SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended..............................................12-31-95
Commission File Number................................................. 2-83157
SOUTHEASTERN BANKING CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 58-1423423
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1010 NORTHWAY STREET
P.O. BOX 455
DARIEN, GEORGIA 31305
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (912) 437-4141
Securities registered pursuant to Section 12(b) of the Act:
NONE
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of January 31, 1996, 1,193,599 shares of the $1.25 par value common
stock of Southeastern Banking Corporation (the"Company") were issued and
outstanding, and the aggregate market value of the shares of $1.25 par value
common stock of the Company held by nonaffiliates was approximately $22,338,228
(based on a per share price of $31.00 which is an estimated price since the
stock is not listed, not actively traded, and transactions are conducted on a
private basis).
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part Number and Item
Document Incorporated Number of Form 10-K Into
by Reference Which Incorporated
The Company's Annual Report Part IV - Item 14
on Form 10-K for the Year
Ended December 31, 1990
<PAGE>
PART I
ITEM 1. BUSINESS.
1. HISTORY AND ORGANIZATION. Southeastern Banking Corporation (the
Company) is a two-bank holding company headquartered in Darien, Georgia. The
Company's subsidiary banks, Southeastern Bank (SEB) and Southeastern Bank of
Florida (SEBF), operate fifteen full-service banking offices in southeast
Georgia and central Florida. The Company's corporate offices are located at 1010
Northway Street, Darien, Georgia.
The Company was formed in 1980 to serve as the parent holding company
of its then sole subsidiary bank, The Citizens Bank, Folkston, Georgia, which
later changed its name to SEB. In 1983, the Company acquired The Darien Bank,
Darien, Georgia. Since 1983, the Company has acquired three additional financial
institutions in the southeast Georgia market. These acquisitions were
consummated by merging the acquired bank with SEB; the acquired banks were
subsequently converted to branches of SEB. In this manner, the Company acquired
The Camden County State Bank, Woodbine, Georgia, in 1984; the Jeff Davis Bank,
Hazlehurst, Georgia, in 1986; and the Nicholls State Bank, Nicholls, Georgia, in
1988. In 1990, SEB merged with and into The Darien Bank, with The Darien Bank
being the surviving bank in the merger operating under its 1888 Charter.
Immediately, The Darien Bank changed its name to "Southeastern Bank". SEB is a
state banking association incorporated under the laws of the State of Georgia.
In 1991, the Company acquired the Folkston, St. Marys, and Douglas,
Georgia, offices of First Georgia Savings Bank, a savings bank in Brunswick,
Georgia. Offices located in St. Marys and Douglas are now operating as branches
of SEB, but the First Georgia office in Folkston was closed and merged into the
existing Folkston branch. In 1993, the Company acquired the Folkston and St.
Marys offices of Bank South, N.A., Atlanta, Georgia. Both of the acquired
offices were closed and merged into existing offices of the Company. See Note 2
to the Consolidated Financial Statements.
On October 14, 1994, the Company acquired 100% of the outstanding
common stock of United Citizens Bank of Alachua County, Alachua, Florida under
the name Southeastern Bank of Florida. The acquisition was consummated by means
of the merger of Alachua Interim Corp., a wholly owned subsidiary of the
Company, with and into SEBF under the Charter and Bylaws of SEBF. The aggregate
consideration paid by the Company for SEBF pursuant to the transaction was
approximately $5,139,000, payable in cash to the shareholders of Alachua. SEBF
is a state banking association incorporated under the laws of the State of
Florida. See Note 2 to the Consolidated Financial Statements.
2. BUSINESS. The Company provides full banking services through its
subsidiaries, SEB & SEBF. SEB operates from its main office in Darien and its
branch offices in Douglas, Eulonia, Folkston, Hazlehurst, Hoboken, Kingsland,
Nahunta, Nicholls, St. Marys, and Woodbine. At December 31, 1995, SEB had total
assets of approximately $256,455,000. SEBF operates from its main office in
Alachua and its branch offices in Gainesville and Jonesville. At December 31,
1995, SEBF had total assets of approximately $40,753,000. Both banks provide
traditional deposit and credit services to individual and corporate customers.
Deposit services offered include NOW and money market accounts as well as
savings, time deposits, and individual retirement accounts. Credit services
offered include commercial and installment loans. Commercial loans are made
primarily to fund real estate purchases and construction and to meet the needs
of customers employed in the agriculture, timber, and seafood industries.
Installment loans are made for both consumer and non-consumer purposes. In
addition to deposit and credit services, both banks also provide official check
services, wire transfer services, and safe deposit box rentals.
The Federal Reserve Bank of Atlanta is the principal correspondent of
the Company's subsidiaries. The Company's subsidiaries also maintain accounts
with other correspondent banks in Georgia and Florida.
At December 31, 1995, the Company and its subsidiaries had 160 and 23
full and part-time employees.
3. COMPETITION. The diversity of the Company's trade area results in a
varying amount of competition in each of the seven counties in which it
operates: With the exception of Brantley, Charlton, and McIntosh counties in
Georgia, the Company has direct competition with other commercial banks, savings
and loan associations, and credit unions in each market area. In March 1996, a
national bank is scheduled to open in Charlton County. Additionally, a group of
investors has filed an application for a national bank charter in McIntosh
County; approval of this application would result in increased competition in
this market area.
Previously, the Georgia legislature imposed restrictions on intrastate
branching. During its recent 1996 session, the Georgia General Assembly passed
an intrastate branching bill that relaxes these restrictions: Effective July 1,
1996, Georgia banks will be permitted to branch into three additional counties,
and effective July 1, 1998, all branching restrictions will be removed. The
intrastate branching bill will give the Company opportunities for growth in its
Georgia markets as well as intensify competition. The Florida legislature does
not have any restrictions on intrastate branching.
The Company also competes with non-regulated entities such as
securities brokerage firms, insurance companies, and money market funds for
deposit dollars. In recent years, regulatory legislation has provided the
banking industry with various deposit instruments needed to remain competitive
with non-regulated competitors.
<PAGE>
4. SUPERVISION AND REGULATION. As a bank holding company, the Company
is subject to the supervision and regulation of the Federal Reserve Board. The
Company's subsidiaries are also subject to supervision and regulation by
applicable state and federal banking agencies: Southeastern Bank, an insured
state non-member bank chartered by the Georgia Department of Banking and Finance
(GDBF), is subject to supervision and regulation by the GDBF and the Federal
Deposit Insurance Corporation (FDIC). Southeastern Bank of Florida, an insured
state member bank chartered by the Florida Department of Banking and Finance
(FDBF), is subject to supervision and examination by the FDBF and the Federal
Reserve Board. Various federal and state laws also regulate the operations of
the banks, requiring the maintenance of reserves against deposits, limiting the
nature of loans and interest that may be charged thereon, and restricting
investments and other activities. The operations of the subsidiary banks are
also affected by numerous consumer laws and regulations. In addition to the
impact of regulation, commercial banks are also significantly affected by the
actions of the Federal Reserve Board as it attempts to control the money supply
and credit availability in order to influence the economy.
The Bank Holding Company Act previously prohibited the Federal Reserve
Board from approving an application from a bank holding company to acquire
shares of a bank holding company outside the state in which the operations of
the holding company's banking subsidiaries were principally conducted, unless
such an acquisition was specifically authorized by statute of the state in which
the bank whose shares were to be acquired was located. However, under recently
enacted federal legislation, the restriction on interstate acquisitions was
abolished effective September 1995, and bank holding companies from any state
can acquire banks and bank holding companies located in any other state, subject
to certain conditions, including nationwide and state imposed concentration
limits. Banks also will be able to branch across state lines by acquisition,
merger, or de novo, effective June 1, 1997 (unless state law would permit such
interstate branching at an earlier date), provided certain conditions are met
including that applicable state law must expressly permit de novo interstate
branching.
The Company is expected to act as a source of financial strength to,
and commit resources to support, its subsidiaries. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA), federal banking
regulators are required to take prompt corrective action in respect of
depository institutions that do not meet minimum capital requirements. Capital
adequacy is measured with a framework that makes capital requirements sensitive
to the risk profiles of individual banking companies. Regulatory guidelines
define capital as either Tier 1 (primarily stockholders' equity) or Tier 2
(certain debt instruments and a portion of the allowance for loan losses). The
Company and its subsidiaries are subject to a minimum Tier 1 capital to
risk-weighted assets ratio of 4% and a total capital (Tier 1 plus Tier 2) to
risk-weighted assets ratio of 8%. Additionally, the Company is subject to a Tier
1 leverage ratio that measures the ratio of Tier 1 capital to average quarterly
assets. The regulatory agencies have defined "well-capitalized" institutions as
those whose capital ratios equal or exceed the following minimum ratios: Tier 1
capital ratio of 6%, total risk-based capital of 10%, and Tier 1 leverage ratio
of 5%. At December 31, 1995, the Company's Tier 1 capital, total risk-based
capital, and Tier 1 leverage ratios were 16.26%, 17.52%, and 9.67%. See Note 13
to the Consolidated Financial Statements and the Capital Resources section of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
FDICIA also amends the bank regulatory insurance coverage, imposes
substantial new audit and reporting requirements on insured depository
institutions, and increases the role of independent accountants and outside
directors. Additionally, FDICIA requires each regulatory agency to prescribe
standards covering internal controls, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation, operational and managerial
standards, asset quality, earnings, and stock valuation standards for preserving
a minimum ratio of market value to book value for publicly traded shares (if
feasible), and other standards as the agency deems appropriate.
There are various legal and regulatory limits on the amount of
dividends the subsidiary banks may pay the Company. Additionally, federal and
state regulatory agencies also have the authority to prevent a bank or bank
holding company from engaging in any activity that, in the opinion of the
agency, would constitute an unsafe or unsound practice. See Note 13 to the
Consolidated Financial Statements.
