor any member of the FF
Board of Directors, will enter into negotiations or discussions for the
purpose of selling or exchanging any shares of or a substantial portion of
the assets of FF or any FF Subsidiary, or for the purpose of causing the
merger or consolidation of FF or any FF Subsidiary into or with any other
entity.
(x) Notwithstanding any of the foregoing, however, the directors of FF
and FF Subsidiaries shall not be obligated to take or not to take any
action that they shall be advised in writing by counsel may be contrary to
their fiduciary duties as directors.
(B) FF has caused its independent auditors, Hacker, Johnson, Cohen & Grieb,
to conduct, at its expense, certified audits of FF and the FF Subsidiaries which
comply with the laws, rules or regulations applicable to the Merger as
contemplated by this Agreement, including, without limitation, those necessary
to complete any registration of Bancorp Common Stock under federal securities
laws, and to assure pooling of interests treatment for the transaction, and
agrees to cause said accountants to make such other accounting and/or credit
examination of the books, records, financial statements and loan portfolio of FF
and FF Subsidiaries which Bancorp reasonably deems necessary in connection with
the transactions contemplated by this Agreement.
(C) In connection with the Merger, FF shall cause to be furnished to each
of its shareholders the Proxy Statement as contained in the Registration
Statement to be used in connection with the special meeting of FF shareholders
which will be held to consider and vote on the Plan of Merger. Such Proxy
Statement and Registration Statement shall contain such information as required
by Section 14(a) of the 1934 Act and Form S-4 of the 1933 Act, as well as all
applicable regulations of the Federal Reserve Board, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the Georgia Department
of Banking and Finance, and the Florida Department of Banking and Finance, and
any other laws, rules or regulations
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applicable to the Merger transactions as contemplated by this Agreement. FF
shall promptly provide to Bancorp all information relating to FF and the FF
Subsidiaries as Bancorp shall request to aid in the preparation of the
Registration Statement, and FF covenants that all information relating to FF and
the FF Subsidiaries furnished by FF for inclusion in the Registration Statement,
taken as a whole, shall be true, complete and correct, and shall not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading. In
addition, FF shall promptly furnish to Bancorp such additional data and
information as may be requested by Bancorp for the timely preparation of the
Registration Statement.
(D) FF agrees to promptly submit this Agreement to its shareholders for
adoption, at a special meeting thereof which shall be called and held at least
twenty (20) business days after the delivery to its shareholders of the
prospectus and Proxy Statement contained in the Registration Statement, but,
unless consented to by Bancorp, not more than forty-five (45) days after the
effective date of the Registration Statement. FF shall solicit proxies from its
shareholders for the purpose of voting on the adoption of this Agreement and
shall mail to each of its shareholders an appropriate and timely notice of such
meeting, a form of proxy and a prospectus and Proxy Statement. FF consents to
the use of the Proxy Statement by Bancorp in connection with the registration
under the Securities Act of 1933 of the Bancorp shares to be issued in the
merger. The notice, Proxy Statement, proxy and any other materials sent to
shareholders shall in all respects be in form and substance reasonably
satisfactory to Bancorp and FF.
(E) Upon the required approvals by regulatory authorities and upon approval
of this Agreement by a majority of the holders of the outstanding shares of FF
Common Stock FF will execute in duplicate and return to Bancorp for filing with
the Georgia Secretary of State and the Florida Secretary of State Articles of
Merger prepared by Bancorp containing such information as may be required by the
Georgia Code and the Florida Act and as may be consistent with this Agreement.
(F) FF shall take such action, shall cause the FF Subsidiaries to take such
action, and shall use its reasonable best efforts to cause the officers,
directors and other affiliates of both FF and the FF Subsidiaries to take such
action, as may be necessary to assure that the transactions contemplated by this
Agreement may be accounted for by Bancorp using the "pooling of interests"
method of accounting.
(G) FF shall promptly take such action and shall cause FF Subsidiaries to
take such action as may be reasonably requested by Bancorp to timely carry out
the terms of this Agreement in accordance with its terms and in accordance with
all applicable laws, rules and regulations.
(H) Each holder of FF stock options which are exercisable prior to the
Closing Date shall agree in writing on or before December 31, 1994, that such
options, if not exercised prior to the Closing Date, shall be cancelled and
converted into the right to receive shares of Bancorp Common Stock, based on the
Conversion Ratio and the midpoint between "bid" and "asked" price for Bancorp
Common Stock as of the Closing Date ("Midpoint Value"). To determine the shares
of Bancorp Common Stock to be received, the aggregate number of all such FF
option shares with the same exercise price shall be multiplied by the difference
between the "Conversion Value" of each such FF option share and the price of
exercising such option share. The result shall then be divided by the Midpoint
Value to determine the number of shares of Bancorp common stock to be received.
"Conversion Value" shall be determined by multiplying the Midpoint Value by the
Conversion Ratio. Further, each holder of FF stock options which are not
exercisable prior to the Closing Date shall agree in writing on or before
December 31, 1994, that such options, if not exercised on the Closing Date as
permitted under their terms, shall be cancelled and converted into the right to
receive the number of shares of Bancorp Common Stock determined in the same
manner as set forth above.
(I) FF will request that FF's independent accountants make available to
Bancorp all accounting and auditing workpapers of the independent accountants
pertaining to FF that are reasonably requested by Bancorp. FF shall use its best
efforts to make such information reasonably available to Bancorp during the
pendency of the Merger.
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(J) Upon election by Bancorp or FF, FF may accrue the expense of the
termination payments referred to in subparagraph V(K) herein at the time it is
determined that consummation of the Merger is probable of occurrence. Any
termination payments that are due may be made by FF or any FF Subsidiary on the
Closing Date.
(K) FF will suspend its 1994 Stock Repurchase Program during the pendency
of the Merger.
VIII. CONDITIONS TO OBLIGATIONS OF FF.
The obligations of FF hereunder shall, at its option, be subject to the
satisfaction of the following conditions:
(A) There shall have been issued an opinion of Stewart, Melvin &
Frost, counsel to Bancorp, in form and substance reasonably satisfactory to
FF, to the effect that, under applicable provisions of the Internal Revenue
Code of 1986, as amended, no gain or loss will be recognized for federal
income tax purposes by FF, Bancorp or the shareholders of FF to the extent
they receive stock of Bancorp in connection with the proposed
reorganization. Said opinion will not state that cash received in exchange
for fractional shares will be non-taxable.
(B) A preliminary fairness opinion shall have been received by FF from
Professional Bank Services, Inc., prior to the distribution of the Proxy
Statement to the shareholders of FF, to the effect that the consideration
to be received by FF's shareholders pursuant to paragraph II of this
Agreement is fair to the shareholders from a financial point of view and
such opinion shall not have been withdrawn or materially modified prior to
the vote of the shareholders. In addition, FF shall receive a confirmation
of the fairness opinion from Professional Bank Services, Inc., dated not
more than 20 days nor less than 10 days from Closing that the consideration
to be received by FF's shareholders is still fair to the shareholders as of
the date of the confirmation.
(C) As of the Closing Date, there shall have occurred no material
adverse change in the financial condition or results of operations of
Bancorp, taken as a whole, from that represented in the consolidated
unaudited financial statements of Bancorp as of September 30, 1994, which
have been previously provided FF, and there shall not have occurred any
loss or damage to any of its properties or assets which would materially
impair its ability to conduct its business after the Merger substantially
as it is now being conducted.
(D) The representations and warranties of Bancorp contained in this
Agreement shall be true in all material respects as of the date hereof and
as of the Closing Date with the same effect as though such representations
and warranties have been made on and as of the Closing Date, except for any
such representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such date.
(E) Bancorp shall have performed, at or prior to the Closing Date, all
agreements and covenants required by this Agreement to be performed by it.
(F) Bancorp shall have delivered to FF:
(i) a certificate executed by the Chairman or the President of
Bancorp dated as of the Closing Date, and certifying in such detail as
FF may reasonably request to the fulfillment of the conditions specified
in subparagraphs VIII(B), VIII(C) and VIII(D) hereof; and
(ii) duly adopted resolutions of the Board of Directors of Bancorp,
certified by the Secretary or an Assistant Secretary of Bancorp as of
the Closing Date, authorizing and approving the execution of this
Agreement on behalf of Bancorp and the consummation of the transactions
contemplated herein.
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IX. CONDITIONS TO OBLIGATIONS OF BANCORP.
The obligations of Bancorp to consummate and effect the Merger contemplated
by this Agreement shall, at the option of Bancorp, be subject to the
satisfaction of the following conditions:
(A) The representations and warranties of FF contained in this
Agreement shall be true in all material respects as of the date hereof and
as of the Closing Date with the same effect as though all such
representations and warranties have been made on and as of the Closing
Date, except for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as
of such date.
(B) FF shall have performed, at or prior to the Closing Date, all
agreements and covenants required by this Agreement to be performed by it.
(C) As of the Closing Date, there shall have occurred no material
adverse change in the financial condition or results of operations of FF
and the FF Subsidiaries, taken as a whole, from that presented in the
consolidated financial statements of FF and the FF Subsidiaries as of
September 30, 1994, which have previously been delivered to Bancorp, and
there shall not have occurred any loss or damage to any of the properties,
assets or business of FF and the FF Subsidiaries, taken as a whole, which
would materially adversely affect their financial condition, taken as a
whole, or impair the ability of either of them to conduct their business,
taken as a whole, after the Merger as now being conducted. For purposes of
this Agreement, changes in interest rate risk associated with FF's
operations shall not be considered a material adverse change, event or
occurrence.
(D) Bancorp shall have received an opinion of KPMG Peat Marwick, in
form and substance reasonably satisfactory to the board of directors of
Bancorp to the effect that the transactions contemplated by this Agreement
may be accounted for by Bancorp using the "pooling of interests" method of
accounting.
(E) FF shall have delivered to Bancorp:
(i) a certificate executed by the Chairman or the President of FF,
dated as of the Closing Date and certifying in such detail as Bancorp
may reasonably request to the fulfillment of the conditions specified in
subparagraphs IX(A), IX(B) and IX(C) hereof; and
(ii) duly adopted resolutions of the board of directors and the
shareholders of FF, certified by the Secretary or an Assistant Secretary
of FF as of the Closing Date, authorizing and approving the execution of
this Agreement on behalf of FF and the consummation of the transactions
contemplated herein.
X. CONDITIONS TO OBLIGATIONS OF BANCORP AND FF.
The obligations of Bancorp and FF to consummate the Merger contemplated
hereby are, at the option of either of them, subject to the following conditions
having been satisfied:
(A) The holders of a majority of the issued and outstanding stock of
FF shall have been voted in favor of the Merger at the special meeting of
the shareholders duly called and held with respect thereto pursuant to
proper notice of such meeting accompanied by proper proxy solicitation and
disclosure documents.
(B) Any and all orders, permits, approvals, licenses or qualifications
from authorities administering federal laws or laws of any state or other
political subdivision having jurisdiction, required for the consummation of
the transaction contemplated by this Agreement shall have been obtained.
This Agreement and the exchange of the shares herein contemplated shall be
in compliance with the regulations and directives of all governmental
agencies having jurisdiction.
(C) At the time of mailing the Proxy Statement to FF shareholders and
thereafter through the Closing Date, the Bancorp Common Stock to be
received by FF shareholders upon the conversion of their stock shall be the
subject of an effective registration statement (subject to no stop order)
under the
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1933 Act and shall be duly registered or qualified under the securities
laws of all states in which registration or qualification is required, or
shall be exempt therefrom.
XI. CLOSING; NOTICE OF CLOSING; MERGER DATE.
(A) The closing of the Merger shall be held on or before the last day of
the month during which the later of the following occurs: (i) the special
meeting of FF shareholders to adopt this Agreement as set forth in subparagraph
VII(D) of this Agreement, or (ii) the receipt of all applicable regulatory
approvals which are required prior to consummation of the reorganization (and
the running of any mandatory waiting periods required by such approvals or by
law), provided all conditions set forth herein have not been satisfied or
waived; which date is herein sometimes referred to as the "Closing Date";
provided, however, that the Closing Date shall not be later than the close of
business on August 31, 1995 (the "Termination Date"). If the conditions to this
Agreement have not been satisfied or waived by the Closing Date, then this
Agreement may be terminated pursuant to Paragraph XII. The closing shall be held
at the offices of Bancorp or any other mutually agreeable location. At the
closing, the parties shall execute and deliver such instruments, documents and
certificates as are required by this Agreement and as are necessary or
appropriate to close the transaction contemplated hereby.
(B) The parties contemplate that the Merger Date shall be the same day as
the Closing Date.
XII. TERMINATION.
(A) This Agreement may be terminated by either Bancorp or FF upon written
notice to the other party if: (i) there is a failure of any of the conditions
set forth in Paragraph X hereof to be satisfied by the Closing Date; or (ii) the
Closing shall not have occurred, due to no fault of the terminating party, on or
before the Termination Date.
(B) This Agreement may be terminated by Bancorp upon written notice to FF
if (i) there is a failure of any of the conditions set forth in Paragraph IX
hereof to be satisfied by the Closing Date, or (ii) there is a material breach
by FF of any representation, warranty or agreement contained herein which cannot
be or has not been cured within thirty (30) days after the giving of written
notice thereof to FF.
(C) This Agreement may be terminated by FF upon written notice to Bancorp
if: (i) there is a failure of any of the conditions of Paragraph VIII hereof to
be satisfied by the Closing Date, (ii) there is a material breach by Bancorp of
any representation, warranty or agreement contained herein which cannot be or
has not been cured within thirty (30) days after the giving of written notice
thereof by FF to Bancorp.
(D) Any notice of termination shall state the basis for such termination.
Upon termination as herein provided, this Agreement shall be void and of no
further force and effect and no party hereto shall have any obligation or
liability to the others hereunder, except that (i) the provisions of
subparagraphs XIII(F), XIII(H), and XIII(I) shall survive any such termination,
and (ii) a termination based on a material breach of this Agreement shall not
relieve the breaching party from liability for an uncured breach of a
representation, warranty or agreement giving rise to such termination.
XIII. MISCELLANEOUS.
(A) Any of the terms or conditions of this Agreement may be waived at any
time by any party hereto for whose benefit the term or condition applies, by
action of its board of directors, evidenced by a certificate signed by its
Chairman or President or other duly authorized person.
(B) This Agreement may be amended (including amendments changing the
Closing Date) or supplemented at any time by action taken by the boards of
directors of Bancorp and FF.
(C) This Agreement, the Plan of Merger and the instruments referred to
herein constitute the entire contract among the parties and supersede all other
understandings with respect to the subject matter hereof.
(D) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall be deemed one
and the same agreement and shall become binding on
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the parties hereto when one or more counterparts has been signed by each of the
parties and delivered to the other parties.
(E) This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their successors and assigns.
(F) FF and Bancorp each represent to the other that no business broker
assisted the representing party in the negotiations leading to the execution of
this Agreement. Each party agrees to indemnify the other and hold and save it
harmless from any claim or demand for commissions or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
(G) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Florida, except where federal law
supersedes state law and except for the application of Florida and Georgia law
to the Merger.
(H) Bancorp and FF shall each pay its own expenses in connection with the
Merger, including the fees and expenses of its respective counsel and
accountants. Any certified audit of FF or the FF Subsidiaries, if required,
shall be the responsibility of FF or the FF Subsidiaries. Notwithstanding the
foregoing, if this Agreement is terminated by either Bancorp or FF as a result
of a material breach by the other party of any representation, warranty,
covenant or other agreement contained in this Agreement which is not timely
cured, or if the Merger is not consummated as a result of the failure of either
Bancorp or FF to satisfy certain conditions set forth in this Agreement, then
the breaching party or the party that failed to satisfy such conditions shall
pay the other party the sum of all its out-of-pocket costs and expenses,
including costs of counsel, accountants and other advisors as can be verified in
writing. Nothing contained in this subparagraph XIII(H) shall constitute or be
deemed to constitute liquidated damages or otherwise limit the rights of the
nonbreaching party.
(I) Any and all information supplied by any party to another party in
connection with the activities contemplated by this Agreement, whether obtained
before or after the execution of this Agreement, shall be held in strict
confidence. The party gaining access to such information shall exercise the same
degree of care with respect thereto that any party uses to protect and safeguard
its own confidential proprietary information. Such information shall not,
directly or indirectly, be divulged, disclosed or communicated to any other
person or entity or used for any purposes other than those expressly
contemplated by this Agreement except for disclosure to representatives of a
party (including, without limitation, legal counsel, accountants and
consultants,) disclosure to regulatory authorities, or as is otherwise required
by judicial or regulatory authorities. If the Merger as contemplated by this
Agreement are not consummated, then all copies of all documents and other
recorded materials supplied by one party to the other shall be immediately
returned to the other. The obligations set forth in this subparagraph XIII(I)
shall not extend to information that:
(i) can be demonstrated to have been in the public domain prior to the
date of disclosure to the party;
(ii) can be demonstrated to have been in the party's possession prior
to the date of disclosure to such party;
(iii) became part of the public domain prior to the date of disclosure
to the party; or
(iv) is supplied to a party by a third party as a matter of right.