There have been a number of legislative and regulatory proposals that
would have an impact on the operation of bank holding companies and their
subsidiaries. It is impossible to predict whether or in what form these
proposals may be adopted in the future and, if adopted, what their effect will
be on the Company.
<PAGE>
ITEM 2. PROPERTIES.
COMPANY PROPERTY. The Company's executive offices are located in
Southeastern Bank's main banking office at 1010 Northway Street, Darien,
Georgia.
BANKING FACILITIES. Besides its main office in Darien, Southeastern
Bank has offices in the following communities:
620 S. Peterson Street Highway 40
Coffee County Camden County
DOUGLAS, GEORGIA 31533 KINGSLAND, GEORGIA 31548
Highway 17 Highway 301 North
McIntosh County Brantley County
EULONIA, GEORGIA 31331 NAHUNTA, GEORGIA 31553
101 Love Street Liberty Street at Birmingham
Charlton County Coffee County
FOLKSTON, GEORGIA 31537 NICHOLLS, GEORGIA 31554
110-112 Hinson Street 2512 Osborne Road
Jeff Davis County Camden County
HAZLEHURST, GEORGIA 31539 ST. MARYS, GEORGIA 31558
Highway 82, Main Street Highway 17
Brantley County Camden County
HOBOKEN, GEORGIA 31542 WOODBINE, GEORGIA 31569
Southeastern Bank of Florida's main office is located at 1010 South
Highway 441, Alachua, Florida. Additional offices are located in the following
communities:
4000 North Main Street 14009 Highway 26 East
Alachua County Alachua County
GAINESVILLE, FLORIDA 32609 JONESVILLE, FLORIDA 32669
2725 Southeast Hawthorne Road
Alachua County
GAINESVILLE, FLORIDA 32641
The Company owns all of its banking facilities with the exception of
its offices in Alachua, Jonesville, and 4000 North Main Street, Gainesville,
which are being leased from third parties for various terms. See Note 6 to the
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS.
The Parent Company and its subsidiaries are parties to claims and
lawsuits arising in the course of their normal business activities. Although the
ultimate outcome of these suits cannot be ascertained at this time, it is the
opinion of management and counsel that none of these matters, when resolved,
will have a material effect on the Company's consolidated results of operations
or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's stock is not traded publicly and no specific market sales
prices can be quoted. From information available from private sales of stock and
the Company's service as transfer agent, the sales price of the Company's common
stock for the past three years has ranged from $22 to $30 per share.
The table below sets forth (a) the high and low sales price of the
Company's common stock for each of the last three years and (b) the amount of
the quarterly dividends declared on the common stock during the periods
indicated. The dividend data has been restated to give retroactive effect to the
stock dividend paid on March 15, 1993.
SALES PRICE
-----------
CASH DIVIDEND
QUARTER HIGH LOW DECLARED
------- ---- --- -------------
1993 First $22.00 $22.00 $ .15
Second No Sales No Sales .15
Third 22.00 22.00 .15
Fourth 25.00 22.00 .31
1994 First 24.00 23.00 .16
Second 25.00 25.00 .16
Third 27.00 26.00 .16
Fourth 27.00 27.00 .33
1995 First 28.00 27.00 .17
Second 30.00 27.00 .17
Third 30.00 30.00 .17
Fourth No Sales No Sales .35
At January 31, 1996, there were approximately 411 holders of record of
the Company's common stock.
The Company has paid regular cash dividends on a quarterly basis every
year since its inception. Additionally, in recent years, the Company has
declared a special dividend in the fourth quarter of each year. Management
anticipates that the Company will continue to pay regular and special cash
dividends.
The Company is a legal entity separate and distinct from its
subsidiaries, and its revenues depend primarily on the payment of dividends from
its subsidiaries. State banking regulations limit the amount of dividends the
Company's subsidiaries may pay without prior approval of the regulatory
agencies. The amount of cash dividends available from the subsidiary banks for
payment in 1996 without such prior approval is approximately $2,214,000.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------------------------------------------------
(Amounts in thousands except per share data)
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31:
Total Assets $296,956 $283,814 $234,195 $205,779 $196,989
Deposits 259,540 251,030 203,470 179,259 172,586
Loans, net 161,853 153,015 111,938 99,146 98,179
Long-term Debt 2,525 3,500 0 0 838
Realized Stockholders' Equity 30,558 27,298 24,614 21,998 19,776
SUMMARY OF OPERATIONS:
Net Interest Income $ 14,617 $ 12,601 $ 11,245 $ 9,950 $ 9,036
Provision for Loan Losses 1,200 1,130 1,050 800 760
Net Income 4,287 3,651 3,525 2,981 2,479
PER SHARE DATA:
Net Income $ 3.59 $ 3.06 $ 2.95 $ 2.50 $ 2.08
Cash Dividends Declared 0.86 0.81 0.76 0.64 0.59
Book Value 25.60 22.87 20.62 18.43 16.57
</TABLE>
The per share data has been restated to give retroactive effect to the
stock dividend paid on March 15, 1993. The book value per share excludes the
effects of mark-to-market accounting for investment securities.
See Note 2 to the Consolidated Financial Statements for information
regarding business combinations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The response to this item commences on page 7. Selected Statistical
information begins on page 13.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Southeastern Banking Corporation (the Company) is a bank holding
company headquartered in Darien, Georgia. Its two subsidiaries, Southeastern
Bank and Southeastern Bank of Florida, operate full-service banking offices in
southeast Georgia and central Florida. Southeastern Bank (SEB), a state banking
association incorporated under the laws of the State of Georgia, operates from
its main office in Darien and its branch offices in Douglas, Eulonia, Folkston,
Hazlehurst, Hoboken, Kingsland, Nahunta, Nicholls, St. Marys, and Woodbine. At
December 31, 1995, Southeastern Bank had total assets of approximately
$256,455,000.* Southeastern Bank of Florida (SEBF), a state banking association
incorporated under the laws of the State of Florida, operates from its main
office in Alachua and its branch offices in Gainesville and Jonesville. At
December 31, 1995, Southeastern Bank of Florida had total assets of
approximately $40,753,000.* Both banks provide traditional deposit and credit
services to individual and corporate customers.
The primary objective of Southeastern Banking Corporation is to provide
quality banking service to the people in its trade areas while maintaining an
adequate return on investment for its stockholders and a capital base in excess
of regulatory requirements.
On October 14, 1994, the Company acquired 100% of the outstanding
common stock of United Citizens Bank of Alachua County, Alachua, Florida under
the name Southeastern Bank of Florida (SEBF). The aggregate consideration paid
for SEBF was approximately $5,139,000.00. The results of operations of SEBF have
been included in the consolidated financial statements from the date of
acquisition forward.
On September 15, 1995, the Company and SEBF signed a definitive
agreement to acquire the Callahan, Hilliard, and Yulee offices of Compass Bank
in North Florida's Nassau County. Geographically, Nassau County borders Camden
and Charlton Counties in South Georgia where the Company has existing offices.
The transaction is subject to the receipt of all necessary regulatory approvals.
At December 31, 1995, these Compass Bank offices had approximately $24,000,000
in total assets.
Total assets increased 4.63% at December 31, 1995 compared to December
31, 1994, after increasing $49,619,597 or 21.19% during 1994. Deposit growth was
the principal reason for the asset increase at year-end 1995. The acquisition of
SEBF and deposit growth at SEB were the primary factors in the asset growth at
December 31, 1994. Earning assets represented approximately 89% and 88% of total
assets at December 31, 1995 and 1994.
Investment securities, exclusive of unrealized gains and losses,
declined $365,408 or .39% during 1995. Funds from the net principal paydowns,
maturities, calls, and sales of these securities were used to fund loan demand.
During 1994, investment securities increased $1,240,244 or 1.33%. SEBF accounted
for all of the prior year increase because SEB's holdings declined. The
composition of the investment securities portfolio did not change significantly
in 1995 or 1994.
Generally accepted accounting principles require that securities
classified as available for sale be carried at market value. The higher interest
rates in 1994 meant that the market value of our investment securities
classified as available for sale would decline, resulting in an overall net
unrealized loss at December 31, 1994. Due to the stabilization of interest rates
during 1995, the market value of our investment securities increased, resulting
in a $324,084 net unrealized gain at December 31, 1995.
Though loan demand softened from 1994 levels, net loans grew $9,113,573
or 5.83% during 1995. Approximately 6% of the current year growth occurred
during the fourth quarter. Nonaccrual loans represented .38% of net loans at
year-end 1995 versus 1.42% at December 31, 1994. The net loans to deposit ratio
was 63.72% compared to 62.25% a year ago. During 1994, loans accounted for
virtually all of the growth in earning assets, increasing $41,858,956, with
$20,411,020 and $21,447,936 of the growth being attributable to SEBF and SEB,
respectively.
The allowance for loan losses was 2.14% of net loans at December 31,
1995 compared to 2.08% a year ago. Net charge-offs were $925,128, up 14.77% from
the net charge-offs at December 31, 1994.
Gross premises and equipment increased $599,686 during 1995 due
primarily to the preparatory work and equipment costs involved with the
installation of automatic teller machines at the Alachua and Gainesville offices
of SEBF and the Prime Retail outlet mall in Darien; renovation of the Kingsland
office; renovation of the drive-in at Eulonia; and the purchase of a new
computer software system. All of these improvements will enable us to better
serve our customers. Gross premises and equipment increased during the prior
year due to the acquisition of SEBF and the purchase of proof equipment for the
centralized proof center operating at SEB's main office in Darien.
Other assets declined $350,183 or 3.94% at year-end 1995 compared to
1994. The substantial decline in the deferred tax effects of mark-to-market
accounting for investment securities was largely offset by increases in
foreclosed real estate and accrued interest receivable on loans and securities.
Management is optimistic that the other real estate parcels recently acquired
can be sold in 1996. Other assets, net of deferred taxes on the unrealized gains
and losses on available-for-sale securities, increased $2,057,239 at December
31, 1994 compared to 1993. Last year's net increase in other assets resulted
mainly from the other assets associated with the acquisition of SEBF, including
goodwill.