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(J) All notices, requests and other communications shall be in writing and
shall be deemed to have been duly given at the time delivered or mailed to the
parties at the following addresses:
(i) FF:
Mrs. Frances Ford
Chairman and C.E.O.
FF Bancorp, Inc.
900 North Dixie Highway
New Smyrna Beach, Florida 32069
with copies to Igler & Dougherty, P.A.
Attention: A. George Igler, Esquire
Barnett Bank Building, Suite 500
315 South Calhoun Street
Tallahassee, Florida 32301
(ii) Bancorp:
Mr. C. Talmadge Garrison
Secretary and Treasurer
303 Jesse Jewell Parkway
Suite 700
P. O. Drawer 937
Gainesville, Georgia 30503
with copies to Stewart, Melvin & Frost
Attention: T. Treadwell Syfan
Hunt Tower, Suite 600
200 Main Street
Gainesville, Georgia 30501
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IN WITNESS WHEREOF, the parties hereto, pursuant to the authority given by
their respective Boards of Directors have caused this Agreement to be duly
executed under seal as of the date first written above.
FIRST NATIONAL BANCORP
By: /s/ PETER D. MILLER
-----------------------------------
Peter D. Miller,
President, C.A.O. & C.F.O.
(CORPORATE SEAL)
Attest: /s/ C. TALMADGE GARRISON
-------------------------------
C. Talmadge Garrison,
Secretary and Treasurer
FF BANCORP, INC.
By: /s/ FRANCES R. FORD
-----------------------------------
Frances R. Ford,
Chairman of the Board, Chief
Executive Officer, President
(CORPORATE SEAL)
Attest: /s/ CHARLES H. BYRD
-------------------------------
Charles H. Byrd,
Vice Chairman
A-19
<PAGE> 146
EXHIBIT A
1. Employment Agreement, dated July 9, 1992, between First Federal Savings
Bank of New Smyrna and Frances R. Ford.
2. Employment Agreement, dated July 9, 1992, between First Federal Savings
Bank of New Smyrna and Charles H. Byrd.
<PAGE> 147
EXHIBIT B
Frances R. Ford
Charles H. Byrd
Fred J. Faust
Raymond H. Hester
Cyril Marchenton
J.E. Tumblin
Tildon W. Smith
<PAGE> 148
EXHIBIT C
November , 1994
Richard A. McNeece
Chairman of the Board and
Chief Executive Officer
First National Bancorp
303 Jesse Jewell Parkway
Gainesville, GA 30503
RE: FF Bancorp, Inc.
Dear Mr. McNeece:
I am writing to confirm the following agreement between First National and
me regarding the pending merger between FF Bancorp, Inc. and First National
Bancorp ("Merger"). In consideration of First National Bancorp entering into the
Agreement and Plan of Merger ("Agreement") dated November , 1994, with FF
Bancorp, Inc., I agree to vote all of the shares of FF Bancorp, Inc. which I own
or otherwise have the power to vote in favor of the Merger and in favor of the
other transactions contemplated by the Agreement for a period of nine months
from the date of this letter. Furthermore, for the same period of time, I shall
vote against any business combination or other reorganization of any kind
involving FF Bancorp, Inc. or its subsidiaries with any entity other than First
National Bancorp. If the Agreement is terminated, I shall have no further
obligations under this letter after the date of such termination.
Sincerely,
<PAGE> 149
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated January 23, 1995,
between FIRST NATIONAL BANCORP, a Georgia corporation (hereinafter referred to
as "Bancorp"), FF BANCORP, INC., a Florida corporation (hereinafter referred to
as "FF"), and FNB SUBSIDIARY CORPORATION, a Florida corporation (hereinafter
referred to as "FNB Subsidiary").
W I T N E S S E T H :
WHEREAS, Bancorp and FF have entered into that certain Agreement and Plan
of Merger dated as of November 22, 1994 (the "Merger Agreement"), providing for
the merger of FF into Bancorp; and
WHEREAS, Bancorp and FF wish to amend the Merger Agreement to provide for
the merger of FF into FNB Subsidiary, a wholly owned subsidiary of Bancorp, in a
forward triangular merger pursuant to which Bancorp will acquire FF in exchange
for shares of common stock of Bancorp; and
WHEREAS, the parties wish to amend the Merger Agreement to make FNB
Subsidiary a party to the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto hereby agree as follows:
1. Paragraph I of the Merger Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"I. AGREEMENT TO MERGE.
(a) On the date designated as the merger date in "Articles of
Merger" to be filed with the Florida Secretary of State pursuant to the
Florida Act (hereinafter the "Merger Date"), FF shall be merged into FNB
Subsidiary, which shall be the survivor (hereinafter sometimes referred
to as the "Surviving Corporation"), in a forward triangular merger. Such
merger shall be pursuant to the applicable provisions of the Florida
Act.
(b) The articles of incorporation of FNB Subsidiary shall be the
articles of incorporation of the Surviving Corporation. The bylaws of
FNB Subsidiary shall be the bylaws of the Surviving Corporation.
(c) The name of FNB Subsidiary shall be changed to "FF Bancorp,
Inc." as a result of the merger.
(d) The board of directors and officers of FNB Subsidiary shall
continue to be the board of directors and officers of the Surviving
Corporation.
(e) Bancorp agrees to appoint Charles H. Byrd, Vice Chairman of FF,
and Tildon W. Smith, Executive Vice-President of FF, to the board of
directors of Bancorp at the next scheduled board meeting following
consummation of the merger.
(f) FF shall receive a fairness opinion and confirmation regarding
the stock conversion in the merger as contemplated by Subparagraph
VIII(B) hereof.
(g) The corporate existence of FF and FNB Subsidiary shall be
merged into and continued in FNB Subsidiary as the Surviving
Corporation. The established offices and facilities of FF immediately
prior to the merger shall become the offices and facilities of the
Surviving Corporation.
(h) All rights, properties and privileges of every kind or
character of FF and FNB Subsidiary shall be transferred to or vested in
FNB Subsidiary as the Surviving Corporation by virtue of such merger
without any deed, assignment or other transfer. FNB Subsidiary as the
Surviving Corporation shall by virtue of the merger be responsible and
liable for all of the liabilities and obligations of both FF and FNB
Subsidiary.
<PAGE> 150
(i) The "Closing Date" shall not be later than the close of
business on August 31, 1995, unless extended by the mutual consent of
FF, Bancorp and FNB Subsidiary."
2. Subparagraph II(A) of the Merger Agreement shall be deleted in its
entirety and the following shall be substituted in lieu thereof:
"(A) On the merger date, FF Common Stock shall be converted into the
following rights:
(i) At the time of the merger described in subparagraph I(A), each
share of outstanding FF Common Stock shall be converted into the right
to receive .825 shares of Bancorp Common Stock (the "Conversion Ratio");
provided, however, that the foregoing Conversion Ratio may be subject to
adjustment pursuant to subparagraph II(B); and
(ii) Fractional shares of Bancorp common stock will not be issued
in the merger. Any FF shareholder who would be entitled to a fraction of
a Bancorp share shall receive cash payment in lieu of such fractional
share in an amount determined by multiplying the fraction of a share he
would otherwise be entitled to receive by $20.50; provided, however,
that the foregoing amount shall be subject to adjustment pursuant to the
provisions of subparagraph II(B)."
3. The conditions to obligations of Bancorp to consummate and effect
the merger contemplated by the Merger Agreement, which conditions are set
forth in Paragraph IX of the Merger Agreement, shall also be conditions to
the obligations of FNB Subsidiary to consummate and effect the merger
contemplated by the Merger Agreement as amended hereby.
4. Subparagraph VII(H) is hereby deleted in its entirety and the
following substituted in lieu thereof:
"(H) Each holder of FF stock options which are exercisable prior to
the Closing Date shall agree in writing on or before February 6, 1995,
that such options, if not exercised prior to the closing date, shall be
canceled and converted into the right to receive shares of Bancorp
Common Stock, based on the Conversion Ratio and the midpoint between
"bid" and "asked" price for Bancorp Common Stock as of the Closing Date
("Midpoint Value"). To determine the shares of Bancorp Common Stock to
be received, the aggregate number of all such FF option shares with the
same exercise price shall be multiplied by the difference between the
"Conversion Value" of each such FF option share and the exercise price
of such option share. The result shall then be divided by the Midpoint
Value to determine the number of shares of Bancorp Common Stock to be
received. "Conversion Value" shall be determined by multiplying the
Midpoint Value by the Conversion Ratio. Further, each holder of FF stock
options which are not exercisable prior to the Closing Date shall agree
in writing on or before February 6, 1995, that such options, if not
exercised on the Closing Date as permitted under their terms, shall be
converted into options to purchase Bancorp Common Stock, with the number
of shares of Bancorp Common Stock to be subject to such stock options to
be determined by multiplying the number of such FF option shares by the
Conversion Ratio and with the exercise price for such Bancorp common
stock to be determined by dividing the stated exercise price set forth
in such FF stock options by the Conversion Ratio."
5. As amended hereby the Merger Agreement shall remain in full force
and effect.
2
<PAGE> 151
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
FIRST NATIONAL BANCORP
By: /s/ PETER D. MILLER
-----------------------------------
Peter D. Miller,
President, C.A.O. & C.F.O.
Attest: /s/ C. TALMADGE GARRISON
-------------------------------
C. Talmadge Garrison,
Secretary & Treasurer
(CORPORATE SEAL)
FF BANCORP, INC.
By: /s/ FRANCES R. FORD
-----------------------------------
Frances R. Ford,
Chairman of the Board, C.E.O., &
President
Attest: /s/ CHARLES H. BYRD
-------------------------------
Charles H. Byrd,
Vice-Chairman
(CORPORATE SEAL)
FNB SUBSIDIARY CORPORATION
By: /s/ PETER D. MILLER
-----------------------------------
Peter D. Miller,
President
Attest: /s/ C. TALMADGE GARRISON
-------------------------------
C. Talmadge Garrison,
Secretary
(CORPORATE SEAL)
3
<PAGE> 152
APPENDIX B
December 16, 1994
Board of Directors
FF Bancorp, Inc.
900 North Dixie Freeway
New Smyrna Beach, Florida 32170
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial perspective, to the common shareholders of FF Bancorp, Inc.,
New Smyrna Beach, Florida ("FF Bancorp") of the proposed merger of FF Bancorp
with First National Bancorp, Gainesville, Georgia ("First National"). In the
proposed merger, FF Bancorp shareholders will receive .825 First National common
shares for each FF Bancorp common share. The terms of the merger are more fully
set forth in the Agreement and Plan of Merger by and between FF Bancorp and
First National dated November 22, 1994.
PBS is a bank consulting firm and as part of its investment banking
business is continually engaged in reviewing the fairness, from a financial
perspective, of bank and thrift acquisition transactions and in the valuation of
banks and other businesses and their securities in connection with mergers,
acquisitions, estate settlements and other purposes. We are independent with
respect to the parties of the proposed transaction.
For purposes of this preliminary opinion, we have reviewed and analyzed the
performance of FF Bancorp contained in (i) audited financial statements dated
December 31, 1991, 1992 and 1993; (ii) Form 10-Q filed with the Securities and
Exchange Commission for the periods ended March 31, 1994, June 30, 1994 and
September 30, 1994; (iii) September 30, 1994 FR Y-11Q, FR Y-9LP and FR Y-9C
filed with the Federal Reserve; and (iv) historical common stock trading
activity of FF Bancorp. We have reviewed and tabulated statistical data
regarding the loan portfolio, securities portfolio and other performance ratios
and statistics. Financial projections were prepared and analyzed as well as
other financial studies, analyses and investigations as deemed relevant for the
purposes of this preliminary opinion. In review of the aforementioned
information, we have taken into account our assessment of general market and
financial conditions, our experience in other transactions, and our knowledge of
the banking industry generally.
In conjunction with our preliminary opinion, we have evaluated the
historical performance and current financial condition of First National
contained in: (i) audited financial statements for the years ending December 31,
1992 and 1993 included in First National's 1993 Annual Report to Shareholders;
(ii) September 30, 1994 Form 10-Q filed with the Securities and Exchange
Commission; (iii) 1994 Third Quarter Report to Shareholders; (iv) historical
common stock trading and dividend activity to date; (v) the Agreement; (vi)
Investor Summary as of September 30, 1994; and (vii) the financial terms of
certain other comparable transactions. We have prepared and analyzed the pro
forma consolidated financial condition of FF Bancorp and First National. We have
reviewed and tabulated consolidated statistical data regarding growth, growth
prospects for service markets, liquidity, asset composition and quality,
profitability, leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of FF
Bancorp or First National, nor have we independently verified any of the
information reviewed; we have relied upon such information as being complete and
accurate in all material respects. We have not made independent evaluation of
the assets of FF Bancorp or First National.
B-1
<PAGE> 153
Based on the foregoing and all other factors deemed relevant, it is our
opinion as investment bankers, that, as of the date hereof, the consideration
proposed to be received by the shareholders of FF Bancorp is, from a financial
perspective, fair to the common shareholders of FF Bancorp.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
/s/ CHRISTOPHER L. HARGROVE
Christopher L. Hargrove
Vice President
B-2
<PAGE> 154
REVOCABLE PROXY FF BANCORP, INC.
900 NORTH DIXIE FREEWAY
NEW SMYRNA BEACH, FLORIDA 32168
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FF BANCORP,
INC. ("FF BANCORP") WHO WILL SERVE AS THE PROXY COMMITTEE FOR THE SPECIAL
MEETING OF SHAREHOLDERS ("SPECIAL MEETING").
The undersigned shareholder of FF Bancorp hereby appoints the Proxy
Committee with the full power of substitution to represent and to vote, as
designated on the reverse side, all the shares of FF Bancorp held of record by
the undersigned on , 1995, at the Special Meeting to be held at
5:00 p.m., Eastern Time, on , 1995, at the Edgewater Branch Office
of First Federal Savings Bank of New Smyrna, 1404 South Ridgewood Avenue,
Edgewater, Florida 32132, or any adjournment thereof.
The undersigned shareholder may revoke this Proxy at any time before it is
voted by either filing with the Secretary of FF Bancorp a written notice of
revocation, delivering to FF Bancorp a duly executed Proxy bearing a later date,
or by attending the Special Meeting and voting in person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL I AND PROPOSAL II
I. Approval of the Agreement and Plan of Merger dated November 22, 1994, as
amended by Amendment thereto dated January 23, 1995, wherein FF Bancorp will
be merged into FNB Subsidiary Corporation in a forward triangular merger
which will result in the shareholders of FF Bancorp exchanging each of their
shares of FF Bancorp common stock for .825 shares of First National Bancorp
common stock.
/ / FOR / / AGAINST / / ABSTAIN
II. Authorize the Board of Directors to adjourn the Special Meeting to solicit
additional proxies in the event that the number of proxies sufficient to
approve Proposal I has not been received by the date of the Special Meeting.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE
IN THEIR DISCRETION THE PROXY COMMITTEE IS AUTHORIZED TO TRANSACT AND TO VOTE
UPON SUCH OTHER BUSINESS as may properly come before the Special Meeting or any
adjournments thereof.
NOTE: When properly executed, this Proxy will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT
WILL BE VOTED FOR PROPOSAL I AND FOR PROPOSAL II.
IMPORTANT:
PLEASE SIGN your name exactly as it appears on this Proxy Card. If shares are
held jointly, each holder may sign, but only one signature is required. When
signing as attorney, executor, administrator, agent, trustee or guardian, please
give your full title. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign as the
authorized person in the partnership name.
The undersigned acknowledges
receipt from FF Bancorp, prior
to the execution of this Proxy,
of a Notice of Special Meeting
and a Proxy Statement-
Prospectus dated
, 1995.
X
-------------------------------
Signature
X
-------------------------------
Signature, if held jointly
Date:
-------------------------------
Please mark, sign, date and return this Proxy Card promptly, using the enclosed
envelope.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The bylaws of First Bancorp provide that any person may be indemnified
or reimbursed by First Bancorp for reasonable expenses actually incurred in
connection with any action, suit or proceeding, civil or criminal, to which he
shall be made a party by reason of his being or having been a director, officer
or employee of First Bancorp or of any firm, corporation or organization which
he served in any such capacity at the request of First Bancorp. However, under
the bylaws, no person may be indemnified or reimbursed in relation to any
matter in such action, suit or proceeding as to which he is finally adjudged to
have been guilty of or liable for gross negligence, willful misconduct or
criminal acts in the performance of his duties for First Bancorp. In addition,
the bylaws provide that no person shall be indemnified or reimbursed in relation
to any matter in such action, suit or proceeding which has been made the subject
of a compromise settlement except with the approval of a court of competent
jurisdiction, or the holders of record of a majority of the outstanding shares
of First Bancorp, or the Board of Directors, acting by vote of directors not
parties to the same or substantially the same action, suit or proceeding,
constituting a majority of the whole number of directors. The foregoing right
of indemnification or reimbursement is not exclusive of other rights to which
such person may be entitled as a matter of law.
In addition, Georgia law provides broad authority to directors and
shareholders of corporations to indemnify officers, directors and employees
against liabilities and expenses of defending civil (and in some cases
criminal) matters. See Official Code of Georgia Annotated Section 14-2-
851, et seq.
In addition to the above-described indemnification provisions, the
articles of incorporation of First Bancorp have provisions limiting the
liability of directors.
In response to increasing concern over liability exposure of corporate
officers, directors and employees, the Georgia Legislature, in 1987,
following a trend begun by Delaware and followed by several other states,
passed legislation broadening the ability of corporations to relieve
corporate directors of exposure to liability.
As permitted by Georgia law, the articles of incorporation of First
Bancorp were amended in 1990 to limit the standards of conduct required of
directors by providing that no director shall be personally liable to the
corporation or its shareholders for monetary damages for breach of duty of
care or other duty as a director; provided, however, that this provision
does not eliminate or limit the liability of a director:
II-1
<PAGE> 156
(a) For any appropriation, in violation of his duties, of any
business opportunity of the corporation;
(b) For acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(c) For the types of liabilities set forth in Official Code of
Georgia Annotated Section 14-2-832 (relating primarily to improper
dividends or other distributions by the corporation);
(d) For any transaction from which the director derives an improper
personal benefit; or
(e) For any liability or expenses related to any action or omission
by a director occurring prior to the adoption of the amendment.
Further, the right of First Bancorp or its shareholders to seek injunctive
or other equitable relief not involving monetary damages is not limited by
the above provisions.
In general, the effect of the above-referenced statute, the Articles
of First Bancorp and of the bylaws of First Bancorp is that First Bancorp
will indemnify its directors, officers and employees for reasonable
expenses and damages actually incurred in connection with any action, suit
or proceeding, civil or criminal, to which they shall be made a party by
reason of their being or having been directors, officers, or employees of
the corporation, provided that such persons are not finally adjudged to
have been guilty of or liable for gross negligence, willful misconduct or
criminal acts in the performance of their duties for First Bancorp. The
bylaws also provide that First Bancorp may purchase insurance for the
purpose of indemnifying its directors, officers and other employees to the
extent that such indemnification is allowed under the bylaws. Pursuant to
the bylaws, the corporation has purchased insurance to indemnify its
officers and directors.
ITEM 21. EXHIBITS FILED.
See Index of Exhibits at sequentially numbered page 163 and Exhibits
immediately following the index.
ITEM 22. UNDERTAKINGS.
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 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 theregistrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
II-2
<PAGE> 157
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.
The undersigned registrant hereby further undertakes as follows:
(a) That prior to any public reoffering of the securities
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the
registrant undertakes that such reoffering prospectus will
contain the information called for by Item 7 of Form S-4 with
respect to the securities to be so offered, in addition to the
information called for by the other items of Form S-4.
(b) That every prospectus (i) that is filed pursuant to
paragraph (a) 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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one (1) 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.
II-3
<PAGE> 158
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gainesville, State
of Georgia, this 8th day of February, 1995.
FIRST NATIONAL BANCORP
By: s/ Richard A. McNeece
----------------------------
Richard A. McNeece, Chairman
and C.E.O.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE
1. Principal Executive Officer
s/ Richard A. McNeece Director, Chairman and
------------------------- C.E.O.
Richard A. McNeece
February 8, 1995
Date
2. Principal Financial Officer
s/ Peter D. Miller Director, President,
--------------------------- C.A.O. and C.F.O.
Peter D. Miller
February 8, 1995
Date
3. Principal Accounting Officer
s/ C. Talmadge Garrison Senior Vice President,
---------------------------- Secretary and Treasurer
C. Talmadge Garrison
February 8, 1995
Date
II-5
<PAGE> 160
4. Other Directors
s/ Richard L. Shockley Director and Vice
--------------------------- Chairman of the Board
Richard L. Shockley
February 8, 1995
Date
Director
------------------------------
Jane Wood Banks
___________, 1995
Date
s/ Thomas S. Cheek Director
------------------------------
Thomas S. Cheek
February 8, 1995
Date
s/ John A. Ferguson, Jr. Director
------------------------------
John A. Ferguson, Jr.
February 8, 1995
Date
Director
------------------------------
James H. Harris, Jr.
___________, 1995
Date
s/ Ray C. Jones Director
------------------------------
Ray C. Jones
February 8, 1995
Date
s/ Arthur J. Kunzer, Jr. Director
------------------------------
Arthur J. Kunzer, Jr.
February 8, 1995
Date
------------------------------ Director
W.L. Lester
___________, 1995
Date
II-6
<PAGE> 161
Director
------------------------------
Loy D. Mullinax
___________, 1995
Date
s/ J. Kenneth Nix, Sr. Director
------------------------------
J. Kenneth Nix, Sr.
February 8, 1995
Date
Director
------------------------------
Edwin C. Poss
___________, 1995
Date
s/ Paul J. Reeves Director
------------------------------
Paul J. Reeves
Februarty 8, 1995
Date
Director
------------------------------
A. Roy Roberts, Jr.
___________, 1995
Date
s/ Harold L. Smith Director
------------------------------
Harold L. Smith
February 8, 1995
Date
s/ W. Woodrow Stewart Director
------------------------------
W. Woodrow Stewart
February 8, 1995
Date
s/ Bobby M. Thomas Director
------------------------------
Bobby M. Thomas
February 8, 1995
Date
II-7
<PAGE> 162
s/ James A. Walters Director
------------------------------
James A. Walters
February 8, 1995
Date
Director
------------------------------
Mack G. West
___________, 1995
Date
Director
------------------------------
J. Michael Womble
___________, 1995
Date
s/ Joe Wood, Jr. Director
------------------------------
Joe Wood, Jr.
February 8, 1995
Date
II-8
<PAGE> 163
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER
------
<S> <C> <C>
2.1 Agreement and Plan of Merger between
First National Bancorp and FF Bancorp,
Inc. and Amendment thereto (included
herein as Appendix A to the Proxy
Statement and incorporated by
reference).............................. Incorporated
by Reference
3.1 Articles of Incorporation of First
National Bancorp, as amended
(incorporated by reference in this
Registration Statement from
Exhibit 3.1 of First National Bancorp's
Registration Statement No. 33-64590
on Form S-4)............................. Incorporated
by Reference
3.2 Bylaws of First National Bancorp
currently in effect (incorporated
by reference in this Registration
Statement from Exhibit 3.2 of First
National Bancorp's Registration
Statement No. 33-64590 on Form S-4)...... Incorporated
by Reference
5. Opinion of Messrs. Stewart, Melvin &
Frost, Attorneys re: Validity of
Securities...............................
8. Opinion of Messrs. Stewart, Melvin &
Frost, Attorneys, re: Tax Aspects of
Merger...................................
</TABLE>
<PAGE> 164
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER
------
<S> <C> <C>
10.1 1988 Employee Stock Option Plan of
First National Bancorp (incorporated
by reference in this Registration
Statement from such document filed
as an exhibit to First National
Bancorp's Registration Statement
No. 33-24985 on Form S-8)................ Incorporated
by Reference
10.2 1990 Employee Stock Option Plan of
First National Bancorp and Amendment
thereto dated July 17, 1991
(incorporated herein by reference to
such document filed as Exhibit 3.1 of
First National Bancorp's Registration
Statement No. 33-64590 on Form S-4)...... Incorporated
by Reference
10.3 1993 Employee Stock Option Plan of
First National Bancorp dated
April 26, 1993 (incorporated herein
by reference to such document filed
as Exhibit 10.11 of First National
Bancorp's Registration Statement
No. 33-64590 on Form S-4)................ Incorporated
by Reference
10.4 First National Bancorp Incentive
Compensation Plan (incorporated by
reference to Exhibit 10.12 of
Registration Statement No. 33-64590
on Form S-4)............................. Incorporated
by Reference
10.5 Change of Control Agreement, dated
June 23, 1992, between First National
Bancorp and Richard A. McNeece
(incorporated herein by reference to
such document filed as Exhibit 10.7 of
First National Bancorp's Registration
Statement No. 33-50422 on Form S-4)...... Incorporated
by Reference
</TABLE>
<PAGE> 165
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER
------
<S> <C> <C>
10.6 Change of Control Agreement, dated
June 16, 1992, between First National
Bancorp and Peter D. Miller
(incorporated herein by reference to
such document filed as Exhibit 10.8
of First National Bancorp's
Registration Statement No. 33-50422
on Form S-4)............................. Incorporated
by Reference
10.7 Change of Control Agreement, dated
June 16, 1992, between First National
Bancorp and C. Talmadge Garrison
(incorporated herein by reference
to such document filed as Exhibit 10.9
of First National Bancorp's
Registration Statement No. 33-50422
on Form S-4)............................. Incorporated
by Reference
10.8 Change of Control Agreement, dated
June 24, 1992, between First National
Bancorp and Richard D. White
(incorporated herein by reference to
such document filed as Exhibit 10.10
of First National Bancorp's
Registration Statement No. 33-50422
on Form S-4)............................. Incorporated
by Reference
10.9 Change of Control Agreement, dated
June 16, 1992, between First National
Bancorp and Bryan F. Bell (incorporated
herein by reference to such document
filed as Exhibit 10.9 to First National
Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1993,
SEC File No. 0-10657).................... Incorporated
by Reference
10.10 Change of Control Agreement, dated
July 1, 1992, between First National
Bancorp and Stephen M. Rownd.............
</TABLE>
<PAGE> 166
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER
------
<S> <C> <C>
10.11 First National Bancorp Performance-
Based Restricted Stock Plan
approved by the shareholders on
April 20, 1994 (incorporated herein by
reference to such document filed as
Exhibit 10.10 of First National
Bancorp's Registration Statement
No. 33-53719 on Form S-4) . . . . . . . . Incorporated
by Reference
11. Statement re computation of per share
earnings (incorporated by reference
to First National Bancorp's Annual
Report on Form 10-K for the year
ended December 31, 1993, SEC File
No. 0-10657). . . . . . . . . . . . . . . Incorporated
by Reference
13.1 1993 Annual Report to
Security Holders (incorporated
by reference to First National
Bancorp's 1993 Annual Report
of Security Holders, SEC
File No. -010657. . . . . . . . . . . . . Incorporated
by Reference
13.2 First National Bancorp's
Quarterly Report on Form 10-Q
for the quarter end September 30,
1994 (incorporated by reference
to such Quarterly Report on Form
10-Q, SEC File No. 0-10657) . . . . . . . Incorporated
by Reference
21. Subsidiaries of the Registrant. . . . . .
23.1 Consent of KPMG Peat Marwick LLP. . . . .
23.2 Consent of Hacker, Johnson,
Cohen & Grieb . . . . . . . . . . . . . .
23.3 Consent of Stewart, Melvin & Frost. . . .
23.4 Consent of Investment Banker. . . . . . .
23.5 Consents of New Directors . . . . . . . .
</TABLE>
<PAGE> 167
<TABLE>
<S> <C> <C>
99.1 First National Bancorp's Annual Report
on Form 10-K for the year ended
December 31, 1993 (incorporated by
reference to such Annual Report on
Form 10-K, SEC File No. 0-10657). . . . . Incorporated
by Reference
99.2 First National Bancorp 1994 Annual
Meeting Proxy Statement (incorporated
by reference to such Proxy Statement,
SEC File No. 0-10657) . . . . . . . . . . Incorporated
by Reference
99.3 Fairness Opinion Analysis . . . . . . . .
</TABLE>
<PAGE> 1
Exhibit 5
February 8, 1995
First National Bancorp
303 Jesse Jewell Parkway
Suite 700
P.O. Box 937
Gainesville, Georgia 30503
Re: Registration Statement on Form S-4 covering 3,885,050 shares of
First National Bancorp to be issued in connection with the
acquisition of FF Bancorp, Inc.
Ladies and Gentlemen:
At your request, we have participated as counsel for First National
Bancorp, a Georgia corporation (the "Company"), in the preparation of the
above-referenced Registration Statement (the "Registration Statement"),
relating to the proposed issuance of 3,885,050 shares (the "Shares") of the
Company's common stock, $1.00 par value per share, in connection with the
merger of FF Bancorp, Inc. into First National Bancorp under the terms of
the Agreement and Plan of Merger described in the Registration Statement.
In connection with the preparation of the Registration Statement, we
have examined originals or copies of such corporate records, documents and
other instruments relating to the authorization and issuance of the Shares
as we have deemed relevant under the circumstances.
On the basis of the foregoing, it is our opinion that:
(1) The Company is duly organized and incorporated and is validly
existing under the laws of the State of Georgia, with an authorized
capitalization consisting of 30,000,000 shares of common stock, $1.00 par
value per share.
(2) The issuance of the Shares has been duly authorized by the Board
of Directors of the Company, and when the Shares are issued pursuant to the
terms and provisions of the Agreement and Plan of Merger described in the
Registration Statement, the Shares will be legally and validly issued,
fully paid and non-assessable.
Very truly yours,
STEWART, MELVIN & FROST
By: /s/ T. Treadwell Syfon
-----------------------------------
Partner
<PAGE> 1
Exhibit 8
February 8, 1995
FF Bancorp, Inc.
900 North Dixie Freeway
New Smyrna Beach, Florida 32168
First National Bancorp
303 Jesse Jewell Parkway
Suite 700
P. O. Box 937
Gainesville, Georgia 30503
Ladies and Gentlemen:
You have asked for our opinion in regard to the income tax
consequences, under the Internal Revenue Code of 1986, as amended (the
"Code"), of the proposed issuance of a maximum of 3,855,050 shares of
common stock of First National Bancorp, a Georgia corporation ("First
Bancorp"), in connection with the merger of FF Bancorp, Inc., a Georgia
corporation ("FF Bancorp"), and FNB Subsidiary Corporation ("FNB
Subsidiary"), a wholly-owned subsidiary of First Bancorp, in a forward
triangular merger pursuant to the laws of the State of Florida and pursuant
to the terms of the Agreement and Plan of Merger and the Amendment thereto
between the parties to the reorganization. In rendering this opinion we
have assumed the following:
(i) First Bancorp is a corporation organized under the laws of
the State of Georgia and operates as a bank holding company
pursuant to the federal Bank Holding Company Act of 1956, as
amended (the "BHCA"). First Bancorp has authorized 30,000,000
shares of $1.00 par value common stock of which approximately
16,465,036 shares were issued and outstanding as of September 30,
1994. First Bancorp presently has 17 wholly-owned operating
subsidiaries, The First National Bank of Gainesville, First
National Bank of Habersham, Granite City Bank, Bank of Clayton,
The First National Bank of White County, The First National Bank
of Jackson County, The Citizens Bank of Toccoa, Bank of Banks
County, First State Bank of Gilmer County, The Peoples Bank of
Forsyth County, Pickens County Bank, and First National Bank of
Paulding County, Citizens Bank, Ball Ground, Georgia, Bank of
Villa Rica, The Community Bank of Carrollton, and The Commercial
Bank, Douglasville, Georgia, and Barrow Bank & Trust Company,
Winder, Georgia.
<PAGE> 2
(ii) FF Bancorp is organized as a Florida business corporation
and operates as a multiple savings and loan and one bank holding
company pursuant to the BHCA and the federal Savings and Loan
Holding Company Act. FF Bancorp has authorized 5,000,000 shares
of $.01 par value voting common stock, with 4,680,818 shares
issued and outstanding as of September 30, 1994 and with
outstanding employee stock options to purchase 84,397.5 shares as
of September 30, 1994. FF Bancorp also has authorized 2,500,000
shares of preferred stock, of which no shares are outstanding.
(iii) FNB Subsidiary has been recently organized as a Florida
business corporation for the purpose of effecting the triangular
merger. FNB Subsidiary has authorized 5,000,000 shares of voting
common stock with one cent ($.01) par value. 500 shares of FNB
Subsidiary's stock are issued and outstanding. All of said
shares are held by First Bancorp.
(iv) FF Bancorp will be merged with and into FNB Subsidiary
under the applicable laws of the State of Florida. By operation
of law, FF Bancorp will transfer all of its assets and
liabilities to FNB Subsidiary. FNB Subsidiary will be the
surviving corporation, and the separate corporate existence of FF
Bancorp will cease. As a result of the merger each share of FF
Bancorp will be exchanged for .825 shares of First Bancorp common
stock. No fractional shares of First Bancorp stock will be
issued in the proposed transaction.