*Stand-alone basis
<PAGE>
LIQUIDITY
The purpose of liquidity management is to ensure sufficient cash flow
to satisfy demands for credit, deposit withdrawals, and other corporate needs.
The Company meets most of its daily liquidity needs through the management of
cash and federal funds sold. The Company's liquidity position is strengthened by
payments and maturities of the loan and investment securities portfolios. At
December 31, 1995, securities maturing within one year totaled approximately
$22,548,000; securities maturing between one and five years totaled
approximately $55,691,000. In addition, the Company's investment portfolio has
been structured to meet liquidity needs prior to asset maturity when necessary.
The Company's core deposit base is the foundation for its liquidity
position. Deposits grew $8,509,836 or 3.39% at year-end 1995 compared to 1994.
Noninterest bearing deposits represented 21.42% of total deposits compared to
19.21% a year ago. Total interest bearing deposits grew only marginally at
December 31, 1995 compared to 1994. Savings and interest bearing demand deposits
declined $12,750,082, while certificates of deposits grew $13,891,819. The loss
of several political subdivision accounts accounted for most of the decline in
savings and interest-bearing demand deposits. The increase in time certificates
was due primarily to the higher average rates available on these instruments in
1995 versus 1994. Approximately $224,508,000 and $35,032,000 of year-end
deposits were attributable to SEB and SEBF, increases of $5,537,000 and
$2,973,000 from last year. During 1994, deposits grew $47,560,391 or 23.37%,
with approximately $32,058,000 and $15,502,000 of the growth being attributable
to SEBF and SEB, respectively.
In addition to deposits and the other liquidity sources mentioned
above, the Company's capital position has enabled it to make arrangements with
correspondent banks to handle any unusual short-term liquidity needs.
The Company paid $975,000 on its note payable in 1995. Principal
payments of $425,000 are due annually. Besides assuming deposit liabilities, the
Company will not incur any debt in connection with its February 1996 purchase of
the Callahan, Hilliard, and Yulee offices of Compass Bank.
INTEREST RATE SENSITIVITY
The objective of interest rate sensitivity management is to minimize
the effect of interest rate changes on net interest margin while maintaining net
interest income at acceptable levels. The Company attempts to accomplish this
objective by structuring the balance sheet so that repricing opportunities exist
for both assets and liabilities in roughly equivalent amounts at approximately
the same time intervals. Imbalances in these repricing opportunities at any time
constitute interest rate sensitivity. An indicator of interest rate sensitivity
is the difference between interest rate sensitive assets and interest rate
sensitive liabilities; this difference is known as the interest rate sensitivity
gap.
The Company's interest rate sensitivity position at December 31, 1995
is set forth in the table below:
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE
SENSITIVITY REPRICING WITHIN
------------------------------------------------------------------------
(Amounts in Thousands) More
0-90 91-180 181-365 One - Five Than Five
Days Days Days Years Years Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Sensitive Assets:
Federal Funds Sold $ 8,030 $ 8,030
Securities* 8,571 4,747 9,726 55,195 15,583 93,822
Loans 78,728 7,384 15,816 46,257 21,043 169,228
-----------------------------------------------------------------------
Total Interest Rate Sensitive Assets $ 95,329 $ 12,131 $ 25,542 $101,452 $ 36,626 $271,080
Interest Rate Sensitive Liabilities:
Deposits $ 79,097 $ 21,082 $ 30,722 $ 46,992 $ 222 $178,115
U. S. Treasury Demand Note 448 448
Note Payable 2,525 2,525
-----------------------------------------------------------------------
Total Interest Rate Sensitive
Liabilities $ 82,070 $ 21,082 $ 30,722 $ 46,992 $ 222 $181,088
-----------------------------------------------------------------------
INTEREST RATE SENSITIVITY GAP $ 13,259 $ (8,951) $ (5,180) $ 54,460 $ 36,404 $ 89,992
=======================================================================
CUMULATIVE INTEREST RATE SENSITIVITY GAP $ 13,259 $ 4,308 $ (872) $ 53,588 $ 89,992
=======================================================================
CUMULATIVE GAP AS A % OF TOTAL ASSETS-- 4.36% 1.42% (.29)% 17.62% 29.59%
DECEMBER 31, 1995
=======================================================================
CUMULATIVE GAP AS A % OF TOTAL ASSETS-- (2.16)% (5.01)% (4.95)% 14.75% 27.83%
DECEMBER 31, 1994
=======================================================================
</TABLE>
* Distribution of maturities for available for sale securities is based on
amortized cost. Additionally, distribution of maturities for mortgage-backed
securities is based on expected final maturities which may be different from the
contractual terms.
At December 31, 1995, the gap analysis indicates a negative cumulative
gap position through the one year time interval of $(872,000). A negative gap
position indicates that the Company's rate sensitive liabilities will reprice
faster than its rate sensitive assets, with 74% of rate sensitive liabilities
and 49% of rate sensitive assets repricing within one year. As a percent of
total assets, the Company's cumulative gap for the one year time interval has
narrowed to (.29)% from (4.95)% a year ago.
The interest rate sensitivity table presumes that all loans and
securities* will perform according to their contractual maturities when, in many
cases, actual loan terms are much shorter than the original terms and securities
are subject to early redemption. In addition, the table does not necessarily
indicate the impact of general interest rate movements on net interest margin
since the repricing of various categories of assets and liabilities is subject
to competitive pressures and customer needs. The Company monitors and adjusts
its exposure to interest rate risks within specific policy guidelines based on
its view of current and expected market conditions.
CAPITAL RESOURCES
Realized stockholders' equity increased 11.94% during 1995, an increase
in book value from $22.87 to $25.60 per share. Our investment securities
classified as available for sale appreciated in value at December 31, 1995
compared to December 31, 1994, resulting in a $2,087,260 increase in unrealized
stockholders' equity; this appreciation resulted from a decline in market
interest rates since year-end 1994. Consistent with our objectives, the Company
maintains capital ratios well above regulatory requirements. Our capital ratios
for the most recent periods are presented in the table below.
Capital adequacy is measured with a framework that makes capital
requirements sensitive to the risk profiles of individual banking companies.
Regulatory guidelines define capital as either Tier 1 (primarily stockholders'
equity) or Tier 2 (certain debt instruments and a portion of the allowance for
loan losses). The Company and its subsidiaries are subject to a minimum Tier 1
capital to risk-weighted assets ratio of 4% and a total capital (Tier 1 plus
Tier 2) to risk-weighted assets ratio of 8%. Additionally, the Company is
subject to a Tier 1 leverage ratio that measures the ratio of Tier 1 capital to
average quarterly assets. In December 1994, the regulatory agencies issued a
final rule prohibiting banks and bank holding companies from including
unrecognized gains and losses on investment securities in calculating risk-based
capital.
The regulatory agencies have defined "well-capitalized" institutions as
those whose capital ratios equal or exceed the following ratios: Tier 1 capital
ratio of 6%, total risk-based capital of 10%, and Tier 1 leverage ratio of 5%.
At December 31, 1995, the Company's Tier 1 capital, total risk-based capital,
and Tier 1 leverage ratios were 16.26%, 17.52%, and 9.67%. As shown in the table
below, the Company's ratios improved at December 31, 1995 compared to December
31, 1994, after declining last year due to the increase in assets that resulted
from our cash purchase of SEBF.
<TABLE>
<CAPTION>
SOUTHEASTERN BANKING CORPORATION 12/31/95 12/31/94 12/31/93
-------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital Ratio 16.26% 15.07% 19.46%
-------------------------------------------
Total Risk-Based Capital Ratio 17.52% 16.33% 20.71%
-------------------------------------------
Tier 1 Leverage Ratio 9.67% 8.79% 10.15%
-------------------------------------------
Realized Shareholders' Equity
to Assets 10.30% 9.56% 10.53%
===========================================
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Interest income increased $4,809,164 or 24.29% in 1995 compared to
1994, after increasing $1,675,849 or 9.25% in 1994 compared to 1993. The loan
portfolio was the primary factor in the interest income improvement. Interest
and fees on loans were up $4,185,857 or 29.23% in 1995. SEBF, whose operating
results have been included in the consolidated financial statements from the
date of acquisition forward, added $1,869,323 in interest and fees on loans
during 1995. The remaining improvement in interest and fees on loans resulted
from increases in average balances and yields at SEB. On average, SEB loan
balances were 9.20% higher in 1995 than 1994. On a consolidated basis, the yield
on loans was 11.81% in 1995, up 63 basis points from 1994. In 1994, interest and
fees on loans increased $2,137,603, a 17.55% increase from 1993. A 17.55%
increase in consolidated average balances was the primary factor in the prior
year results. Approximately 21% and 79% of the 1994 results were attributable to
SEBF and SEB, respectively.
Interest income on investment securities increased $318,299 or 6.06% in
1995. SEBF accounted for all of the increase, because SEB's interest earnings on
investment securities declined $160,525 or 3.13%. The SEB decline resulted from
a 7.68% drop in average balances. The yield on taxable securities was 5.88% at
year-end 1995 compared to 5.86% and 5.46% at September 30, 1995 and December 31,
1994. The taxable-equivalent yield on tax-free securities was 9.17%, down from
the 9.45% yield in 1994. Interest income on investment securities declined
$508,198 or 8.83% in 1994 compared to 1993. The decline resulted from both lower
average balances and lower yields. The $120,000 increase in interest income on
investment securities attributable to SEBF last year only partially offset the
decline that resulted from SEB's need to fund its loan demand.
After giving effect to the increase in interest income on federal funds
sold attributable to SEBF, interest income on federal funds sold increased
$228,515 during 1995. The current period increase was marked by higher average
balances and rates at SEB. The yield on federal funds sold was 5.86%, up 166
basis points from 1994. Interest income on federal funds sold increased $46,444
or 25.69% in 1994.