(v) Shareholders of FF Bancorp will not have any right of
dissent and appraisal in the transaction.
It is assumed that the following additional representations have been
made or will be made by the parties to the merger in connection with the
proposed transaction:
(a) The fair market value of First Bancorp stock to be received by
the shareholders of FF Bancorp will, in each instance, be approximately
equal to the fair market value of the FF Bancorp stock surrendered in
exchange therefor.
(b) The management of FF Bancorp knows of no plan or intention on the
part of the FF Bancorp shareholders to sell or otherwise dispose of the
First Bancorp stock received in the transaction which would reduce their
holdings thereof to a number of shares having, in the aggregate, a value,
as of the date of the merger, less than 50% of the total value of all the
formerly outstanding stock of FF Bancorp as of the same date.
(c) Taking into account amounts to be paid by FF Bancorp for its
merger expenses, FNB Subsidiary will hold, after the merger, at least 90%
of the fair market value of FF Bancorp's net assets and at least 70% of the
fair market value of FF Bancorp's gross assets, and FNB Subsidiary will
hold at least 90% of the fair market value of its net assets and at least
70% of the fair market value of its gross assets. For purposes of this
representation, First Bancorp stock transferred to FNB Subsidiary, if any,
will not be considered as assets of FNB Subsidiary or FF Bancorp.
<PAGE> 3
(d) FF Bancorp has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in FF Bancorp, except employee stock options to purchase
28,333.8 shares of FF Bancorp common stock which are to be exercised prior
to consummation of the proposed merger or canceled in return for First
Bancorp stock based on the value of the options and presently non-
exerciseable stock options to purchase 56,063.7 shares which are to be
converted into options to purchase First Bancorp stock.
(e) FF Bancorp has no plan or intention to sell or otherwise dispose
of any of the assets which it will receive in the transaction.
(f) First Bancorp will operate FNB Subsidiary in a substantially
unchanged manner as a wholly-owned subsidiary.
(g) First Bancorp has no plan or intention to redeem or otherwise
reacquire any of its stock issued in the proposed transaction.
(h) First Bancorp, FNB Subsidiary and FF Bancorp will each pay its
own expenses incurred in the transaction, and each shareholder of FF
Bancorp will pay his own expenses incurred, if any.
(i) No parties to the transaction are investment companies within the
meaning of Section 368(a)(2)(F)(iii) of the Code.
(j) First Bancorp does not presently own, directly or indirectly, nor
has it owned within the preceding five years, directly or indirectly, more
than 10% of the stock of FF Bancorp.
(k) First Bancorp, FNB Subsidiary and FF Bancorp are each
corporations within the meaning of Section 7701(a)(3) of the Code.
Based upon our understanding of the transaction and on the
representations set forth above, we are of the following opinion:
(1) Provided that the proposed merger of FF Bancorp with and into FNB
Subsidiary qualifies as a statutory merger under the applicable laws of the
State of Florida and provided that (a) after the transaction FNB Subsidiary
will hold substantially all of its assets and substantially all of the
assets of FF Bancorp and (b) in the transaction the FF Bancorp shareholders
will exchange an amount of FF Bancorp stock constituting more than 50% of
FF Bancorp stock for First Bancorp voting common stock, the proposed
transaction will constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Code. The reorganization will not be disqualified by
reason of the fact that common stock of First Bancorp is used in the
transaction (Section 368(a)(2)(D)). As used herein, "substantially all"
means at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets of FNB Subsidiary and FF
Bancorp. First Bancorp, FNB Subsidiary and FF Bancorp will each be a
"party to a reorganization" within the meaning of Section 368(b).
(2) No gain or loss will be recognized to FNB Subsidiary upon the
receipt of the assets of FF Bancorp and the assumption by FNB
<PAGE> 4
Subsidiary of the liabilities, if any, of FF Bancorp in the merger.
Taxable income on a consolidated basis may be created for First Bancorp as
a result of the merger due to accounting method changes which will be
required to be made by the FF Bancorp subsidiaries to be acquired
indirectly by First Bancorp in the merger.
(3) No gain or loss will be recognized to FF Bancorp upon the
transfer of its assets and liabilities to FNB Subsidiary in the merger.
(4) No gain or loss will be recognized to the shareholders of FF
Bancorp upon the receipt of First Bancorp voting common stock in exchange
for their shares of FF Bancorp common stock.
(5) The basis of the shares of First Bancorp voting common stock
received by a FF Bancorp shareholder will, in each instance, be the same as
the basis of the shares of the FF Bancorp common stock surrendered in
exchange therefor.
(6) The basis of the FF Bancorp assets received by FNB Subsidiary
will, in each instance, be the same as FF Bancorp's basis in the assets.
(7) The holding period of the shares of First Bancorp voting common
stock received by the FF Bancorp shareholders will include the period
during which the stock of FF Bancorp surrendered in exchange therefor was
held, provided that the shares of FF Bancorp common stock were held as
capital assets on the date of the exchange.
(8) The holding period of the assets of FF Bancorp in the hands of
FNB Subsidiary will include the period during which such assets were held
by FF Bancorp.
(9) Cash received by a FF Bancorp shareholder in lieu of a fractional
share will be treated as received in exchange for such fractional share and
not as a dividend, and any gain or loss recognized as a result of the
receipt of such cash will be capital gain or loss equal to the difference
between cash received and the portion of the shareholder's basis in FF
Bancorp common stock allocable to such fractional share interest.
No opinion is expressed as to the tax treatment of any conditions
existing at the time of, or effects resulting from, the transaction that
are not specifically covered by the above opinion.
Very truly yours,
STEWART, MELVIN & FROST
By: /s/ T. Treadwell Syfan
-----------------------------
Partner
<PAGE> 1
EXHIBIT 10.10
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1992, by and between
FIRST NATIONAL BANCORP (hereinafter referred to as "Company") and STEPHEN
M. ROWND (hereinafter referred to as "Employee"), establishes a severance
arrangement between the parties in the event of a change of control of
Company.
WITNESSETH:
WHEREAS, Employee has rendered valuable service to the Company or its
subsidiaries in various executive capacities; and
WHEREAS, Company desires to induce Employee to remain in his current
employment by providing Employee a measure of security; and
WHEREAS, Company wants to continue to have the benefits of Employee's
full time and attention to the affairs of Company without diversion due to
concerns about a possible change of control;
NOW, THEREFORE, in consideration of ONE DOLLAR and other good and
valuable consideration, receipt of which is hereby acknowledged, Company
and Employee agree as follows:
1. PAYMENT OF SEVERANCE AMOUNT. If the Employee's employment by the
Company or any subsidiary or successor of the Company shall be subject to
an Involuntary Termination within the Covered Period, then the Company
shall pay to the Employee an amount equal to the Severance Amount, payable
within 15 days after the Termination Date. In addition, Employee will
immediately be entitled to payment of the Severance Amount and the other
benefits hereunder if, following a Change of Control, any successor to
Company refuses to acknowledge and accept the obligations of Company
hereunder either directly or by operation of law. If for any reason or no
reason, the Company takes the position that some or all of the benefits
provided hereunder are not due and owing to Employee or that it will not
pay Employee any or all of the benefits provided hereunder, Employee may,
at his discretion, submit the resolution of such dispute to arbitration as
provided in Paragraph 5 below by notifying Company in writing of his intent
to do so.
2. DEFINITIONS. All the terms defined in this Paragraph 2 shall
have the meanings given below throughout this Agreement.
(a) An "AFFILIATE" shall mean any entity which owns or controls, is
owned by or is under common ownership or control with, the Company.
(b) "BASE ANNUAL SALARY" shall, as determined on the Termination
Date, be equal to the greater of:
i. the Employee's annual salary excluding bonuses and
<PAGE> 2
special incentive payments on the date of the earliest Change of
Control to occur during the Covered Period; or
ii. the Employee's annual salary excluding bonuses and special
incentive payments on the Termination Date.
(c) "CHANGE IN DUTIES" shall mean any one or more of the following:
i. a significant change in the nature or scope of the Employee's
authorities or duties from those applicable to him immediately prior
to the date on which a Change of Control occurs;
ii. a reduction in the Employee's Base Annual Salary from that
provided to him immediately prior to the date on which a Change of
Control occurs;
iii. any diminution in the Employee's eligibility to participate or
level of participation in bonus, stock option, incentive award and
other compensation plans which provide opportunities to receive
compensation, from the greater of:
-the opportunities provided by the Company (including its
subsidiaries) for executives with comparable duties; or
-the opportunities under any such plans under which he was
participating immediately prior to the date on which a Change of
Control occurs;
iv. a diminution in employee benefits (including but not limited to
medical, dental, life insurance and long-term disability plans) and
perquisites applicable to Employee, from the greater of:
-the employee benefits and perquisites provided by the Company
(including its subsidiaries) to executives with comparable
duties; or
-the employee benefits and perquisites to which he was entitled
immediately prior to the date on which a Change in Control
occurs;
v. a change in the location of the Employee's principal place of
employment by the Company (including its subsidiaries) by more than 50
miles from the location where he was principally employed immediately
prior to the date on which a Change of Control occurs to which
Employee has not agreed;
vi. any reduction in the Employee's title with Company;
vii. if Employee, because of any change in circumstances
resulting from a Change of Control, is adversely affected with
<PAGE> 3
respect to his ability to exercise the authorities, powers, functions
or duties attached to his position immediately prior to the date on
which a Change of Control occurs.
(d) A "CHANGE OF CONTROL" shall be deemed to have occurred if:
i. any "person," including a "group" as determined in accordance
with Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act")(other than the Company, any subsidiary of the Company,
or any employee benefit plan, as defined in ERISA, of any of the
foregoing) is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities;
ii. as a result of, or in connection with, any tender offer or
exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who were directors of the
Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company;
iii. the Company is merged or consolidated with another corporation
and as a result of the merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former
shareholders of the Company, other than (x) affiliates within the
meaning of the Exchange Act or (y) any party to the merger or
consolidation;
iv. a tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding voting
securities; or
v. the Company transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of Company.
(e) "COVERED PERIOD" for the Employee shall mean two years following
the occurrence of any Change of Control, including a Change of Control
following another/other Change(s) of Control.
(f) "INVOLUNTARY TERMINATION" shall mean any termination which:
i. does not result from a resignation by the Employee (other than a
resignation pursuant to clause ii of this subparagraph (f)); or
3
<PAGE> 4
ii. results from a resignation following any Change in Duties;
provided, however, the term "Involuntary Termination" shall not
include:
x. a Termination for Cause, or
y. any termination as a result of death, disability, or normal
retirement pursuant to a retirement plan to which the Employee was
subject prior to any Change in Control.
(g) "SEVERANCE AMOUNT" is equal to one hundred percent (100%) of the
Employee's Base Annual Salary, plus an amount equal to the average of the
annual amounts Employee was awarded during the preceding three years under
the Company's Senior Management Incentive Compensation Plan.
(h) "TERMINATION FOR CAUSE" shall mean only a termination as a result
of fraud, gross negligence, gross dereliction of duties, misappropriation
of or intentional material damage to the property or business of the
Company (including its subsidiaries), or a commission of a felony by the
Employee. In the event that the Company takes the position that there is a
Termination for Cause, the Company shall so notify the Employee in writing
at the Termination Date and Employee may, at his discretion, submit the
determination of such matter to arbitration by notification to Company that
he elects his rights pursuant to Paragraph 5 below within thirty (30) days
after the receipt of such notification.
(i) "VOTING SECURITIES" shall mean any securities which ordinarily
possess the power to vote in the election of directors without the
happening of any pre-condition or contingency.
3. OTHER EMPLOYEE BENEFITS. If the Employee's employment by the
Company or any subsidiary or successor of the Company shall be subject to
an Involuntary Termination within the Covered Period, then the following
provisions shall also apply:
(a) MEDICAL, DENTAL, LIFE INSURANCE AND LONG-TERM DISABILITY
BENEFITS. To the extent that the Employee or any of the Employee's
dependents may be covered under the terms of any medical, dental, life
insurance or long-term disability plans of the Company (or any subsidiary)
for active employees immediately prior to the termination, the Company will
provide the Employee and those dependents with equivalent coverages for
twenty-four (24) months from the termination. The coverages may be
procured directly by the Company (or any subsidiary, if appropriate) apart
from, and outside of the terms of the plans themselves; provided that the
Employee and the Employee's dependents comply with all of the conditions of
the medical, dental, life insurance or long-term disability plans. In
consideration for these benefits, the Employee must make contributions
equal to those required from time to time from active employees of Company
(or its subsidiaries) for
4
<PAGE> 5
equivalent coverages under the medical, dental, life insurance, or long-
term disability plans. Company shall not be entitled to amend or modify
the benefits for Employee or any of his dependents or any of the terms or
conditions thereof without the prior written consent of Employee. The
foregoing health benefits are not intended to be a substitute for any
benefits required under COBRA. Notwithstanding the foregoing, Employee's
rights to the foregoing benefits shall terminate as to any benefit for
which he becomes entitled to substantially similar benefits on
substantially similar terms, without limitations or exclusions for pre-
existing conditions or similar limitations, through a program of a
subsequent employer.
(b) PROFIT-SHARING PLANS. An amount equal to the amount of the
Employee's account balance which is not vested under any profit-sharing
plans (including, without limitation, plans with 401k arrangements)
maintained by Company immediately prior to the termination of Employee
shall be paid by Company to Employee within 15 days after the Termination
Date. Such amount shall be repaid by Employee to Company, without
interest, in the event that the profit-sharing plan(s) is/are terminated
and Employee receives distribution of his fully vested account from a
terminated plan. In addition, at each of the two consecutive plan year
ends the first of which coincides with or next follows the Termination
Date, Company shall pay to Employee (within 15 days after the end of the
plan year) the amounts which Employee would have been allocated under the
profit-sharing plans from contributions (including, without limitation,
matching contributions under any 401(k) plan or arrangement) made by the
Company for such plan years had Employee not been terminated, had he
continued to earn the Base Annual Salary, and had he elected to make
employee deferrals to any 401(k) plan at the level such deferrals were made
by Employee immediately prior to his termination. In addition, if the
Employee has, or should have, an Excess Benefit Account under the First
National Bancorp Excess Benefits Plan (the "Excess Plan") or similar
account under any other deferred compensation plan which is designed to
supplement the Company's 401(k) plan, the entire account, including any
nonvested portion, shall be paid by Company to Employee within 15 days
after the Termination Date. If, at the two consecutive plan year ends of
the Excess Plan (or other deferred compensation plan, as applicable) the
first of which coincides with or next follows the Termination Date,
Employee's Excess Benefit Account, or similar account under any other
deferred compensation plan, would have been credited with amounts (based on
Employee's Base Salary Amount and employee deferrals to any 401(k) and
other deferred compensation plans at the level such deferrals were made by
Employee immediately prior to his termination) if Employee had not been
terminated, then Company shall pay to Employee said amounts within 15 days
after the end of each respective plan year. The Excess Plan shall be
deemed amended to reflect the above provisions as applicable to Employee
and the provisions shall also apply to any deferred compensation plan which
is subsequently adopted by
5
<PAGE> 6
Company under which Employee participates.
(c) PENSION PLAN. The Company's pension plan is currently being
terminated, and Employee's accrued benefits thereunder will be fully vested
upon such termination. If a Change of Control occurs prior to the date on
which all the assets under the pension plan have been used to provide
benefits under the pension plan, and if there is an Involuntary Termination
of Employee during the Covered Period, then the following provisions shall
apply:
(i) If excess assets (amounts which exceed the accrued
benefits of the participants under the pension plan's formula) are
allocated and/or distributed to participants of the pension plan,
Company shall pay to Employee, at such times as the allocations and/or
distributions of excess assets are made, any amounts Employee would
have been entitled to as a participant under the pension plan were it
not for limitations contained in the pension plan or law applicable to
the pension plan.
(ii) The present value of Employee's fully vested benefits
(determined as of the Termination Date using the Base Salary Amount as
two of the five highest consecutive years, and using the actuarial
assumptions then in effect) under the Supplemental Executive
Retirement Plan for First National Bancorp (the "SERP") shall be paid
by Company within fifteen days after the Termination Date. This
amount shall be paid to Employee even if it exceeds the amount
otherwise payable under the terms of the SERP.
(d) STOCK PLANS. Employee shall receive full vesting and all
restrictions against Employee shall lapse with respect to and under any
stock plans maintained by Company immediately prior to the Termination
Date. Employee shall have six months following the Termination Date in
which to exercise the rights granted below. The six-month exercise period
shall apply notwithstanding any shorter exercise period which may be
provided for under the stock option agreement in the case of Employee's
termination of employment. To the extent that the provision set forth in
the previous sentence conflicts with Employee's stock option agreement, the
stock option agreement is deemed amended and the provision in the previous
sentence shall control. Provided, however, the exercise period shall in no
event be extended beyond the date on which the option would expire under
the stock option agreement if Employee had not been terminated. During the
six-month period (or shorter period if the options would expire within such
shorter period under the stock option agreement if Employee had not been
terminated) following the Termination Date, the Employee shall be entitled
to elect one (but not more than one) of the following alternatives:
(1) To exercise any stock options not exercised prior to the
Termination Date;
6
<PAGE> 7
(2) To make a written demand for payment by Company of an amount
equal to the difference between the value of the stock which is
subject to the options and the exercise price for the stock
subject to said options. For this purpose, the "value" of the
stock subject to the options shall be the greatest of (i) the
fair market value of the stock on the date Employee demands
payment hereunder, or (ii) the highest fair market value of the
stock on the date any Change of Control occurred, or (iii) the
highest consideration (whether in cash or in kind) paid in
connection with any Change of Control event to any shareholder of
Company for such shareholder's shares of stock in Company by the
"person" or "group," as determined in accordance with Section
13(d)(3) of the Exchange Act, which attained control pursuant to
said Change of Control event. Company shall make payment of the
appropriate amount, as determined above, within 15 days after
Employee makes the written demand.
(e) MISCELLANEOUS BENEFITS. Employee may continue using any Company-
owned automobile and any Company-provided country club privileges through
the end of the month in which the Termination Date occurs.
(f) OTHER EMPLOYEE BENEFITS. The benefits hereunder shall not be
affected by or reduced because of any other benefits (including, but not
limited to, a severance pay plan which is independent of a Change of
Control) to which Employee may be entitled by reason of his continuing
employment with Company or the termination of his employment with Company,
and no other such benefit by reason of such employment shall be affected or
reduced because of the benefits bestowed by this Agreement; provided,
however, that the foregoing will not be interpreted to require duplicative
medical benefits.
4. GOLDEN PARACHUTE PAYMENT. It is the intention of the parties
that the Severance Amount payments and other payments under this Agreement
are reasonable compensation for Employee's service to Company and its
subsidiaries and shall not constitute "excess parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended, and any regulations thereunder. If the independent accountants
acting as auditors for the Company on the date of a Change of Control (or
another accounting firm designated by them) determine that the Severance
Amount payments or other payments under this Agreement constitute "excess
parachute payments" (without taking into account any amounts in excess of
299 percent (299%) of the "base amount," as defined in Section 280G(b)(3)
which might otherwise be "reasonable compensation" within the meaning of
Section 280G(b)(4)), then the payments under this Agreement shall, in lieu
of the payments otherwise due, be increased to the sum of (a) the base
amount, as defined in Section 280G(b)(3), plus (b) an amount equal to the
7
<PAGE> 8
quotient of (i) the "excess parachute payment," as defined in Section
280G(b), divided by (ii) one (1) minus the rate of tax (expressed as a
decimal) imposed under Code Section 4999. The purpose of the preceding
sentence is that payments hereunder are "grossed up" so that Employee will
receive all amounts due under this Agreement without diminution by reason
of taxes imposed under Section 4999.
5. ARBITRATION AND LITIGATION.
(a) Arbitration is not required of Employee to resolve any dispute
with Company hereunder, but is merely an alternative to resolve the dispute
available to Employee if he elects to use it. Company shall have no right
to avail itself of arbitration unless Employee agrees to arbitration. All
arbitrations pursuant to this Agreement shall be determined in accordance
with the rules of the American Arbitration Association then in effect, by a
single arbitrator if the parties shall agree upon one, or by three
arbitrators, one appointed by each party, and a third arbitrator appointed
by th two arbitrators selected by the parties, all arbitrators from a panel
proposed by the American Arbitration Association. If any party shall fail
to appoint an arbitrator within thirty (30) days after it is notified to do
so, then the arbitration shall be accomplished by a single arbitrator.
Unless otherwise agreed by the parties hereto, all arbitration proceedings
shall be held in Gainesville, Georgia. Each party agrees to comply with
any award rendered in such proceeding. The decision of the arbitrator(s)
shall be tendered within sixty (60) days after final submission of the
parties in writing or any hearing before the arbitrators and shall include
their individual votes. If Employee is entitled to any award pursuant to
the determination reached in the arbitration proceeding, he shall be
entitled to payment by Company of all attorney's fees, costs and other out-
of-pocket expenses incurred in connection with the arbitration.
(b) In the event that any dispute hereunder is resolved through
litigation, and Employee's position in such litigation is sustained to any
extent by the court, then Company agrees that it shall pay all of
Employee's attorney's fees, court costs and other out-of-pocket expenses
relating to the litigation.
6. NOTICES. Notices and all other communications under this
Agreement shall be in writing and shall be deemed given when personally
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Company to:
First National Bancorp
P.O. Drawer 937
Gainesville, Georgia 30503
8
<PAGE> 9
Attention: Secretary of First National Bancorp, or its
successor, with copies to the President of First National Bancorp, or
its successor and the President of The First National Bank of
Gainesville, or its successor.
If to the Employee to:
or to such other address as either party may furnish to the other in
writing, except that notice of changes of address shall be effective only
upon receipt.
7. APPLICABLE LAW. This contract is entered into under, and shall
be governed for all purposes by, the laws of the State of Georgia.
8. SEVERABILITY. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement and all
other provisions shall remain in full force and effect.
9. WITHHOLDING OF TAXES; SET-OFF. Company may withhold from any
benefits payable under this Agreement all federal, state, city or other
taxes as may be required pursuant to any law, governmental regulation or
ruling. The right of Employee to receive benefits under this Agreement,
however, shall be absolute and shall not be subject to any set-off,
counterclaim, recoupment, defense, duty to mitigate, or other rights
Company may have against him or anyone else.
10. NOT AN EMPLOYMENT AGREEMENT; SUBSEQUENT EMPLOYMENT. Nothing in
this Agreement shall give the Employee any rights (or impose any
obligations) to continued employment by the Company or any subsidiary or
successor of the Company, nor shall it give the Company any rights (or
impose any obligations) for the continued performance of duties by the
Employee for the Company or any subsidiary or successor of the Company.
Employee's right to receive benefits under this Agreement shall not be
reduced by Employee's employment with any other employer after terminating
employment with the Company. Any compensation for services rendered or
consulting fees earned after the date of termination shall not diminish
Employee's right to receive all amounts due hereunder.
11. NO ASSIGNMENT. The Employee's right to receive payments or
benefits under this Agreement shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than
a transfer by will or by the laws of descent
9
<PAGE> 10
and distribution. In the event of any attempted assignment or transfer
contrary to this paragraph the Company shall have no liability to pay any
amount so attempted to be assigned or transferred. This Agreement will
inure to the benefit of and be enforceable by the Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns (including, without
limitation, any company into or with which the Company may merge or
consolidate). The Company agrees that it will not effect the sale or other
disposition of all or substantially all of its assets unless etither (i)
the person or entity acquiring the assets or a substantial portion of the
assets shall expressly assume by an instrument in writing all duties and
obligations of the Company under this Agreement or (ii) the company shall
provide, through the establishment of a separate reserve for the payment in
full of all amounts which are or may reasonably be expected to become
payable to the Employee under this Agreement.
13. EMPLOYEE'S INDEMNITY. Employee shall be entitled to the
indemnity provided to officers of Company immediately prior to the Change
of Control. Any changes to Company's bylaws or otherwise which reduce any
indemnity granted to officers shall not affect the rights granted
hereunder. Company shall not reduce any of Employee's indemnity benefits
without the prior written consent of Employee. Any references to Georgia
law in the bylaws of Company or other documents granting indemnity to
Employee shall be deemed to be references as of the date of this Agreement,
and any amendments to Georgia law, including a revocation thereof, shall
not reduce the indemnity benefits granted hereunder.
14. COSTS OF ENFORCEMENT; INTEREST. Subject to the provisions of
Paragraph 5 above, in the event the Employee collects any part of the
Severance Amount or other benefits hereunder or otherwise enforces the
terms of this Agreement through a lawyer or lawyers, Company will pay all
costs of such collection or enforcement, including reasonable legal fees
incurred by the Employee. In addition, Company shall pay to Employee
interest on all or any part of the Severance Amount or other benefits
hereunder that is not paid when due at a rate equal to the Prime Rate as
announced by The First National Bank of Gainesville or its successors from
time to time.
15. TERM. This Agreement shall be effective as of the date first
above written and shall remain in effect for a period of three years.
Notwithstanding anything herein to the contrary, in the event of a Change
of Control during the initial, or any subsequent, term of this Agreement,
this Agreement shall remain in effect until the later of (a) the end of the
term of the Agreement or (b) the day after the last day in the Covered
Period. This
10
<PAGE> 11
Agreement, unless terminated as provided below, shall be automatically
renewed to add an additional year after each year expires, so that the term
is always three years, without further action by the Employee or the
Company. This Agreement can be terminated only by either party giving the
other notice on or before June 30 of the year of termination. If the
agreement is terminated under the preceding sentence, the term shall
continue for two years after the end of the year in which the notice of
termination was given. If notice of termination is given after June 30 of
a year, then the term of the Agreement shall continue for three years after
the end of the year in which the notice of termination was given.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
FIRST NATIONAL BANCORP
By: /s/ Richard A. McNeece
----------------------------------
Its: Chairman of the Board
/s/ Stephen M. Rownd
--------------------------------------
STEPHEN M. ROWND
11
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
OF REGISTRANT
1. The First National Bank of Gainesville
111 Green Street, S.E., Gainesville, Georgia 30501
2. First National Bank of Habersham
138 Front Street, S.E., Cornelia, Georgia 30531
3. Granite City Bank
125 Heard Street, S.E., Elberton, Georgia 30635
4. Bank of Clayton
E. Savannah Street, Clayton, Georgia 30525
5. First National Bank of White County
North Main Street, Cleveland, Georgia 30528
6. First National Bank of Jackson County
121 Lee Street, Jefferson, Georgia 30549
7. The Citizens Bank
303 E. Doyle Street, Toccoa, Georgia 30577
8. Bank of Banks County
Highway 441 South, P. O. Drawer B, Homer, Georgia 30547
9. First National Bank of Gilmer County
75 South Main Street, Ellijay, Georgia 30540
10. The Peoples Bank of Forsyth County
515 Atlanta Highway, Cumming, Georgia 30130
11. Pickens County Bank
606 Church Street, Jasper, Georgia 30143
12. The First National Bank of Paulding County
160 Confederate Avenue, P. O. Box 108, Dallas, Georgia 30132
13. Citizens Bank, Ball Ground, Georgia
2995 Canton Highway, Ball Ground, Georgia 30107
14. Bank of Villa Rica
549 West Bankhead Highway, Villa Rica, Georgia 30107
15. The Community Bank of Carrollton
777 South Park Street, Carrollton, Georgia 30117
16. The Commercial Bank, Douglasville, Georgia
6636 Church Street, Douglasville, Georgia 30134
17. Barrow Bank & Trust Company
209 North Broad Street, Winder, Georgia 30680
All of the above listed subsidiaries are organized under the laws of the
United States in the case of national banks and under thelaws of the State
of Georgia in the case of state chartered banks.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First National Bancorp:
We consent to incorporation herein by reference of our report dated January 28,
1994, relating to the consolidated balance sheets of First National Bancorp and
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1993, which report appears in
the annual report on Form 10-K of First National Bancorp for the year ended
December 31, 1993. Our report refers to changes in method of accounting for
investments, income taxes, and postretirement benefits to adopt Statement of
Financial Accounting Standards (SFAS) No. 115, SFAS No. 109, and SFAS No. 106.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
February 8, 1995
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
FF Bancorp, Inc.
The Board of Directors
First National Bancorp
We consent to the use of our report dated January 14, 1994, except Note 21
which is dated July 18, 1995, relating to the Consolidated Financial Statements
as of December 31, 1993 and 1992 and for each of the years in the three-year
period then ended of FF Bancorp, Inc. and Subsidiary included in the
Registration Statement on Form S-4 and to the use of our name under the caption
of "Experts," in the Form S-4 Registration Statement of First National Bancorp.
/s/ Hacker, Johnson, Cohen, & Grieb
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
February 8, 1995
<PAGE> 1
CONSENT OF COUNSEL EXHIBIT 23.3
To the Board of Directors
First National Bancorp
We hereby consent to the filing of our opinions regarding validity of
shares and tax consequences as exhibits to the Registration Statement to
which this consent is attached and further consent to the use of our name
under the heading "Legal Opinion" in the Registration Statement and the
Prospectus which is a part thereof.
Very truly yours,
STEWART, MELVIN & FROST
By: /s/ T. Treadwell Syfan
--------------------------
Partner
Date: February 8, 1995
----------
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INVESTMENT BANKER
We consent to the inclusion of our fairness opinion letter addressed
to the Board of Directors of FF Bancorp, Inc. and the referencees to and
summary of our fairness opinoin analysis in the Proxy Statement, which is part
of the Registration Statement, and to the inclusion of our report of our
fairness opinion analysis as an exhibit to the Registration Statement.
Louisville, Kentucky PROFESSIONAL BANK SERVICES, INC.
February 9, 1995 By: s/ Christopher L. Hargrove
----------------------------
Christopher L. Hargrove
Vice President
<PAGE> 1
EXHIBIT 23.5
CONSENT OF PERSON NAMED IN REGISTRATION STATEMENT
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 of Regulation C under the Securities Act of 1933,
the undersigned hereby consents to be named as a person about to become a
director in the Registration Statement on Form S-4 of First National
Bancorp for the registration of its common stock to be issued to
shareholders of FF Bancorp, Inc.
/s/ Tildon W. Smith
-------------------
Tildon W. Smith
Dated: January 26, 1995
<PAGE> 2
EXHIBIT 23.5
CONSENT OF PERSON NAMED IN REGISTRATION STATEMENT
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 of Regulation C under the Securities Act of 1933,
the undersigned hereby consents to be named as a person about to become a
director in the Registration Statement on Form S-4 of First National
Bancorp for the registration of its common stock to be issued to
shareholders of FF Bancorp, Inc.
/s/ Charles H. Byrd
-------------------
Charles H. Byrd
Dated: January 26, 1995
<PAGE> 1
EXHIBIT 99.3
December 1994
PROFESSIONAL BANK SERVICES
FAIRNESS OPINION ANALYSIS
FF Bancorp, Inc.
New Smyrna Beach, Florida
<PAGE> 2
- --------------------------------------------------------------------------------
FAIRNESS OPINION ANALYSIS
- --------------------------------------------------------------------------------
FF Bancorp, Inc.
New Smyrna Beach, Florida
December 1994
<PAGE> 3
FAIRNESS OPINION ANALYSIS
FF BANCORP, INC.
TABLE OF CONTENTS
==================================================================
TAB
I FAIRNESS OPINION LETTER
II FIRST NATIONAL BANCORP - DUE DILIGENCE
III COMPARATIVE FINANCIAL ANALYSIS
IV INVESTMENT BANKING ANALYSIS
<PAGE> 4
<TABLE>
<S> <C> <C>
Professional Bank Services, The 1000 Building
Incorporated 6200 Dutchman's Lane, Suite 305
Louisville, Kentucky 40205
Atlanta, Chicago,
Louisville, Nashville, 502 451-6633
Ocala 502 451-6755 (FAX)
800 523-4778 (WATS)
Consultants to the
Financial Industry
(LOGO) PROFESSIONAL BANK SERVICES
</TABLE>
December 16, 1994
Board of Directors
FF Bancorp, Inc.
900 North Dixie Freeway
New Smyrna Beach, Florida 32170
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial perspective, to the common shareholders of FF Bancorp, Inc., New
Smyrna Beach, Florida ("FF Bancorp") of the proposed merger of FF Bancorp with
First National Bancorp, Gainesville, Georgia ("First National"). In the
proposed merger, FF Bancorp shareholders will receive .825 First National
common shares for each FF Bancorp common share. The terms of the merger are
more fully set forth in the Agreement and Plan of Merger by and between FF
Bancorp and First National dated November 22, 1994.
PBS is a bank consulting firm and as part of its investment banking business is
continually engaged in reviewing the fairness, from a financial perspective, of
bank and thrift acquisition transactions and in the valuation of banks and
other businesses and their securities in connection with mergers, acquisitions,
estate settlements and other purposes. We are independent with respect to the
parties of the proposed transaction.
For purposes of this preliminary opinion, we have reviewed and analyzed the
performance of FF Bancorp contained in (i) audited financial statements dated
December 31, 1991, 1992 and 1993; (ii) Form 10-Q filed with the Securities and
Exchange Commission for the periods ended March 31, 1994, June 30, 1994 and
September 30, 1994; (iii) September 30, 1994 FR Y-11Q, FR Y-9LP and FR Y-9C
filed with the Federal Reserve; and (iv) historical common stock trading
activity of FF Bancorp. We have reviewed and tabulated statistical data
regarding the loan portfolio, securities portfolio and other performance ratios
and statistics. Financial projections were prepared and analyzed as well as
other financial studies, analyses and investigations as deemed relevant for the
purposes of this preliminary opinion. In review of the aforementioned
information, we have taken into account our assessment of general market and
financial conditions, our experience in other transactions, and our knowledge
of the banking industry generally.