Interest expense on deposits increased $2,547,878 or 35.82% in 1995
compared to 1994, after increasing $268,968 or 3.93% during 1994. Approximately
$1,108,000 or 43% of the current period increase was due to SEBF; the remaining
57% increase resulted largely from higher rates on deposits at SEB. The average
interest paid on deposits was 4.78%, up 83 basis points from last year. The
increase in interest expense on deposits in 1994 was due almost entirely to
SEBF; interest expense on SEBF deposits for the post-acquisition period totaled
$234,359. The average interest paid on the term loan was 7.94% in 1995 compared
to 7.42% in 1994.
In summary, net interest income increased $2,016,305 or 16.00% in 1995.
Approximately 65% and 35% of this increase were attributable to SEBF and SEB,
respectively. Net interest income increased $1,355,346 or 12.05% in 1994.
The table below presents interest income on a taxable-equivalent basis
and summarizes the average interest earned and average interest paid on
interest-bearing assets and liabilities:
Years Ended December 31
-----------------------------------------
(Amounts in Thousands) 1995 1994 1993
=========================================
Total Interest Income* $25,356 $20,640 $19,031
Total Interest Expense 9,990 7,198 6,877
Net Interest Income* 15,366 13,442 12,154
Average Interest Earned* 9.75% 9.10% 9.08%
Average Interest Paid 4.83% 3.96% 4.02%
Net Interest Spread* 4.92% 5.14% 5.06%
Net Interest Margin* 5.91% 5.93% 5.80%
* Interest income on tax-exempt loans and securities is presented on a
taxable-equivalent basis, using the Federal income tax rate of 34%.
The provision for loan losses was $1,200,000 in 1995, up $70,000 or
6.19% from 1994. The provision increased $80,000 or 7.62% in 1994.
<PAGE>
NONINTEREST INCOME
After giving effect to the $337,909 increase in noninterest income
attributable to SEBF, noninterest income grew $218,565 or 7.48% during 1995. The
current period improvement resulted from increases in service charges on deposit
accounts and commissions from the sale of credit life insurance; these increases
offset declines in book gains on sales of other real estate owned and investment
securities. Although SEBF contributed $58,822 in noninterest income for the
post-acquisition period, consolidated noninterest income declined $168,970 or
5.47% in 1994. Last year's decline resulted primarily from a $189,487 reduction
in book gains on sales of other real estate owned.
NONINTEREST EXPENSE
When compared to 1994 results, salaries and employee benefits were up
$730,474 or 14.35% in 1995. Of this increase, $582,068 or 80% was attributable
to SEBF; the remaining 20% was attributable to increased benefit accruals at
SEB. Salaries and employee benefits increased $449,250 or 9.68% in 1994 compared
to 1993. Approximately 36% of the increase was due to SEBF; a full year of
salaries and employee benefits on in-house legal counsel, employee costs
associated with the proof center now operating in Darien, and increased fringe
benefit costs at SEB were the major factors in the remaining increase a year
ago.
Net occupancy and equipment expense increased $285,274 or 18.73% in
1995 compared to 1994. Virtually all of the increase in net occupancy and
equipment expense was attributable to SEBF. During the prior year, net occupancy
and equipment expense increased a mere $14,031 or .93%. Other operating expense
was up $172,871 or 5.90% in 1995 compared to 1994. The $462,120 increase
attributable to SEBF was largely offset by the effective reduction in SEB's FDIC
assessment fees due both to the recapitalization refunds received on assessments
paid during the second and third quarters of 1995 and the lower assessment for
the fourth quarter. Management expects the reduction in FDIC assessment fees to
have a favorable impact on 1996 earnings: On a consolidated basis, assessment
fees are expected to decline from $294,724 in 1995 to only $4,000 in 1996. In
1994, other operating expense increased $324,613 or 12.47%. Approximately 40% of
the prior year increase was attributable to SEBF; the remaining increase was due
largely to legal and accounting fees associated with pending acquisitions. The
Company realized net losses of $38,790 on sales of investment securities in
1995. Various investment securities were sold during 1995 to enable the Company
to maintain its liquidity position and increase the overall rates of return of
the investment portfolio.
Income tax expense for 1995 totaled $1,838,341, up 53.30% over 1994
which was up $193,121 over 1993. Net income totaled $4,286,910, up $636,214 or
17.43% over 1994 which was up $125,361 or 3.56% over 1993. SEBF contributed
$112,209 in earnings during 1995; although these results were lower than
expected, management anticipates that SEBF's profitability will improve in 1996.
In 1994, SEBF had an insignificant loss due primarily to the conversion costs
necessarily associated with an acquisition. On a per share basis, net income was
$3.59, $3.06, and $2.95 in 1995, 1994, and 1993. The return on average assets
for the three most recent years was 1.50%, 1.47%, and 1.53%. The 15.70% return
on beginning equity for 1995 compares favorably with the 14.83% return in 1994.
<PAGE>
SELECTED STATISTICAL INFORMATION
The following tables set forth selected statistical information and should
be read in conjunction with the consolidated financial statements of
Southeastern Banking Corporation (Company) and Subsidiaries (Banks). Averages
referred to in the following statistical information generally represent average
daily balances.
TABLE 1 - AVERAGE BALANCES AND INTEREST RATES
Condensed average balance sheets for the years indicated are presented below:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
ASSETS 1995 1994 1993
------ --------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C>
Cash and due from banks $ 11,491 $ 9,549 $ 9,434
Interest-earning assets:
Loans, net (a) 157,128 128,706 109,487
Federal funds sold 9,084 5,407 6,051
Taxable investment securities 71,444 68,480 69,163
Tax-exempt investment securities 22,482 24,109 24,804
--------------------------------------------------
Total interest-earning assets 260,138 226,702 209,505
--------------------------------------------------
Premises and equipment, net 7,195 6,480 5,820
Other assets 8,292 6,343 5,942
Unrealized (losses) gains on investment securities, gross (1,058) (972)
--------------------------------------------------
TOTAL ASSETS $ 286,058 $ 248,102 $ 230,701
==================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 47,671 $ 38,146 $ 33,719
Interest-bearing liabilities:
Savings and interest-bearing demand deposits 80,567 85,407 78,901
Time deposits 121,566 94,614 91,047
U. S. Treasury demand note 1,386 1,051 1,167
Note payable 3,200 587
--------------------------------------------------
Total interest-bearing liabilities 206,719 181,659 171,115
--------------------------------------------------
Other liabilities 3,091 2,744 2,176
--------------------------------------------------
Total liabilities 257,481 222,549 207,010
--------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 1,492 1,492 1,469
Additional paid-in capital 4,376 4,376 4,061
Retained earnings 23,407 20,327 18,161
--------------------------------------------------
Realized stockholders' equity 29,275 26,195 23,691
Unrealized (losses) gains on investment securities, net of tax (698) (642)
--------------------------------------------------
Total stockholders' equity 28,577 25,553 23,691
--------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 286,058 $ 248,102 $ 230,701
==================================================
Total interest-earning assets $ 260,138 $ 226,702 $ 209,505
Total interest-bearing liabilities 206,719 181,659 171,115
--------------------------------------------------
Excess of interest-earning assets over
interest-bearing liabilities $ 53,419 $ 45,043 $ 38,390
==================================================
</TABLE>
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 1 - AVERAGE BALANCES AND INTEREST RATES
Condensed net interest earnings for the years indicated are presented below:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1995 1994 1993
--------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C>
INTEREST EARNED ON:
Loans, net (b) (c) $ 18,559 $ 14,395 $ 12,259
Federal funds sold 532 227 181
Taxable investment securities 4,203 3,739 4,104
Tax-exempt investment securities (b) 2,062 2,279 2,487
--------------------------------------------------
Total Interest Income 25,356 20,640 19,031
--------------------------------------------------
INTEREST PAID ON:
Savings and interest-bearing demand deposits 2,564 2,542 2,287
Time deposits 7,097 4,571 4,557
U. S. Treasury demand note 75 41 33
Note payable 254 44
--------------------------------------------------
Total Interest Expense 9,990 7,198 6,877
--------------------------------------------------
NET INTEREST INCOME $ 15,366 $ 13,442 $ 12,154
==================================================
AVERAGE PERCENTAGE EARNED ON:
Loans, net (b) (c) 11.81% 11.18% 11.19%
Federal funds sold 5.86% 4.20% 2.99%
Taxable investment securities 5.88% 5.46% 5.93%
Tax-exempt investment securities (b) 9.17% 9.45% 10.03%
--------------------------------------------------
TOTAL INTEREST-EARNING ASSETS 9.75% 9.10% 9.08%
--------------------------------------------------
AVERAGE PERCENTAGE PAID ON:
Savings and interest-bearing demand deposits 3.18% 2.98% 2.90%
Time deposits 5.84% 4.83% 5.01%
U. S. Treasury demand note 5.41% 3.90% 2.83%
Note payable 7.94% 7.42%
--------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 4.83% 3.96% 4.02%
--------------------------------------------------
NET YIELD (MARGIN) ON INTEREST-EARNING ASSETS 5.91% 5.93% 5.80%
==================================================
</TABLE>
(a) Average loans are shown net of unearned income and the allowance for loan
losses. Nonperforming loans are included.
(b) Interest income on tax-exempt loans and investment securities is presented
on a taxable-equivalent basis, using the Federal income tax rate of 34%. The
taxable-equivalent amounts included in the above table aggregated approximately
$749,000, $842,000, and $909,000 in 1995, 1994, and 1993.