<PAGE> 5
Board of Directors
FF Bancorp, Inc.
December 16, 1994
Page 2
In conjunction with our preliminary opinion, we have evaluated the historical
performance and current financial condition of First National contained in: (i)
audited financial statements for the years ending December 31, 1992 and 1993
included in First National's 1993 Annual Report to Shareholders; (ii) September
30, 1994 Form 10-Q filed with the Securities and Exchange Commission; (iii)
1994 Third Quarter Report to Shareholders; (iv) historical common stock trading
and dividend activity to date; (v) the Agreement; (vi) Investor Summary as of
September 30, 1994; and (vii) the financial terms of certain other comparable
transactions. We have prepared and analyzed the pro forma consolidated
financial condition of FF Bancorp and First National. We have reviewed and
tabulated consolidated statistical data regarding growth, growth prospects for
service markets, liquidity, asset composition and quality, profitability,
leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of FF
Bancorp or First National, nor have we independently verified any of the
information reviewed; we have relied upon such information as being complete
and accurate in all material respects. We have not made independent evaluation
of the assets of FF Bancorp or First National.
Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers, that, as of the date hereof, the consideration proposed
to be received by the shareholders of FF Bancorp is, from a financial
perspective, fair to the common shareholders of FF Bancorp.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
Christopher L. Hargrove
Vice President
CLH/bts
<PAGE> 6
DUE DILIGENCE REVIEW
FIRST NATIONAL BANCORP
GAINESVILLE, GEORGIA
ON BEHALF OF
FF BANCORP, INC.
NEW SMYRNA BEACH, FLORIDA
PBS performed a limited due diligence review of First National Bancorp ("FNB")
Gainesville, Georgia in connection with FNB's pending merger with FF Bancorp,
Inc. ("FFB") New Smyrna Beach, Florida. Attachment I outlines the various
documents reviewed and individuals interviewed during the review, which was
conducted at the offices of FNB in Gainesville, Georgia on December 7, 8, and
9, 1994.
Overall Conclusion
Based upon the information available during the limited review and offered by
individual interviews, FNB is in satisfactory financial condition. FNB's
strength comes from its diversification in several markets in north Georgia,
mainly surrounding the metropolitan Atlanta area. The First National Bank of
Gainesville ("FNBG") is considered the lead bank and represents approximately
40% of FNB assets. However, the performance of the smaller affiliates is
stronger as a group and brings the performance ratios for the corporation
generally above those of FNBG. The primary area of concern noted during this
review was the past and present performance of FNBG's mortgage department,
known as The Mortgage Source. That division is losing approximately $50,000 a
month in 1994, and its activities have resulted in one discrimination suit
being filed against FNBG.
The interviews revealed Executive Management to be well informed and
conservative in its banking philosophy. There are some asset quality and credit
administration concerns at newer, smaller subsidiary banks; however, these
problems are moderate on a consolidated basis. FNB experienced some asset
quality problems in the early 1990s, resulting from weaknesses in underwriting
and credit administration systems throughout the organization. Since then, a
number of additions have been made to both management and control systems to
alleviate the deficiencies. Management's implementation of these control
systems, along with certain capital expenditures to posture itself for future
growth in keeping with its strategic plan, have increased overall overhead
expense.
II-1
<PAGE> 7
There was no information disclosed during this review that would impact the
integrity of published financial statements or otherwise indicate a pending
reversal of FNB's solid operating performance.
First National Bancorp
FNB was organized in 1980 with the purchase of FNBG. FNB acquired another bank
in 1982 and then approximately two institutions a year through 1989. There were
no acquisitions for the next two years as management worked to improve its
control systems and develop its strategic plan. Three institutions were
acquired in 1992, two in 1993, and two in 1994. FNB holds assets totaling $2.3
billion as of September 30, 1994. There are now 17 affiliate banks with 54
banking facilities throughout north Georgia. FNB has no non-banking
subsidiaries.
The most recent Holding Company Inspection Report was for an inspection
commenced as of August 1, 1994 and concluded August 12, 1994 utilizing
financial data as of March 31, 1994. Some of the significant comments in the
Holding Company Inspection Report are as follows:
- The overall condition of the consolidated organization is
considered satisfactory.
- Consolidated asset quality remains satisfactory.
- Earnings performance continues to improve with most measures
exceeding peer group averages as of the inspection date.
- Risk-based capital ratios are well in excess of regulatory
minimum guidelines, despite high dividend payout ratios.
- Corporate debt is minimal and cash flow prospects seem
adequate to meet future needs.
- Liquidity positions and capital levels at all subsidiary banks
are adequate.
- The Commercial Bank, Douglasville, Georgia was in
unsatisfactory financial condition with less than satisfactory
asset quality, earnings, capital
II-2
<PAGE> 8
and liquidity. However, the Federal Reserve noted substantial
improvement in the bank's condition since its short tenure as
a subsidiary of FNB.
Asset Quality - Consolidated asset quality is satisfactory. Discussions with
FNB's President and Chief Financial Officer Peter D. Miller revealed that
controls over the lending function were substantially tightened and improved
after moderate credit problems were experienced in 1989 and 1990. The lending
policy and credit administration procedures have been improved. Monitoring
systems have also been enhanced through the hiring of a new senior credit
officer at the holding company level, institution of a corporate credit review
function, and the hiring of a new internal auditor in 1992. In addition, FNB
engages the external accounting firm of KPMG Peat Marwick to provide annual
opinion audits. Asset quality indicators have improved since the new controls
have been implemented. Net charge offs as a percentage of average loans and
leases were trending upward from 1989 through 1992, but never exceeded peer
group averages. For 1993, net losses dropped considerably and were 10 basis
points below peer group averages.
(Graph)
II-3
<PAGE> 9
(Graph)
Loans 90 days or more past due or on non-accrual remain moderately high at
1.56% of the portfolio as of September 30, 1994. Total past due loans remain
well controlled at 2.05% of total loans as of September 30, 1994.
After building its loan loss reserve to 1.94% of total loans and leases as of
December 31, 1992, FNB has allowed the reserve to fall to 1.62% as of September
30, 1994, consistent with improvements in asset quality indicators. However,
FNB's non-performing loans remain above peer group averages and its ALLL
coverage of non-performing loans is well below peer, standing at 108% versus
peer group averages of 214% as of September 30, 1994.
II-4
<PAGE> 10
(Graph)
(Graph)
Management closely scrutinizes these larger non-performing assets on at least a
quarterly basis and has provided specific allocations to the ALLL as needed.
The balance of the portfolio is relatively clean with loans past due less than
90 days representing only .49% of total loans.
II-5
<PAGE> 11
An interview was held with Senior Credit Policy Officer Stephen M. Rownd and
First Vice President Arlene Lucas. Mr. Rownd is also the Senior Credit Officer
for FNBG. Ms. Lucas is responsible for the credit and appraisal review function
at the holding company level. As of September 30, 1994, consolidated loans
rated Substandard or worse total $77,466,000 representing 31% of Tier I capital
plus the ALLL. This ratio increases to 35% when other real estate owned is
added. Loans rated OAEM total a high $43,000,053, resulting in a ratio of total
criticized to Tier I capital plus the ALLL of 53%. These ratios are all down
slightly from the same period 1993. Six of the 17 affiliate banks have total
classified to capital ratios exceeding 35%. Four of these affiliates have
classified ratios exceeding 60%, with the highest being the affiliate in
Douglasville, at 118%. On a consolidated basis, however, classified loans to
capital stands at 31%, which is considered satisfactory. Asset quality
considerations appear to be adequately reserved for given the declining trends
in non-performing loans and net loan losses, and the manageable levels of
classified loans on a corporate-wide basis. The regulators have found FNB's and
FNBG's methodology for analyzing the adequacy of the ALLL to be adequate.
It was noted that the credit review manager reports to the senior credit policy
officer, which could represent a conflict of interest. Management feels
strongly that this function is independent.
Earnings - Earnings increased 16% in 1993, with FNB's ROA reaching 1.28% at
year-end 1993. The solid earnings performance in recent years stems from strong
core earnings from operations.
II-6
<PAGE> 12
(Graph)
(Graph)
ROA was consistently above 1.4% from 1982 through 1989, but has declined to
the 1.28% range since then. However, ROA remains well above peer group
averages, which stood at .98% as of December 31, 1993. Net income for the
quarter ending September 30, 1994 was $7.2 million, or 6.10% over the third
quarter earnings in 1993. Net income through the nine months ended September
30, 1994 totals $21 million and is 12% ahead of the same period in 1993. These
earning gains have been realized de-
II-7
<PAGE> 13
spite the fact that FNBG has posted net income for the first nine months of
$9.1 million, which is almost $1 million below the results of the same period
in 1993. Earnings at FNBG are $2.9 million below budget due to the lack of
sales of mortgage servicing rights, a $94 million shortfall in earning assets,
primarily mortgage volume, and lower mortgage loan fee revenue.
(Graph)
(Graph)
II-8
<PAGE> 14
Earnings performance is attributed to successfully consolidating various points
of operations while allowing decentralized loan, deposit, and sales activity at
the subsidiary banks. The slightly downward movement in earnings in recent
years it attributed to the costs of establishing control systems at the holding
company level to better monitor performance, credit risks, and controls at the
decentralized affiliate institutions. In addition, recent acquisitions have
included problem institutions, which management is in process of restructuring
in order to bring ROA and other performance measurements up to holding company
standards.
Capital Ratios - The historically strong earnings performance has resulted in a
strong capital base at the holding company. As of December 31, 1993, FNB's
leverage ratio stood at 9.37% of average assets with all capital measurements
exceeding regulatory requirements.
(Graph)
On a quarterly basis, subsidiary banks declare dividends equalling 40% of their
respective net incomes. The bank holding company has a minimal amount of debt
to service, and President Miller indicated it is not likely to increase.
President Miller indicated the holding company plans to continue to pay out 40%
to 42% of its net income in dividends. President Miller also indicated he
considers an 8% primary capital ratio to be a minimum capital level.
Asset/Liability Management - The funds management function is headed by Group
Vice President and Senior Investment Officer Laurence O. Howard, Jr. Mr. Howard
is em-
II-9
<PAGE> 15
ployed by FNBG, but provides services to all affiliates under contract. Each
affiliate institution has its own asset/liability management committee and
executes its own asset/liability management modeling function utilizing the
Sendero asset/liability management model. While portions of this function are
decentralized, the holding company provides certain corporate-wide information
such as interest rates, CMO prepayment rates, and other pricing information.
Mr. Howard also runs a consolidated asset/liability management model at the
holding company level. Asset/liability management decisions are then
coordinated with the controllers at each institution and with the holding
company. Mr. Howard indicated the institution runs its own high risk test on
collateralized mortgage obligations on a semi-annual basis. Mr. Howard
indicated that all CMOs presently pass the stress test. In addition, management
runs interest rate shock tests on the entire investment portfolio on a
quarterly basis.
(Graph)
FNB has been successful in managing net interest income, which remains well
above the peer group average. Mr. Howard stated the interest rate risk
parameters set forth in the holding company's policy are tight with interest
rate risk measured by the ratio of rate sensitive assets to rate sensitive
liabilities over 3, 6 and 12 month timeframes. The target ratio for the 3 and 6
month timeframes for all affiliates except FNBG are set at .8% to 1.2%, and
.91% to 1.1% for the 12 month time horizon. The guidelines for FNBG are set at
.65% to 1.2% for the 3 and 6 month time horizons, and .91% to 1.1% for the 12
month time horizon. Management feels that FNBG has access to more external
sources of funds than do the smaller affiliate institutions. Mr. Howard
indicated that the
II-10
<PAGE> 16
present rate sensitive asset to rate sensitive liability ratios are within
policy guidelines for all time periods.
(Graph)
FNB's liquidity position was considered adequate as was that of FNBG, at their
most recent regulatory examinations. FNB's loan-to-deposit ratio has been
consistently above peer, but remains at a manageable level. FNB targets three
goals in its liquidity maintenance program. These include the ratio of core
deposits to gross loans which the affiliate banks must maintain at a minimum
ratio of 100%, and FNBG a 90% to 100% ratio. The second target goal is the
ratio of purchased money to total funding, with this ratio parameter set at a
maximum of 35% for all affiliate banks with the exception of FNBG which can go
from 35% to 40%. The third liquidity measurement is cash flow expected over the
next 6 months as a percentage of expected outflows. Management targets inflows
and available funds to exceed expected outflows by 125%. Mr. Howard indicated
that FNB is within all liquidity measurement parameters at this time.
Investment Activity
As previously mentioned, Group Vice President Laurence O. Howard, Jr. is
employed at FNBG and also oversees the investment activity of the corporation.
Mr. Howard is the Senior Investment Officer of FNB and manages all affiliate
portfolios under contract. There is no investment authority in place at the
subsidiary bank levels, with all authority resting at FNBG with Mr. Howard,
Gary Thornton, Vice President and Portfolio Manager, and Cindy Tymchuck, who
oversees the money market function. All affiliates have
II-11
<PAGE> 17
delegated their investment authority to these individuals. Each affiliate
sweeps its Fed Funds to FNBG on a daily basis. Mr. Howard then executes
investment transactions in keeping with holding company needs, individual bank
needs, and after communication with the controller or chief executive officer
of the affiliate institutions. While Mr. Howard has the final investment
authority, he informally calls the affiliate on any major strategy to inform
them of the pending transaction.
Of some concern is the fact that Mr. Howard has no dollar limit on his
investment authority. Mr. Howard sets his own dollar limits, which are reviewed
by FNB's President Peter Miller. There is no investment committee. Monthly
investment reports are provided to each affiliate Board of Directors and to the
holding company Board.
According to Mr. Howard, FNB's investment philosophy addresses four objectives,
as follows: liquidity, providing collateral for secured borrowings, the
management of interest rate risks, and income. Mr. Howard indicated the
overriding objective is high quality and that state, county, and municipal
issues are required to be rated BAA or its equivalent for in-state issuances,
and rated A or the equivalent for out-of-state issuances. Mr. Howard indicated
the desired mix in the portfolio is 25% in municipals, 66% to 75% in mortgage
pass-through obligations with a mix in fixed and adjustable rate obligations,
and 25% to 33% in U.S. Treasury and Agency obligations.
FNB has set a guideline of designating approximately 75% of the investment
portfolio as available for sale on a corporate-wide basis. Generally, municipal
obligations and certificates of deposit are designated to be held to maturity,
with all other investments designated as available for sale. Mr. Howard
indicated there was no target for an average maturity in the portfolio as FNB
is more concerned with interest rate risk. He indicated the portfolio has an
average maturity of approximately 4.8 years at this time. The portfolio has an
average repricing horizon of 3.5 years. These averages are calculated using the
expected average life of collateralized mortgage obligations.
As of September 30, 1994, FNB's consolidated investment portfolio held net
unrealized losses on securities available for sale totaling $8.4 million,
compared to net unrealized gains of $3.3 million as of December 31, 1993. This
figure has lost some of its importance due to the recent decision by regulatory
agencies to exclude unrealized gain and loss figures from the calculation of
Tier I capital.
Mr. Howard indicated that interest rate risk in the mortgage subsidiary of FNBG
is
II-12
<PAGE> 18
hedged by the secondary marketing division under a separate policy with tight
parameters. He indicated that there are strict loss limits on warehouse and
pipeline activity, with a $175,000 risk cap managed on a day-to-day basis. Mr.
Howard indicated that there are no other areas of operations involved in
hedging or arbitrage.
Risk Monitoring
External Audit - The external audit has been performed by the CPA firm of KPMG
Peat Marwick for 25 years. The external CPA Management Letters for 1992 and
1993 audits were reviewed. The 1992 audit Management Letter noted recurring
deficiencies in The Mortgage Source subsidiary relating to accounting issues
and documentation deficiencies. The Management Letter also noted deficiencies
in documenting and accounting for other real estate owned values. The 1993
Management Letter was dated March 31, 1994, and again noted several instances
of inconsistent accounting treatment for similar transactions in The Mortgage
Source subsidiary of FNBG. The external auditors also noted that The Mortgage
Source management's responsiveness to the resolution of certain internal
control concerns noted by internal audit and regulatory agencies has been slow.
In response to these weaknesses, FNB management created the position of
controller in The Mortgage Source division and has recently filled that
position. The Mortgage Source management is also reviewing all internal audit
and OCC findings, and is developing an action plan to resolve all exceptions
where possible. Both the 1992 and 1993 audit Management Letters made
recommendations to enhance the operations of internal audit and credit review,
but had no specific deficiencies as to their existing operations.