(c) Interest income includes loan fees of approximately $827,000, $640,000, and
$539,000 in 1995, 1994, and 1993.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 2 - INTEREST DIFFERENTIAL
The following table summarizes the changes in interest income and interest
expense attributable to changes in balances and changes in rates for the year
ended December 31, 1995:
<TABLE>
<CAPTION>
Increase Due to Changes in Average
1995 1994 (Decrease) Balances (a) Rates (a)
------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans, net (b) $ 18,559 $ 14,395 $ 4,164 $ 3,179 $ 985
Federal funds sold 532 227 305 154 151
Taxable investment securities 4,203 3,739 464 162 302
Tax-exempt investment securities (b) 2,062 2,279 (217) (154) (63)
------------------------------------------------------------------------
Total Interest Income 25,356 20,640 4,716 3,341 1,375
------------------------------------------------------------------------
INTEREST PAID ON:
Savings and interest-bearing demand deposits 2,564 2,542 22 (144) 166
Time deposits 7,097 4,571 2,526 1,302 1,224
U. S. Treasury demand note 75 41 34 13 21
Note payable 254 44 210 194 16
------------------------------------------------------------------------
Total Interest Expense 9,990 7,198 2,792 1,365 1,427
------------------------------------------------------------------------
NET INTEREST INCOME $ 15,366 $ 13,442 $ 1,924 $ 1,976 ($52)
========================================================================
</TABLE>
(a) Changes in net interest income are attributed to either changes in average
balances (balance change) or changes in average rates (rate change) for earning
assets and sources of funds on which interest is received or paid. Balance
change is calculated as change in balance times the old rate while rate change
is change in rate times the old balance. The rate/balance change, change in rate
times change in balance, has been allocated to the change in rate.
(b) Interest income on tax-exempt loans and investment securities is presented
on a taxable-equivalent basis, using the Federal income tax rate of 34%.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 2 - INTEREST DIFFERENTIAL
The following table summarizes the changes in interest income and interest
expense attributable to changes in balances and changes in rates for the year
ended December 31, 1994:
<TABLE>
<CAPTION>
Increase Due to Changes in Average
1994 1993 (Decrease) Balances (a) Rates (a)
-----------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans, net (b) $ 14,395 $ 12,259 $ 2,136 $ 2,150 ($14)
Federal funds sold 227 181 46 (19) 65
Taxable investment securities 3,739 4,104 (365) (41) (324)
Tax-exempt investment securities (b) 2,279 2,487 (208) (70) (138)
------------------------------------------------------------------------
Total Interest Income 20,640 19,031 1,609 2,020 (411)
------------------------------------------------------------------------
INTEREST PAID ON:
Savings and interest-bearing demand deposits 2,542 2,287 255 189 66
Time deposits 4,571 4,557 14 179 (165)
U. S. Treasury demand note 41 33 8 (3) 11
Note payable 44 0 44 0 44
------------------------------------------------------------------------
Total Interest Expense 7,198 6,877 321 365 (44)
------------------------------------------------------------------------
NET INTEREST INCOME $ 13,442 $ 12,154 $ 1,288 $ 1,655 ($367)
========================================================================
</TABLE>
(a) Changes in net interest income are attributed to either changes in average
balances (balance change) or changes in average rates (rate change) for earning
assets and sources of funds on which interest is received or paid. Balance
change is calculated as change in balance times the old rate while rate change
is change in rate times the old balance. The rate/balance change, change in rate
times change in balance, has been allocated to the change in rate.
(b) Interest income on tax-exempt loans and investment securities is presented
on a taxable-equivalent basis, using the Federal income tax rate of 34%.
TABLE 3 - INVESTMENT SECURITIES
Investment securities available for sale (carried at estimated fair value) and
held to maturity (carried at amortized cost) at December 31, 1995, 1994, and
1993 are as follows:
<TABLE>
<CAPTION>
1995
-------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- -------------- ------------- ------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Available for sale:
U. S. Treasury and
U.S. Government agencies $ 60,863 $ 492 ($174) $ 61,181
Mortgage-backed securities 9,564 80 (74) 9,570
Equity securities 214 214
------------- -------------- ------------- ------------
70,641 572 (248) 70,965
Held to maturity:
States and political subdivisions 22,780 1,196 (15) 23,961
Other securities 401 1 402
------------- -------------- ------------- ------------
23,181 1,197 (15) 24,363
============= ============== ============= ============
Total investment securities $ 93,822 $ 1,769 ($263) $ 95,328
============= ============== ============= ============
</TABLE>
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
<TABLE>
<CAPTION>
1994
-------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- -------------- ------------- ------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Available for sale:
U. S. Treasury and
U.S. Government agencies $ 58,803 $ 1 ($2,193) $ 56,611
Mortgage-backed securities 10,569 15 (662) 9,922
Equity securities 154 154
------------- -------------- ------------- ------------
69,526 16 (2,855) 66,687
Held to maturity:
States and political subdivisions 24,257 393 (639) 24,011
Other securities 404 (1) 403
------------- -------------- ------------- ------------
24,661 393 (640) 24,414
============= ============== ============= ============
Total investment securities $ 94,187 $ 409 ($3,495) $ 91,101
============= ============== ============= ============
</TABLE>
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 3 - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
1993
---------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Available for sale:
U. S. Treasury and
U.S. Government agencies $ 55,843 $ 687 ($72) $ 56,458
Mortgage-backed securities 11,336 155 (46) 11,445
Equity securities 75 75
--------------------------------------------------
67,254 842 (118) 67,978
Held to maturity:
States and political subdivisions 25,286 1,866 (18) 27,134
Other securities 407 24 431
--------------------------------------------------
25,693 1,890 (18) 27,565
==================================================
Total investment securities $ 92,947 $ 2,732 ($136) $ 95,543
==================================================
</TABLE>
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
The following table shows the distribution of maturities and the weighted
average yields of each type of investment security on an amortized cost basis at
December 31, 1995:
<TABLE>
<CAPTION>
After One Year but After Five Years but
Within One Year Within Five Years Within Ten Years After Ten Years
--------------- ----------------- ---------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
----------------------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government agencies $ 19,268 5.14% $ 41,333 6.19% $ 0 0.00% $ 262 4.58%
Mortgage-backed securities (a) 678 8.18% 5,208 6.57% 3,678 6.16% 0 0.00%
States and political subdivisions (b) 2,200 8.28% 9,152 8.69% 8,042 8.55% 3,386 9.41%
Other securities 401 7.32% 0 0.00% 0 0.00% 214 7.28%
----------------------------------------------------------------------------------------
Total $ 22,547 5.58% $ 55,693 6.64% $ 11,720 7.80% $ 3,862 8.96%
========================================================================================
</TABLE>
There are no investments in the obligations of any state or municipality which
exceed 10% of the Company's stockholders' equity at December 31, 1995.
(a) Distribution of maturities for mortgage-backed securities is based on
expected final maturities which may be different from the contractual terms.
(b) The weighted average yield for tax-exempt securities has been determined
using taxable-equivalent rates.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 4 - LOANS
Loans outstanding are presented by type below:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 76,453 $ 69,574 $ 36,191 $ 35,972 $ 30,565
Real estate - construction 6,260 5,944 2,463 2,011 1,663
Real estate - mortgage 53,509 52,954 49,849 40,361 43,889
Consumer, including credit cards 33,006 31,750 30,196 27,842 31,019
-------------------------------------------------------------------------
Loans, gross 169,228 160,222 118,699 106,186 107,136
Less:
Unearned income 3,843 3,950 4,286 5,135 7,327
Allowance for loan losses 3,532 3,257 2,475 1,904 1,630
=========================================================================
Loans, net $ 161,853 $ 153,015 $ 111,938 $ 99,147 $ 98,179
=========================================================================
</TABLE>
TABLE 5 - LOAN MATURITY AND INTEREST RATE SENSITIVITY
The amount of total loans outstanding at December 31, 1995, based on remaining
contractual repayments of principal, are shown by maturity and interest rate
sensitivity in the following table:
<TABLE>
<CAPTION>
Interest rate sensitivity
------------------------------
Predetermined Floating
Rate Rate
------------------------------
(amounts in thousands)
<S> <C> <C>
Within one year $ 39,204 $ 62,724
After one year but within five years 46,257 -
After five years 21,043 -
------------------------------
Total loans $ 106,504 $ 62,724
==============================
</TABLE>
The above maturity schedule is not necessarily indicative of future principal
reductions since each loan is evaluated at maturity and, in many instances, is
renewed in part or in total.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 6 - RISK ELEMENTS OF LOANS
The following table presents information concerning nonperforming loans for each
of the last five years:
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 632 $ 2,214 $ 1,628 $ 1,626 $ 837
Past due loans still accruing 1,245 1,009 962 1,233 1,396
--------------------------------------------------------------
Total nonperforming loans 1,877 3,223 2,590 2,859 2,233
Foreclosed real estate 1,393 534 723 977 1,065
==============================================================
Total nonperforming loans and foreclosed real estate $ 3,270 $ 3,757 $ 3,313 $ 3,836 $ 3,298
==============================================================
</TABLE>
Nonperforming loans comprise: (a) loans classified as nonaccrual when it appears
that future collection of principal or interest according to contractual terms
may be doubtful ("nonaccrual loans"); (b) loans which are contractually past due
90 days or more as to interest or principal payments ("past due"); and (c) loans
whose terms have been renegotiated to provide for a reduction or deferral of
either interest or principal because of a deterioration in the financial
position of the borrower ("renegotiated loans"). Foreclosed real estate
represents real property acquired by actual foreclosure or directly by title or
deed transfer in settlement of debt.
The Company's policy is to continue accruing interest on consumer loans that are
contractually past due 90 days or more, if in management's opinion the interest
is collectible, up to the time of charging the loan amount against the allowance
for loan losses.
The Company's policy is to change the status of commercial, financial,
agricultural, and real estate loans to nonaccrual status when the loan becomes
past due 90 days or more and management determines that the ultimate
collectibility of the loan is doubtful or the borrower has declared bankruptcy.
<PAGE>
The accrued interest on any loan switched to nonaccrual status is expensed. All
nonaccrual loans are reduced to the lesser of the market value of the underlying
real estate/collateral as determined by an independent appraisal as of the date
of foreclosure or the principal balance of the loan before being placed on
nonaccrual status. Unrecognized income on nonaccrual loans totaled approximately
$137,000, $194,000, $168,000, $133,000, and $64,000 in 1995, 1994, 1993, 1992,
and 1991.
Management is unaware of any potential problem loans at this time which are not
reflected in the totals above.
At December 31, 1995, the Company had no concentration of loans to borrowers
engaged in any single industry that exceeded 10% of total loans.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 7 - ALLOWANCE FOR LOAN LOSSES
The following table presents information concerning the allowance for loan
losses for each of the last five years:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning of year $ 3,257 $ 2,475 $ 1,904 $ 1,630 $ 1,391
Allowance of purchased bank 458
Loans charged-off during year:
Commercial, financial, and agricultural (752) (744) (220) (453) (268)
Real estate - construction 0 0 0 0 (11)
Real estate - mortgage (135) (50) (46) (62) (97)
Consumer, including credit cards (589) (533) (728) (586) (705)
--------------------------------------------------------------
Total loans charged-off during year (1,476) (1,327) (994) (1,101) (1,081)
--------------------------------------------------------------
Recoveries during year of loans previously charged-off:
Commercial, financial, and agricultural 156 161 99 119 66
Real estate - construction 0 0 0 0 0
Real estate - mortgage 34 14 21 20 44
Consumer, including credit cards 361 346 395 436 450
--------------------------------------------------------------
Total loans recovered during year 551 521 515 575 560
--------------------------------------------------------------
Net loans charged-off during year (925) (806) (479) (526) (521)
Provision charged to operating expense during year 1,200 1,130 1,050 800 760
--------------------------------------------------------------
Allowance for loan losses at end of year $ 3,532 $ 3,257 $ 2,475 $ 1,904 $ 1,630
==============================================================
Amount of net loans outstanding at end of year $ 161,853 $ 153,015 $ 111,938 $ 99,147 $ 98,179
==============================================================
Average amount of net loans outstanding $ 157,128 $ 128,706 $ 109,487 $ 99,526 $ 92,722
==============================================================
Ratio of net loans charged-off during year to average
net loans outstanding for year 0.59% 0.63% 0.44% 0.53% 0.56%
==============================================================
</TABLE>
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 8 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The Company has allocated the allowance for loan losses according to the amount
deemed to be reasonably necessary to absorb potential losses within the loan
categories summarized in the table below:
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------
(amounts in thousands)
ALLOCATION OF ALLOWANCE FOR
LOAN LOSSES BY LOAN TYPE
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 1,236 $ 1,377 $ 766 $ 609 $ 456
Real estate - construction 71 56 50 38 33
Real estate - mortgage 353 842 743 666 668
Consumer, including credit cards 706 982 916 591 473
Unallocated (a) 1,166
------------------------------------------------------------------
Total $ 3,532 $ 3,257 $ 2,475 $ 1,904 $ 1,630
==================================================================
ALLOCATION OF ALLOWANCE
FOR LOAN LOSSES AS A
PERCENT OF TOTAL ALLOWANCE
- ----------------------------------------
Commercial, financial, and agricultural 35% 42% 31% 32% 28%
Real estate - construction 2% 2% 2% 2% 2%
Real estate - mortgage 10% 26% 30% 35% 41%
Consumer, including credit cards 20% 30% 37% 31% 29%
Unallocated (a) 33%
------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
==================================================================
YEAR-END LOAN TYPES AS
A PERCENT OF TOTAL LOANS
- ----------------------------------------
Commercial, financial, and agricultural 45% 43% 30% 34% 28%
Real estate - construction 4% 4% 2% 2% 2%
Real estate - mortgage 32% 33% 42% 38% 41%
Consumer, including credit cards 19% 20% 26% 26% 29%
------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
==================================================================
</TABLE>
The Company maintains an allowance for loan losses, available to absorb
potential losses in the loan portfolio, at a level determined by management
based on review of all loans, general economic conditions of the Company's trade
areas, and historical loan loss experience. These factors are analyzed and
reviewed on a continual basis to determine if any changes to the monthly
provision for possible loan losses should be made.
(a) In 1994 and prior years, management allocated the allowance for loan losses
based on historical net charge-offs and year-end loan types. No portion
of the allowance was shown as unallocated.
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 9 - DEPOSITS
The average balances and average interest rates paid on deposits are presented
by category below:
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C>
AVERAGE BALANCES
Noninterest-bearing deposits $ 47,671 $ 38,146 $ 33,719
Savings and interest-bearing demand deposits 80,567 85,407 78,901
Time deposits 121,566 94,614 91,047
------------------------------------------------
Total $ 249,804 $ 218,167 $ 203,667
================================================
AVERAGE INTEREST RATES PAID
Noninterest-bearing deposits - - -
Savings and interest-bearing demand deposits 3.18% 2.98% 2.90%
Time deposits 5.84% 4.83% 5.01%
------------------------------------------------
Total 3.87% 3.26% 3.36%
================================================
</TABLE>
TABLE 10 - MATURITY OF CERTIFICATES OF DEPOSIT OF $100,000 OR MORE
The maturities of certificates of deposit of $100,000 or more at December 31,
1995 are presented below:
Certificates
of Deposit
---------------
(in thousands)
Three months or less $ 7,094
Over three months through six months 5,587
Over six months through one year 11,228
Over one year 12,839
---------------
Total $ 36,748
===============
<PAGE>
SELECTED STATISTICAL INFORMATION, CONTINUED
TABLE 11 - RETURN ON EQUITY AND ASSETS
Selected ratios for measurement of net income and equity are presented below:
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Return on average assets (b) 1.50% 1.47% 1.53%
Return on average equity (b) 14.64% 13.94% 14.88%
Dividend payout ratio (a) 23.96% 26.47% 25.76%
Average equity to average assets ratio (b) 10.21% 10.53% 10.27%
</TABLE>
(a) The dividend payout ratio has been restated to give retroactive effect to
the stock dividend paid on March 15, 1993.
(b) These ratios exclude the effects of mark-to-market accounting for investment
securities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item commences on page 25. The Index to the
Consolidated Financial Statements is located on page 48.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
DELOITTE &
TOUCHE LLP Certified Public Accountants Suite 2801
Independent Square
One Independent Drive
Jacksonville, Florida 32202-5034
Telephone: (904) 356-0011
Facsimile: (904) 355-9104
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Southeastern Banking Corporation
Darien, Georgia
We have audited the accompanying consolidated balance sheets of Southeastern
Banking Corporation and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Southeastern Banking Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
December 31, 1993, the Company changed its method of accounting for investment
securities to conform with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
/s/ Deloitte & Touche LLP
January 19, 1996
<PAGE>
SOUTHEASTERN BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---- ----
<S> <C> <C>
CASH AND DUE FROM BANKS, including reserve requirements
of approximately $3,331,000 in 1995 and $3,452,000 in 1994 $ 17,257,615 $ 18,523,647
FEDERAL FUNDS SOLD 8,030,000 4,720,000
------------- -------------
Cash and cash equivalents 25,287,615 23,243,647
INVESTMENT SECURITIES:
Held to maturity (market value of approximately $24,363,000
and $24,414,000 at December 31, 1995 and 1994) 23,180,696 24,661,034
Available for sale, at market value 70,964,992 66,687,545
------------- -------------
Total investment securities 94,145,688 91,348,579
LOANS, GROSS 169,227,586 160,221,819
Unearned income (3,842,284) (3,950,090)
Allowance for loan losses (3,531,872) (3,257,000)
------------- -------------
Loans, net 161,853,430 153,014,729
PREMISES AND EQUIPMENT, net 7,123,150 7,311,116
INTANGIBLE ASSETS 2,995,981 3,328,426
OTHER ASSETS 5,549,918 5,567,656
------------- -------------
TOTAL ASSETS $ 296,955,782 $ 283,814,153
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
DEPOSITS:
Noninterest-bearing deposits $ 55,584,441 $ 48,216,342
Interest-bearing deposits 203,955,290 202,813,553
------------- -------------
259,539,731 251,029,895
U.S. TREASURY DEMAND NOTE 448,054 635,347
NOTE PAYABLE 2,525,000 3,500,000
OTHER LIABILITIES 3,670,871 3,224,461
------------- -------------
Total liabilities 266,183,656 258,389,703
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 14 and 15)
STOCKHOLDERS' EQUITY:
Common stock - $1.25 par value; authorized 10,000,000 shares;
issued and outstanding 1,193,599 shares 1,491,998 1,491,998
Additional paid-in capital 4,375,721 4,375,721
Retained earnings 24,690,512 21,430,096
------------- -------------
Realized stockholders' equity 30,558,231 27,297,815
Unrealized gains (losses) on investment securities, net of tax 213,895 (1,873,365)
------------- -------------
Total stockholders' equity 30,772,126 25,424,450
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 296,955,782 $ 283,814,153
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SOUTHEASTERN BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
1995 1994 1993
----------- ----------- -----------
INTEREST INCOME:
Loans, including fees $18,506,328 $14,320,471 $12,182,868
Federal funds sold 532,226 227,218 180,774
Investment securities:
Taxable 4,202,698 3,739,159 4,104,759
Tax-exempt 1,365,990 1,511,230 1,653,828
----------- ----------- -----------
Total interest income 24,607,242 19,798,078 18,122,229
----------- ----------- -----------
INTEREST EXPENSE:
Deposits 9,661,112 7,113,234 6,844,266
U.S. Treasury demand note 75,099 40,657 32,747
Note payable to bank 254,164 43,625
----------- ----------- -----------
Total interest expense 9,990,375 7,197,516 6,877,013
----------- ----------- -----------
Net interest income 14,616,867 12,600,562 11,245,216
PROVISION FOR LOAN LOSSES 1,200,000 1,130,000 1,050,000
----------- ----------- -----------
Net interest income after
provision for loan losses 13,416,867 11,470,562 10,195,216
----------- ----------- -----------
NONINTEREST INCOME:
Service charges on deposit accounts 2,693,591 2,225,619 2,216,411
Investment securities gains, net 61,261 14,437
Other operating income 783,938 634,175 859,177
----------- ----------- -----------
Total noninterest income 3,477,529 2,921,055 3,090,025
----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits 5,820,415 5,089,941 4,640,691
Occupancy and equipment, net 1,808,689 1,523,415 1,509,384
Other operating expense 3,101,251 2,928,380 2,603,767
Investment securities losses, net 38,790
----------- ----------- -----------
Total noninterest expense 10,769,145 9,541,736 8,753,842
----------- ----------- -----------
Income before income taxes 6,125,251 4,849,881 4,531,399
INCOME TAX EXPENSE 1,838,341 1,199,185 1,006,064
----------- ----------- -----------
Net income $ 4,286,910 $ 3,650,696 $ 3,525,335
=========== =========== ===========
NET INCOME PER COMMON SHARE $ 3.59 $ 3.06 $ 2.95
=========== =========== ===========
See notes to consolidated financial statements.