An interview was held with External Audit Manager William T. Walton of the CPA
firm KPMG Peat Marwick. Mr. Walton indicated while there have been no recent
changes in the application of accounting principles, FNB has adopted new FASB
rules in recent years, including FASB 109 - Accounting For Income Taxes, FASB
115 - Accounting for Investment Securities, and FASB 106 - Accounting for Post
Retirement Compensation and Benefits. Mr. Walton indicated that FNB has not yet
adopted FASB 114 - Accounting for the Impairment of Loans, but will adopt such
as required in the first quarter of 1995. Mr. Walton expects little overall
impact on the financial statements of FNB upon adoption of this rule. Mr.
Walton indicated there have not been any significant disagreements over
accounting treatment between FNB and KPMG Peat Marwick. In addition, the SEC
has not challenged accounting treatment for any matters. There is one
II-13
<PAGE> 19
pending issue with the IRS regarding the Mountain Lakes resort loan. Mr. Walton
indicated that the IRS feels that FNB has recognized the losses on this credit
earlier than required; however, he also believes any adjustments would not be
material.
Mr. Walton indicated that KPMG Peat Marwick has increased its reliance on the
work performed by internal auditors in recent years, as that department has
progressed. In addition, he indicated that they also place reliance on the
credit review function as to controls in underwriting and the assessment of the
ALLL adequacy. KPMG Peat Marwick relies on the work performed by the internal
auditors throughout the year, and uses the internal audit staff to assist in
completing the annual external audit. Mr. Walton indicated he felt the internal
audit staff is adequately independent at this time. KPMG Peat Marwick tests the
internal auditors' work including both that relied on during the year and that
performed in assistance with the annual audits. Mr. Walton indicated that both
he and General Auditor Charles A. Robinson have adequate relationships with the
audit committee, as well as, with the audit chairman.
There were no specific litigation footnotes in any of the recent audits. Mr.
Walton knows of no material litigation year-to-date 1994 which would require an
FAS 5 accrual for possible losses. Mr. Walton also indicated that he is not
aware of any other contingencies that have not been provided for or that should
be provided for other than normal reserves already stated on the financial
statements.
Mr. Walton indicated that one of the critical areas of FNB's operations
continues to be The Mortgage Source. This division of FNBG remains a concern
due to its rapid growth and history of inadequate management. Mr. Walton
indicated that KPMG Peat Marwick has not performed any consumer compliance or
fair lending audits in this area, but does review the internal audit reports.
KPGM Peat Marwick does not perform audits on any of the subsidiary banks. It
performs significant testing in FNBG and rotates other affiliate bank visits on
a risk assessment basis. It reviews the internal audit and credit review
reports on all of the subsidiaries and performs test audits of that work
performed by the internal audit staff in those subsidiaries.
Internal Audit - An interview was held with General Auditor Charles A. Robinson
to determine independence, staff qualifications and scope of audits. Mr.
Robinson appeared well informed and competent. Mr. Robinson has been in
auditing since 1981, and at
II-14
<PAGE> 20
FNB since 1992. Prior to joining FNB he managed the audit function for C&S Bank
in southeast Florida. Mr. Robinson has a CPA and CBA designation.
Mr. Robinson's staff includes two audit managers, an EDP auditor, and seven
financial auditors. The two audit managers possess audit experience of 10 to 11
years each. One has a CPA designation and both have a CBA designation. The EDP
auditor has 16 to 18 years of audit and regulatory experience. FNB recently
outsourced its data processing function, but still audits for data integrity.
Trust audits are performed by one of the financial auditors, as no trust
specialist is on staff.
The balance of the seven financial auditors are relatively inexperienced,
averaging less than two years experience each. Mr. Robinson stated six of the
seven auditors are in process of testing for either the CPA or CBA
designations. New hire criteria includes a four year college degree, preferably
in accounting. Professional designations are encouraged. Mr. Robinson agreed
the junior audit staff is relatively inexperienced. However, he feels the
auditors are receiving good on-the-job training due to the decentralized
organizational structure. The auditors are exposed to the same programs in up
to 17 different financial institutions on a 12 to 18 month basis.
The consumer compliance function, including the Community Reinvestment Act is
also audited by internal audit department personnel. Such audits are performed
by one of the two audit managers. These individuals receive the bulk of their
compliance training internally. Mr. Robinson stated the last compliance, Fair
Lending and CRA examinations were performed in May 1993 by the OCC, with
satisfactory ratings received in all areas.
Mr. Robinson reports to FNB's audit committee three to four times each year, as
well as to the audit committees of each affiliate institution. Reports are
presented to FNBG's audit committee up to seven or eight times per year. Mr.
Robinson indicated he has a good working relationship with Ray Jones, Chairman
of the audit committee of both FNB and FNBG. Mr. Robinson occasionally meets
with Chairman Jones prior to meetings if a particular area of concern arises.
Mr. Robinson develops an annual audit plan which prioritizes audit scheduling
by risk. He indicated there are not any audits which were not performed
according to schedule in 1993. Mr. Robinson expects to meet the full
requirements of the 1994 audit plan by year end.
II-15
<PAGE> 21
There are specific written audit procedures in place for each area of
operations. In many cases, Mr. Robinson uses the OCC's examination procedures
in specialty areas. Written procedures are updated as needed. To date, no audit
software is utilized in the audit function.
Exceptions reporting and monitoring include reporting exceptions to area
managers (which is always the President of the institution for all subsidiaries
except Gainesville) or to the Group Vice President. Agreements as to exceptions
is reached, a report is drafted and audit "grades" are assigned. Area managers
or Group Vice Presidents have three weeks to respond. Responses are in writing
and recap the finding, note the reason for the exception, and outline
corrective action taken or planned. After responses are received, Mr. Robinson
meets with the audit committee to discuss material findings. Audit then
performs a follow-up review in four to five months to determine the status of
corrective action. The follow-up review is frequently performed telephonically.
A second status report is issued, and a meeting is held with the audit
committees if findings are significant.
The organizational chart shows Mr. Robinson reporting to FNB President Peter
Miller, with a dotted line to the audit committee. This structure is the
opposite of industry standards. Mr. Robinson stated he feels the audit function
is independent. External Auditor Bill Walton also is of the opinion that
adequate independence is present.
Overall, the independence, competency, and performance of the internal audit
staff appears satisfactory. The reporting lines, low experience levels of
junior auditors, and lack of audit specialists in the areas of consumer
compliance, fair lending, and trust represent moderate weaknesses in the
present audit function for an organization of this size. As FNB continues to
grow it will require a more experienced audit staff if a decentralized
organizational structure is maintained.
Operations
An interview was held with Ms. Sheila E. Ray, Group Vice President and head of
operations at FNBG. FNBG provides various services to other holding company
subsidiaries on a contract basis. Ms. Ray is a CPA, and also performs various
special projects including negotiation of group contracts, and involvement in
consolidation of various operational activities. She stated all deposit, loan
and general ledger applications are centralized and processed through M&I Data
Processing in Milwaukee, Wisconsin. A central "help desk" has been established
at FNBG to assist all subsidiary banks in their data
II-16
<PAGE> 22
processing function. Each banking office has a local area network, and utilize
sales software in both the customer service and teller areas. This software
interacts directly with the main database in Milwaukee.
There are presently two encoding centers, one in Gainesville and one in
Douglasville. The Douglasville facility encodes items and transports them to
Gainesville for items processing. FNBG then handles data transmissions to and
from Milwaukee, and to affiliates. Ms. Ray stated she is presently
investigating the use of image processing for commercial deposit statements and
loan files. At present, only signature cards are stored using imaging
technology.
Ms. Ray stated disaster recovery plans have been developed for data processing,
as well as for all areas of critical bank operations at FNBG. Each division has
its own disaster recovery plan. Affiliate banks can use FNBG's plan as a model
if they so desire. She stated testing of the plan has been performed on items
processing, but not on transmission of data files. Adequate data backup
procedures are in place.
Pending Litigation
An interview was held with corporate counsel W. Woodrow Stewart, of the law
firm Stewart, Melvin & Frost, Gainesville, Georgia. Mr. Stewart stated there
is one area of threatened litigation involving the administration of an estate
in the trust department of FNBG. He stated the exact nature of any alleged
breach of duties was not yet clarified and loss exposure, if any, has not yet
been assessed.
FNBG is also involved in a law suit filed by a minority loan applicant and the
NAACP in Alabama. FNBG was named as a defendant along with an unaffiliated
mortgage company in Gadsden, Alabama. FNBG's mortgage lending division
purchases or originates mortgage loans referred by the Alabama mortgage
company. The Atlanta law firm of King & Croft is handling the discrimination
suit for FNBG. Numerous depositions have been taken on both sides; however, a
trial date has not been set pending FNB's motion for a summary judgement to
dismiss the charges. The plaintiff has not responded to all settlement offers
by FNB to date. Ultimate liability to FNB, if any, is unknown at present.
II-17
<PAGE> 23
ATTACHMENT I
DOCUMENTS
1. Minutes of Board of Directors and all Board Committees of First
National Bancorp ("Holding Company") for 1992, 1993, and 1994 to date.
2. Minutes of Board of Directors and all Board Committees of First
National Bank ("Bank") for 1992, 1993 and 1994 to date.
3. Regulatory examination reports for last two examinations of the
Holding Company and of the Bank by the OCC and Federal Reserve.
4. Reports filed with the Securities and Exchange Commission by the
Holding Company on Forms 10-K, 10-Q and 8-K for the year ending
December 31, 1992 throughout 1993 and 1994 to date.
5. Reports of independent auditors for the years ending December 31, 1992
and 1993.
6. Management letters from independent auditors for 1992 and 1993 and
management's responses thereto.
7. Problem loan list for the Holding Company and Bank as of December 31,
1993 and any subsequent reports.
8. Analysis and calculation of the Allowance for Loan and Lease Losses as
of December 31, 1992 and 1993 and any subsequent analysis for the
Holding Company and the Bank.
9. Internal loan review reports issued in 1993 and 1994 to date.
10. Internal audit reports issued in 1993 and 1994 to date.
11. Charter and bylaws of the Holding Company and of the Bank.
INTERVIEWS
1. Chief Financial Officer
2. Senior Lending Officer
3. Head of Operations
4. Chief Investment Officer
5. General Counsel
6. Head of Loan Review
7. Internal Auditor
8. Partner in Charge of External Audit
9. Chairman of the Asset/Liability Committee
II-18
<PAGE> 24
COMPARATIVE FINANCIAL ANALYSIS
The proceeding analysis presents a synopsis of the financial highlights and
operating performance of FF Bancorp, Inc. ("FFB") and First National Bancorp
("FFNB"). The selected financial data and ratio calculations exhibit the
fundamental balance sheet composition and earnings results for the periods
ending December 31, 1992, 1993 and year-to-date September 30, 1994.
Capital
(Graph)
Tier I leveraged capital for FFB and FNB is considered adequate and in excess
of established minimum regulatory guidelines. Capital growth for each financial
institution has exceeded asset growth since year-end 1992 and remains
sufficient to support future expansion.
Earnings
As review of FFB's and FNB's earnings indicated an improved performance trend
since year-end 1992. Earnings results through September 30, 1994 are considered
good for each institution and have remained relatively consistent with year-end
1993 results.
III-1
<PAGE> 25
(Graph)
(Graph)
III-2
<PAGE> 26
(Graph)
The increased earnings trend for FFB and FNB is reflective of the improvement
in net interest income. The lower level of net interest income for FFB results
due to the concentration of lower yielding residential real estate related
lending activities.
(Graph)
The level of non-interest income has improved for FFB, while decreasing for FNB
during the period presented. The significant variance between the two
institutions exists due to
III-3
<PAGE> 27
product differentials and the related service charge/fee structures. The level
of non-interest income for FFB appears somewhat lower than industry standards
and denotes opportunity for improvement.
(Graph)
A review of the level of non-interest expense indicate FFB to be operating more
efficiently than FNB. The higher level of non-interest expense for FNB is most
likely to result from the associated cost of operating numerous independent
affiliate banks.
III-4
<PAGE> 28
(Graph)
FFB's and FNB's loans to deposit ratios are not considered excessive and
indicate the ability to support future loan growth. In addition, the level of
loan to deposit ratio for each institution denotes healthy loan demand.
(Graph)
III-5
<PAGE> 29
Overall loans asset quality is considered acceptable and the level of allowance
for loan and lease loss appears to be adequate to absorb reasonably anticipated
losses for each institution. In addition, FFB's and FNB's net loss activity is
minimal and the level of non-performing assets is considered manageable.
(Graph)
(Graph)
III-6
<PAGE> 30
FF BANCORP, INC.
CONSOLIDATED
(000'S)
<TABLE>
<CAPTION>
GROWTH
1992 1993 YTD 9/94 1992/94
---- ---- -------- -------
<S> <C> <C> <C> <C>
Selected Financial Data:
- ------------------------
Total Assets 548,482 544,861 597,425 8.92%
Total Loans 342,340 356,482 421,640 23.16%
Allowance for Loan Loss 2,583 2,726 4,322 67.32%
Total Deposits 501,096 490,861 539,183 7.60%
Total Equity Capital 34,716 42,277 47,324 36.32%
Interest Income 43,874 39,746 31,513
Interest Expense 25,398 19,651 14,607
------- ------- -------
Net Interest Income 18,476 20,095 16,906
Provision Expense 1,011 177 0
------- ------- -------
Net Income (Net Provision) 17,465 19,918 16,906
Non-Interest Income 1,059 1,198 1,522
Non-Interest Expense 9,676 9,877 8,501
Net Income (Before Taxes) 8,848 11,239 9,927
Income Taxes 3,320 4,258 3,463
Accounting Adjustments 0 824 0
Net Income 5,528 7,805 6,464
Ratio Analysis:
- ---------------
Return on Assets 1.01% 1.43% 1.44%
Return on Equity 15.92% 18.46% 18.21%
Net Int Income/T. Assets 3.37% 3.69% 3.77%
Non-Int Income/T. Assets 0.19% 0.22% 0.34%
Non-Int Expense/T. Assets 1.76% 1.81% 1.90%
Tier One Capital 6.33% 7.76% 7.92%
T. Loans/T. Assets 62.42% 65.43% 70.58%
T. Loans/T. Deposits 68.32% 72.62% 78.20%
ALLL/T. Loans 0.75% 0.76% 1.03%
Non-Perfor./T. Assets N/A 1.25% 1.51%
Net Loss/T. Loans 0.04% 0.01% 0.06%
</TABLE>
III-7
<PAGE> 31
FIRST NATIONAL BANCORP
CONSOLIDATED
(000'S)
<TABLE>
<CAPTION>
GROWTH
1992 1993 YTD 9/94 1992/94
---- ---- -------- -------
<S> <C> <C> <C> <C>
Selected Financial Data:
- ------------------------
Total Assets 1,980,770 2,087,530 2,313,926 16.82%
Total Loans 1,217,695 1,269,747 1,396,948 14.72%
Allowance for Loan Loss 23,589 21,073 22,657 -3.95%
Total Deposits 1,679,696 1,716,191 1,897,135 12.95%
Total Equity Capital 190,140 212,603 226,117 18.92%
Interest Income 152,420 146,866 119,576
Interest Expense 73,170 61,304 47,855
-------- -------- --------
Net Interest Income 79,250 85,562 71,721
Provision Expense 11,181 2,974 (136)
-------- -------- --------
Net Income (Net Provision) 68,069 82,588 71,857
Non-Interest Income 29,959 31,654 21,209
Non-Interest Expense 67,290 79,356 64,441
Net Income (Before Taxes) 30,738 34,886 28,625
Income Taxes 7,908 8,964 7,645
Accounting Adjustments 0 0 0
Net Income 22,830 25,922 20,980
Ratio Analysis:
- ---------------
Return on Assets 1.15% 1.24% 1.21%
Return on Equity 12.01% 12.19% 12.37%
Net Int Income/T. Assets 4.00% 4.10% 4.13%
Non-Int Income/T. Assets 1.51% 1.52% 1.22%
Non-Int Expense/T. Assets 3.40% 3.80% 3.71%
Tier One Capital 9.60% 10.18% 9.77%
T. Loans/T. Assets 61.48% 60.83% 60.37%
T. Loans/T. Deposits 72.49% 73.99% 73.63%
ALLL/T. Loans 1.94% 1.66% 1.62%
Non-Perfor./T. Assets 1.90% 1.46% 1.35%
Net Loss/T. Loans 0.74% 0.43% 0.20%
</TABLE>
III-8
<PAGE> 32
COMMENTS/OBSERVATIONS
- FF Bancorp's affiliates are very fragmented
- Difficult for a new entrant to consolidate operations
- Fit with a existing Florida franchise becomes difficult
- Anti-trust issues
- Need for future management
- Ms. Ford's planned retirement
- Mr. Byrd plans to reduce activity
- Mr. Smith not located or identified with the local market
- Recent growth could present challenges
- FF Bancorp's subsidiaries are run autonomously
- Need some centralization and management information systems
- A significant increase in overhead could be expected to tie
up subsidiaries
- Intermediate term earnings are expected to decline
- Net interest margin will narrow due to (1) increasing market
interest rates; (2) flattening yield curve; and (3) matching
of assets and liabilities.