<PAGE>
SOUTHEASTERN BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Unrealized
Additional Gains (Losses) on
Common Paid-In Retained Investment Securities,
Stock Capital Earnings Net of Tax Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 1,356,470 $ 2,489,161 $ 18,151,870 $ 21,997,501
Net income 3,525,335 3,525,335
Stock dividend 135,528 1,886,560 (2,023,855) (1,767)
Cash dividends declared ($.76 per share) (907,135) (907,135)
Unrealized gains on investment securities,
net of tax $ 477,927 477,927
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1993 1,491,998 4,375,721 18,746,215 477,927 25,091,861
Net income 3,650,696 3,650,696
Cash dividends declared ($.81 per share) (966,815) (966,815)
Change in unrealized gains (losses) on
investment securities, net of tax (2,351,292) (2,351,292)
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1994 1,491,998 4,375,721 21,430,096 (1,873,365) 25,424,450
Net income 4,286,910 4,286,910
Cash dividends declared ($.86 per share) (1,026,494) (1,026,494)
Change in unrealized gains (losses) on
investment securities, net of tax 2,087,260 2,087,260
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1995 $ 1,491,998 $ 4,375,721 $ 24,690,512 $ 213,895 $ 30,772,126
============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHEASTERN BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,286,910 $ 3,650,696 $ 3,525,335
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 1,200,000 1,130,000 1,050,000
Depreciation 897,034 822,880 773,889
Amortization and accretion, net 252,328 275,983 261,301
Deferred income tax benefit (70,511) (80,107) (149,310)
Investment securities losses (gains), net 38,790 (61,261) (14,437)
Net gain on sales of other real estate owned (75,292) (132,116) (321,603)
Changes in assets and liabilities:
(Increase) decrease in other assets (158,667) 85,494 (563,311)
Increase (decrease) in other liabilities 422,538 (25,697) 182,235
------------ ------------ ------------
Net cash provided by operating activities 6,793,130 5,665,872 4,744,099
------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities:
Held to maturity (Held for investment in 1993) 1,806,300 3,229,100 18,402,903
Available for sale 24,795,787 17,676,153
Proceeds from sales of investment securities:
Available for sale (Held for investment in 1993) 7,930,625 4,991,719 6,859,399
Proceeds from sales of other real estate owned 217,472 576,250 497,316
Purchases of investments securities:
Held to maturity (Held for investment in 1993) (352,792) (2,192,459) (40,256,019)
Available for sale (33,836,891) (15,645,788)
Net increase in loans (11,054,896) (22,625,222) (13,811,592)
Additions to premises and equipment, net (599,686) (819,300) (1,029,033)
Purchases of real estate for resale (400,400)
Cash and cash equivalents paid in excess of cash acquired for purchase of
United Citizens Bank of Alachua County (28,924)
------------ ------------ ------------
Net cash used in investing activities (11,094,081) (14,838,471) (29,737,426)
------------ ------------ ------------
FINANCING ACTIVITIES:
Net (decrease) increase in demand, NOW, and savings deposits (5,381,983) 12,554,658 13,179,927
Net increase in certificates of deposit 13,891,819 2,520,467 11,030,845
Net (decrease) increase in U.S. Treasury demand note (187,293) (2,002,298) 626,272
Proceeds from issuance of note payable 3,500,000
Payments on note payable (975,000)
Cash dividends paid (1,002,624) (942,943) (853,585)
------------ ------------ ------------
Net cash provided by financing activities 6,344,919 15,629,884 23,983,459
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,043,968 6,457,285 (1,009,868)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23,243,647 16,786,362 17,796,230
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 25,287,615 $ 23,243,647 $ 16,786,362
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Southeastern Banking Corporation and subsidiaries, Southeastern Bank and
Southeastern Bank of Florida (collectively the "Company"), provide a full range
of banking services to individual and corporate customers in southeast Georgia
and northeast and central Florida. The consolidated financial statements include
the accounts of Southeastern Banking Corporation and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practice within the banking
industry. The following is a description of the more significant accounting and
reporting policies:
CASH EQUIVALENTS - Cash equivalents include due from banks and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
INVESTMENT SECURITIES - Prior to December 31, 1993, investment securities were
carried at cost adjusted for principal payments on mortgage-backed securities,
amortization of premiums, and accretion of discounts. Investment securities were
carried at this amortized cost basis as the Company had the intent and ability
to hold its investment securities to maturity. At December 31, 1993, the Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities (SFAS No. 115)," which
addresses the accounting and reporting for certain investments in debt and
equity securities. This Statement requires that debt securities which the
Company has the positive intent and ability to hold to maturity be classified as
held to maturity and reported at amortized cost. Securities are classified as
trading securities if bought and held principally for the purpose of selling
them in the near future. No investments are held for trading purposes.
Securities not classified as held to maturity are classified as available for
sale and reported at fair value with unrealized gains and losses excluded from
earnings and reported net of tax as a separate component of stockholders' equity
until realized.
The effect of initial adoption of SFAS No. 115 was to increase stockholders'
equity as of December 31, 1993 by $477,927, net of income taxes of $246,205.
Gains and losses on sales of investment securities are recognized upon
disposition based upon the adjusted cost of the specific security.
LOANS - Loans are reported at the principal amount outstanding, net of unearned
income and the allowance for loan losses. Interest income on loans is generally
recognized on a level-yield basis. Interest income on loans which are made on
the discount basis is recognized using the sum-of-the-months-digits method which
does not differ materially from the level-yield basis.
Loans are generally placed on a nonaccrual status when the full timely
collection of interest or principal becomes uncertain or they become
contractually in default for 90 days or more as to either interest or principal,
unless they are both well-secured and in the process of collection. Interest
previously accrued but uncollected on such loans is reversed and charged against
current income when the loan is estimated to be uncollectible. Cash receipts on
nonaccrual loans are applied first to outstanding principal balances and then to
interest.
ALLOWANCE FOR LOAN LOSSES - Additions to the allowance for loan losses are based
on management's evaluation of the loan portfolio under current economic
conditions, past loan loss experience, value of underlying collateral, and other
factors which, in management's judgment, deserve recognition in estimating loan
losses. Loans are charged off when, in the opinion of management, such loans are
deemed to be uncollectible. Recognized losses are charged to the allowance and
subsequent recoveries are added. Although the Company believes it has a sound
basis for estimating the amount needed for the allowance for loan losses, actual
charge-offs are highly dependent upon future events, including the economies of
the areas in which the Company lends.
In 1993, the Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan (SFAS 114)." This
Statement addresses the accounting by creditors for impairment of certain loans
and requires that certain impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate,
observable market price, or the fair value of the collateral, if the loan is
collateral dependent. Adoption of this statement did not have a material effect
on results of operations due to the Company's continuing policy of measuring
loan impairment based on the fair value of the loan's underlying collateral,
which is consistent with the methods prescribed in SFAS 114.
PREMISES AND EQUIPMENT - Premises and equipment are reported at cost less
accumulated depreciation and amortization. Depreciation is computed using the
straight-line and declining balance methods over the estimated useful lives of
the related assets.
INTANGIBLE ASSETS - Intangible assets consist of deposit base premiums and
goodwill. The deposit base premiums are being amortized using the straight-line
method over the estimated useful life of 14 years. Goodwill is being amortized
using the straight-line method over periods ranging from 15 to 20 years.
INCOME TAXES - The Company files consolidated income tax returns where
permissible. Income tax expense (benefit) is allocated to each member of the
consolidated group on the basis of their respective taxable income or loss
included in the consolidated income tax returns. The Company uses an asset and
liability approach to financial accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized based on differences between
financial statement and tax bases of assets and liabilities using presently
enacted tax rates.
LOAN ORIGINATION FEES AND COSTS - Loan origination fees and certain direct loan
origination costs are normally capitalized and recognized as an adjustment to
the yield on the related loans. As the net amount of loan origination fees for
the years ended December 31, 1995, 1994 and 1993 was not significant, no amounts
have been capitalized or deferred.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - In the normal course of business, the
Company originates financial instruments with off-balance sheet risk to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. These commitments
involve varying degrees of risk in excess of the amounts recognized in the
consolidated balance sheets. Commitments to extend credit represent legally
binding agreements to lend to a customer with fixed expiration dates or other
termination clauses. Since many commitments expire without being funded, total
commitment amounts do not necessarily represent future liquidity requirements.
The amount of collateral obtained is based on management's credit evaluation of
the customer. Collateral held varies but may include accounts receivable,
inventory, and property, plant and equipment. Standby letters of credit are
conditional commitments issued by the Company guaranteeing the performance of a
customer to a third party.
EARNINGS PER COMMON SHARE - Earnings per common share are based upon the
weighted average number of common shares outstanding during each year.