- Overhead will likely increase
- new management needs
- larger institution needs additional controls and systems
- Due to the significant growth, the conversion and acquisitions, FF
Bancorp is very difficult to evaluate.
IV-1
<PAGE> 33
SHAREHOLDERS' EQUITY ADJUSTED FOR OPTIONS
<TABLE>
<S> <C>
Shareholders' Equity (09/30/94) $47,324,000
Options Exercised 317,506
-----------
Adjusted Equity $47,641,506
Shares Outstanding (09/30/94) 4,680,818
Option Shares 84,807
-----------
Adjusted Shares 4,765,625
</TABLE>
IV-2
<PAGE> 34
PROJECTED EARNINGS
1995
BUDGET
<TABLE>
<S> <C>
New Smyrna $3,978
Citrus 2,964
Key 750
FF Bancorp (A/T) (326)
Additional Provision for Loan Loss (A/T) * (650)
-------
Projected Net Income $6,716
Earnings Per Share $ 1.41
</TABLE>
(A/T) = After-tax (35%)
* One-half estimated additional reserves requested by First National Bancorp
adjusted for taxes.
IV-3
<PAGE> 35
COMPARABLE STOCK PRICES
SOUTHEAST REGIONAL ACQUIRERS
<TABLE>
<CAPTION>
STOCK PRICE
-------------------------------
09/30/94 12/08/94 Change Percent
-------- -------- ------ -------
<S> <C> <C> <C> <C>
Nations Bank $ 49.00 $ 45.00 $(4.00) (8.2)%
First of America 35.25 31.00 (4.25) (12.1)
Compass Bank 23.63 21.63 (2.00) (8.5)
Union Planters * 24.50 19.88 (4.62) (18.9)
Huntington Bank 18.13 16.88 (1.25) (6.9)
South Trust * 20.00 17.63 (2.37) (11.9)
AmSouth * 31.50 26.88 (4.62) (14.7)
SunTrust 48.75 47.38 (1.37) (2.8)
First Union 43.25 40.00 (3.25) (7.5)
----- ----- ------ -----
Average 32.67 29.59 (3.08) (9.4)
FIRST NATIONAL 20.75 17.75 (3.00) (14.5)
AB Bank Index 192.00 175.00 (17.00) (8.9)
AB Thrift Index 126.00 105.00 (21.00) (16.7)
Avg 25 Largest Thrifts $ 23.62 $ 19.98 $(3.64) (15.4)%
</TABLE>
* Active Acquirers
IV-4
<PAGE> 36
STOCK PRICE HISTORY
<TABLE>
<CAPTION>
NATIONAL EXCHANGE PRO FORMA FF BANCORP PRICE/
BANCORP RATIO VALUE STOCK MARKET VALUE
------- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
September 30, 1993 $20.50 .825 $16.91 $12.39 1.36
December 31, 1993 21.00 .825 17.33 11.25 1.54
March 31, 1994 20.75 .825 17.12 11.48 1.49
June 30, 1994 20.75 .825 17.12 13.19 1.30
September 30, 1994 20.75 .825 17.12 15.00 1.14
October 20, 1994 20.25 .825 16.71 14.50 1.15
October 26, 1994 20.00 .825 16.50 14.75 1.12
November 4, 1994 19.00 .825 15.68 14.00 1.12
November 11, 1994 19.25 .825 15.88 13.50 1.18
November 18, 1994 18.25 .825 15.06 12.50 1.20
November 25, 1994 17.75 .825 14.64 12.50 1.17
December 2, 1994 17.00 .825 14.03 12.50 1.12
December 8, 1994 17.50 .825 14.44 12.75 1.13
</TABLE>
IV-5
<PAGE> 37
FLORIDA THRIFT TRANSACTIONS
1990 - YEAR-TO-DATE 1994
<TABLE>
<CAPTION>
MULTIPLE OF MULTIPLE OF
BOOK VALUE EARNINGS
---------- --------
<S> <C> <C>
Average 1.65X 15.7X
Median 1.55 15.2
FF Bancorp - Announcement Date 1.65X * 9.6X *
Percentile 60 15
FF Bancorp - Current Date 1.44X * 8.4X *
Percentile 35 15
</TABLE>
* First National Bancorp Stock Price $20.00 at announcement date and $17.50
currently.
IV-6
<PAGE> 38
FLORIDA TRANSACTIONS - HIGH PERFORMING
ROE > 12%
<TABLE>
<CAPTION>
MULTIPLE OF MULTIPLE OF
SELLER ROE BOOK VALUE EARNINGS
- ------ --- ---------- --------
<S> <C> <C> <C>
First Florida Svgs Bank, FSB 14.8% 1.48X 20.6X
Regional Investment Corp. 15.5 2.05 19.9
Fst Federal S&L of Brooksville 12.8 1.99 16.5
Seaboard Svgs Bank, FSB 13.2 1.84 15.2
First Fed S&L Assoc., Fort Myers 14.9 1.60 13.0
FloridaBank, FSB 25.7 1.79 11.6
BancFlorida Fin Corp. 24.6 1.62 8.9
First Federal Bancshares 17.0 1.38 8.5
American S&L Assoc. of Florida 14.2 1.53 4.9
Peninsula Federal 29.2 1.51 ---
Average 18.2% 1.68X 13.2X
Median 14.9 1.61 13.0
FF Bancorp - Announcement Date 19.2% 1.65X * 9.6X *
Percentile 64 64 45
FF Bancorp - Current Date 19.2% 1.44X * 8.4X *
Percentile 64 18 36
</TABLE>
* First National Bancorp Stock Price $20.00 at announcement date and $17.50
currently.
IV-7
<PAGE> 39
SOUTHEAST THRIFT TRANSACTIONS
ROE > 15%
<TABLE>
<CAPTION>
MULTIPLE OF MULTIPLE OF
SELLER STATE ROE BOOK VALUE EARNINGS
- ------ ----- --- ---------- --------
<S> <C> <C> <C> <C>
Regional Investment Corp. FL 15.45% 2.05X 19.96X
FloridaBank, A FSB FL 25.65 1.79 11.59
Home Federal Svgs Bank NC 20.48 2.19 11.54
Community Federal Svgs Bank GA 18.79 1.87 10.87
Caldwell Svgs Bank NC 25.41 1.35 10.73
Citizens Svgs Bank, Inc. NC 20.96 1.89 10.47
Robeson Svgs Bank, SSB NC 42.27 1.53 9.65
BancFlorida Fin Corp. FL 24.58 1.62 8.87
First Federal Bancshares FL 17.00 1.38 8.55
Old Stone Bank of NC, FSB NC 15.79 1.51 7.94
United Svgs Bank, FSB AL 28.36 1.48 6.30
Inter Federal Svgs Bank TN 16.53 .83 5.43
Security Trust & SaveTrust TN 16.46 1.03 5.27
First Fed S&LA of Giles Cty TN 25.68 .67 3.88
Saint Clair Holding Co. AL 17.39 N/A N/A
Fst Fed S&L Assoc. of Durham NC 25.07 N/A N/A
Average 20.80% 1.51X 9.36X
Median 20.70 1.52 9.26
FF Bancorp - Announcement
Date (1) 19.20% 1.65X 9.59X
Percentile 53 67 53
FF Bancorp - Current (2) 1.44X 8.39X
Percentile 40 40
</TABLE>
(1) First National Stock Price at announcement date = $20.00
(2) First National Stock Price at current date = $17.50
IV-8
<PAGE> 40
CASH FLOW ANALYSIS
FF BANCORP - 14%
<TABLE>
<CAPTION>
P.U. P.U.
FACTOR CASH FLOW
------ ---------
<S> <C> <C> <C> <C>
1995 6,716 3,358 .8772 $ 2,946
1996 6,716 3,358 .7695 2,584
1997 7,052 3,526 .6750 2,380
1998 7,404 3,702 .5921 2,192
1999 7,775 3,888 .5194 2,019
1999 Equity $65,474
Multiple 1.52
Capitalized $99,520 .5194 51,691
-------
Total $63,812
</TABLE>
IV-9
<PAGE> 41
<TABLE>
<CAPTION>
DEAL VALUE (MILLIONS) MULTIPLE OF BOOK VALUE
--------------------- ----------------------
ANNOUNCE ANNOUNCE CURRENT ANNOUNCE ANNOUNCE CURRENT
DATE DATE DATE DATE PERCENT DATE DATE
---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Presidential Hld Co. 06/29/94 $ 23.8 $ 22.3 * $(1.5) (6.4)% 2.54X * 2.52X *
F&C Bancshares 06/14/94 75.4 66.0 * (9.4) (12.5) 1.70 1.58
FF Enterprises 03/26/93 17.3 14.0 (3.3) (19.1) 1.25 1.02
FloridaBank 06/30/93 27.3 23.2 (4.1) (15.0) 1.79 1.59
BancFlorida 01/17/94 162.1 153.4 (8.7) (5.4) 1.62 1.61
</TABLE>
* Currently trading below the collars.
IV-10
<PAGE> 42
BOOK VALUE ANALYSIS
<TABLE>
<CAPTION>
1992 1993 09/30/94
---- ---- --------
<S> <C> <C> <C>
Shareholders' Equity
- --------------------
First National Bancorp $190,140 $212,603 $226,117
FF Bancorp 34,716 42,277 47,642
-------- -------- --------
Pro Forma $224,856 $254,880 $273,759
======== ======== ========
Shares Outstanding
- ------------------
First National Bancorp 15,293 15,533 16,465
FF Bancorp Shares 3,668 3,826 3,869
-------- -------- --------
Pro Forma Shares 18,961 19,359 20,334
======== ======== ========
Book Value Per Share
- --------------------
Status Quo - First National $ 12.43 $ 13.69 $ 13.73
Pro Forma - First National 11.86 13.17 13.46
Book Value Per Share
- --------------------
Status Quo - FF Bancorp $ 8.00 $ 9.68 $ 10.00
Pro Forma - FF Bancorp 9.78 10.87 11.10
Status Quo Shares - FF Bancorp 4,342 4,368 4,766
</TABLE>
(Graph)
IV-11
<PAGE> 43
NET INCOME ANALYSIS
<TABLE>
<CAPTION>
4-Q TRAILING PROJECTED
1992 1993 09/30/94 1995
---- ---- -------- ----
<S> <C> <C> <C> <C>
Net Income
- ----------
First National Bancorp $22,830 $25,922 $28,168 $31,777
FF Bancorp 5,528 6,981 8,064 6,716
------- ------- ------- -------
Pro Forma $28,358 $32,903 $36,232 $38,493
======= ======= ======= =======
Shares Outstanding
- ------------------
First National Bancorp 15,159 15,361 15,736 16,465
FF Bancorp Shares 3,668 3,826 3,869 3,932
------ ------ ------ ------
Pro Forma Shares 18,827 19,187 19,605 20,397
====== ====== ====== ======
Earnings Per Share
- ------------------
Status Quo - First National $1.51 $1.69 $1.79 $1.93
Pro Forma - First National 1.51 1.71 1.85 1.89
Earnings Per Share
- ------------------
Status Quo - FF Bancorp $1.24 $1.51 $1.72 $1.41
Pro Forma - FF Bancorp 1.25 1.41 1.53 1.56
Status Quo Shares - FF Bancorp 4,446 4,638 4,690 4,766
</TABLE>
(Graph)
IV-12
<PAGE> 44
DIVIDEND ANALYSIS
<TABLE>
<S> <C>
Dividend Rate First National $ .78
Exchange Ratio .825
-----
Pro Forma Dividend $ .64
Current Dividend .56
-----
Change .08
Percent 14.3%
</TABLE>
IV-13
<PAGE> 45
APPENDIX
The Tier One Capital graph, on p. III-1, discloses the Tier One Capital
for FF Bancorp and First Bancorp as a percentage of total assets of the
respective corporations as of certain dates. The information disclosed is as
follows:
Tier One Capital as of: FF Bancorp First Bancorp
- ----------------------- ---------- -------------
December 31, 1992 6.33% 9.60%
December 31, 1993 7.76% 10.18%
September 30, 1994 7.92% 9.77%
<PAGE> 46
The Return on Assets graph, on p. III-2, discloses the earnings for FF Bancorp
and First Bancorp as a percentage of total assets of the respective
corporations as of certain dates. The information disclosed is as follows:
Return on Assets as of: FF Bancorp First Bancorp
- ----------------------- ---------- -------------
December 31, 1992 1.01% 1.15%
December 31, 1993 1.43% 1.24%
September 30, 1994 1.44% 1.21%
The Return on Equity graph, on p. III-2, discloses the earnings for FF Bancorp
and First Bancorp as a percentage of equity of the respective corporations as
of certain dates. The information disclosed is as follows:
Return on Equity as of: FF Bancorp First Bancorp
- ----------------------- ---------- -------------
December 31, 1992 15.92% 12.01%
December 31, 1993 18.46% 12.19%
September 30, 1994 18.21% 12.37%
<PAGE> 47
The Net Interest Income graph, on p. III-3, discloses net interest income of FF
Bancorp and First Bancorp as a percentage of total assets as of certain dates.
The information dislcosed is as follows:
Net Interest Income as of: FF Bancorp First Bancorp
- -------------------------- ---------- -------------
Dec. 31, 1992 3.37% 4.00%
Dec. 31, 1993 3.69% 4.10%
Sept. 30, 1994 3.77% 4.13%
The Non-Interest Income graph, on p. III-3, dislcoses non-interest income of FF
Bancorp and First Bancorp as a percentage of total assets as of certain dates.
The information disclosed is as follows:
Non-interest income as of: FF Bancorp First Bancorp
- -------------------------- ---------- -------------
Dec. 31, 1992 0.19% 1.51%
Dec. 31, 1993 0.22% 1.52%
Sept. 30, 1994 0.34% 1.33%
<PAGE> 48
The Non-Interest Expense graph, on p. III-4, discloses non-interest expense of
each corporation as a percentage of total assets as of certain dates. The
information disclosed is as follows:
Non-Interest Expense as of: FF Bancorp First Bancorp
- --------------------------- ---------- -------------
Dec. 31, 1992 1.76% 3.40%
Dec. 31, 1993 1.81% 3.80%
Sept. 30, 1994 1.90% 3.71%
The Loans-to-Deposits graph, on p. III-5, discloses the loans to deposit ratios
for each corporation as of certain dates. The information disclosed is as
follows:
Loans to deposit ratio as of: FF Bancorp First Bancorp
- ----------------------------- ---------- -------------
Dec. 31, 1992 68.32% 72.49%
Dec. 31, 1993 72.62% 73.99%
Sept. 30, 1994 78.20% 73.63%
The Allowance for Loan Loss graph, on p. III-5, discloses the allowance for
loan to lease loss as a percentage of total loans for each corporation as of
certain dates. The information disclosed is as follows:
Loan Loss Allowance as of: FF Bancorp First Bancorp
- -------------------------- ---------- -------------
Dec. 31, 1992 0.75% 1.94%
Dec. 31, 1993 0.76% 1.66%
Sept. 30, 1994 1.03% 1.62%
<PAGE> 49
The Non-performing assets graph, on p. III-6, discloses non-performing assets
of each corporation as a percentage of total assets as of certain dates. The
information disclosed is as follows:
Non-performing assets as of: FF Bancorp First Bancorp
- ---------------------------- ---------- -------------
Dec. 31, 1993 1.25% 1.46%
Sept. 30, 1994 1.51% 1.35%
The Net Loan Losses graph, on p. III-6, discloses net loan losses of each
corporation as a percentage of total loans as of certain dates. The
information disclosed is as follows:
Net loan losses as of: FF Bancorp First Bancorp
- ---------------------------- ---------- -------------
Dec. 31, 1992 0.04% 0.74%
Dec. 31, 1993 0.01% 0.43%
Sept. 30, 1994 0.06% 0.20%
<PAGE> 50
The Book Value Per Share graph, on p. IV-11, discloses in graph form the book
value per share for FF Bancorp on a status quo basis and a pro forma basis as
of 12/31/92, 12/31/93, and 9/30/94. It is the same information as disclosed
immediately above the graph on p. IV-11.
The Earnings Per Share graph, on p. IV-12, discloses in graph form the earnings
per share for FF Bancorp on a status quo basis and a pro forma basis as of
12/31/92, 12/31/93 and 9/30/94. It is the same information as disclosed
immediately above the graph on p. IV-12.