NOTE 2 - ACQUISITIONS
On October 14, 1994, the Company acquired 100% of the outstanding common stock
of United Citizens Bank of Alachua County, Alachua, Florida (Alachua) under the
name Southeastern Bank of Florida. The aggregate consideration paid for Alachua
was approximately $5,139,000. The source of funds applied toward the purchase of
Alachua was cash of the Company as well as a term loan further described in Note
8. The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price was allocated to assets acquired and
liabilities assumed based on the estimated fair values of such assets and
liabilities at the acquisition date. The purchase price resulted in an excess of
costs over net assets acquired of approximately $1,800,000 which is being
amortized over a period of 15 years. The results of operations of the acquired
bank have been included in the consolidated financial statements from the date
of acquisition forward. The acquisition did not have a material effect on the
consolidated financial statements.
On January 28, 1993, the Company acquired two branches of Bank South, N.A. The
Company received cash, loans, and property and equipment with fair values of
approximately $27,970,000 while assuming deposit and other liabilities totaling
approximately $28,430,000. The excess of liabilities assumed over net assets
acquired was recorded as a deposit premium.
<PAGE>
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
Certain supplemental disclosure of cash flow information and noncash investing
and financing activities for the three years ended December 31, 1995 follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
Interest paid to depositors $8,943,314 $7,160,921 $6,654,243
========== ========== ==========
Interest paid on note payable to bank $ 254,367 $ 42,896 $ --
========== ========== ==========
Income taxes $1,756,000 $1,324,687 $1,410,500
========== ========== ==========
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Loans foreclosed $1,420,184 $ 552,976 $ 734,942
========== ========== ==========
Loans made in connection with sales of foreclosed
real estate $ 404,000 $ 467,150 $ 649,800
========== ========== ==========
Stock dividend $2,022,088
==========
</TABLE>
<PAGE>
NOTE 4 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and
U.S. Government agencies $ 60,862,532 $ 492,500 $ (174,102) $ 61,180,930
Mortgage-backed securities 9,564,076 80,060 (74,374) 9,569,762
Equity securities 214,300 214,300
------------ ------------ ------------ ------------
70,640,908 572,560 (248,476) 70,964,992
Held to maturity:
States and political subdivisions 22,780,130 1,196,451 (15,573) 23,961,008
Corporate bonds 400,566 1,474 402,040
------------ ------------ ------------ ------------
23,180,696 1,197,925 (15,573) 24,363,048
------------ ------------ ------------ ------------
Total investment securities $ 93,821,604 $ 1,770,485 $ (264,049) $ 95,328,040
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1994
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and
U.S. Government agencies $ 58,802,452 $ 1,351 $ (2,192,807) $ 56,610,996
Mortgage-backed securities 10,569,476 14,755 (661,732) 9,922,499
Equity securities 154,050 154,050
------------ ------------ ------------ ------------
69,525,978 16,106 (2,854,539) 66,687,545
Held to maturity:
States and political subdivisions 24,257,028 393,109 (639,369) 24,010,768
Corporate bonds 404,006 (648) 403,358
------------ ------------ ------------ ------------
24,661,034 393,109 (640,017) 24,414,126
------------ ------------ ------------ ------------
Total investment securities $ 94,187,012 $ 409,215 $ (3,494,556) $ 91,101,671
============ ============ ============ ============
</TABLE>
<PAGE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties. The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------- -------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due within one year $19,268,130 $19,260,309 $ 2,601,397 $ 2,691,120
Due after one year through five years 41,332,402 41,726,345 9,150,995 9,526,841
Due after five years through ten years 8,041,870 8,508,858
Due after ten years 262,000 194,276 3,386,434 3,636,229
----------- ----------- ----------- -----------
60,862,532 61,180,930 23,180,696 24,363,048
Mortgage-backed securities 9,564,076 9,569,762
----------- ----------- ----------- -----------
Total $70,426,608 $70,750,692 $23,180,696 $24,363,048
=========== =========== =========== ===========
</TABLE>
Gross gains of $10,371, $8,760 and $49,975 were realized on sales of investment
securities occurring during 1995, 1994 and 1993, respectively. Gross losses of
$68,011, $17,271 and $0 were realized on sales of investment securities
classified as available for sale during 1995, 1994 and 1993, respectively.
Investment securities with an aggregate carrying value of approximately
$32,993,000 and $42,168,000 at December 31, 1995 and 1994, respectively, were
pledged to secure public deposits and for other purposes as required by law.
NOTE 5 - LOANS
Loans outstanding, by classification, are summarized as follows:
December 31
---------------------------
1995 1994
------------ ------------
Commercial, financial and agricultural $ 76,452,520 $ 69,573,811
Real estate - construction 6,259,931 5,944,345
Real estate - mortgage 53,509,163 52,953,787
Consumer, including credit cards 33,005,972 31,749,876
------------ ------------
Loans, gross $169,227,586 $160,221,819
============ ============
The following is a summary of transactions in the allowance for loan losses:
Years Ended December 31
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
Balance at beginning of year $ 3,257,000 $ 2,474,962 $ 1,904,419
Reserve of purchased bank 458,112
Provision for loan losses 1,200,000 1,130,000 1,050,000
Charge-offs (1,476,285) (1,326,666) (994,486)
Recoveries 551,157 520,592 515,029
----------- ----------- -----------
Net charge-offs (925,128) (806,074) (479,457)
----------- ----------- -----------
Balance at end of year $ 3,531,872 $ 3,257,000 $ 2,474,962
=========== =========== ===========
The Company's primary lending area is southeast Georgia and northeast and
central Florida. Although the Company's loan portfolio is diversified, a
significant portion of its loans are collateralized by real estate. It is the
Bank's lending policy to collateralize real estate loans based upon certain loan
to appraised value ratios.
Nonaccrual loans totaled approximately $632,000, $2,214,000 and $l,628,000 as of
December 31, 1995, 1994 and 1993. Unrecognized interest income on such loans
during the years ended December 31, 1995, 1994 and 1993 totaled approximately
$137,000, $194,000 and $168,000.
The Company's subsidiaries engage in customary banking transactions and have
outstanding loans to directors, executive officers, principal shareholders, and
their affiliates. Such transactions are made in the ordinary course of business
on substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other customers, and do not, in the opinion of management, involve more
than normal credit risk or present other unfavorable features. The aggregate
amount of loans to such related parties at December 31, 1995 was approximately
$1,962,000.
<PAGE>
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment, net of depreciation and amortization, are summarized at
December 31, 1995 and 1994 as follows:
1995 1994
------------ ------------
Land $ 851,257 $ 851,257
Buildings and leasehold improvements 6,275,341 6,248,199
Furniture and equipment 4,467,873 4,196,148
Construction in progress 157,289 21,438
------------ ------------
11,751,760 11,317,042
Accumulated depreciation and amortization (4,628,610) (4,005,926)
------------ ------------
Premises and equipment, net $ 7,123,150 $ 7,311,116
============ ============
NOTE 7 - INTEREST-BEARING DEPOSITS
The following is a summary of interest-bearing deposits by classification
at December 31, 1995 and 1994:
1995 1994
------------ ------------
Interest-bearing demand deposits $ 52,162,251 $ 61,255,370
Savings 25,839,803 29,496,766
Time certificates under $100,000 89,205,554 80,440,023
Time certificates $100,000 or more 36,747,682 31,621,394
------------ ------------
Total interest-bearing deposits $203,955,290 $202,813,553
============ ============
Interest expense on time certificates of $100,000 or more approximated
$2,057,000, $1,136,000 and $1,008,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
NOTE 8 - NOTE PAYABLE
The note payable at December 31, 1995 and 1994 consists of a term loan with
principal payments of $425,000 due annually through the September 30, 2004
maturity. Interest is payable currently at 7.5%. The note is collateralized by
100% of the outstanding common stock of Southeastern Bank of Florida.
NOTE 9 - INCOME TAX EXPENSE
The components of income tax expense are as follows:
1995 1994 1993
----------- ----------- -----------
Federal:
Current tax expense $ 1,769,566 $ 1,207,506 $ 1,129,374
Deferred tax benefit (70,511) (80,107) (149,310)
----------- ----------- -----------
1,699,055 1,127,399 980,064
State:
Current tax expense 139,286 71,786 26,000
----------- ----------- -----------
$ 1,838,341 $ 1,199,185 $ 1,006,064
=========== =========== ===========
<PAGE>
The following schedule summarizes the differences between the actual income tax
expense and the income tax expense that would result from applying the Federal
statutory income tax rate:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Taxes at Federal statutory rate $ 2,035,228 $ 1,624,552 $ 1,531,835
Increase (decrease) resulting from:
Tax-exempt interest income, net (440,868) (505,930) (547,770)
Other, net 152,712 33,184 4,839
State income taxes, net of federal benefit 91,269 47,379 17,160
----------- ----------- -----------
Total income tax expense $ 1,838,341 $ 1,199,185 $ 1,006,064
=========== =========== ===========
</TABLE>
<PAGE>
The components of net deferred tax assets (liabilities) at December 31, 1995 and
1994 are as follows:
1995 1994
--------- ---------
Deferred tax assets:
Allowance for loan losses $ 832,905 $ 746,890
Foreclosed real estate 67,498 86,124
--------- ---------
Total deferred tax assets 900,403 833,014
Deferred tax liability:
Accretion of discounts on investment securities (75,865) (78,987)
--------- ---------
Net deferred tax asset $ 824,538 $ 754,027
========= =========
NOTE 10 - EMPLOYEE BENEFIT PLAN
The Company has a noncontributory profit sharing plan which covers substantially
all employees. Under the terms of the plan, the Company's contributions are
discretionary, but are not to exceed an amount determined by a formula provided
in the plan or the amount deductible for income tax purposes. Total
contributions expensed under this plan totaled $282,000, $260,000 and $240,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
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 these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES - For investment securities, fair value equals quoted
market price, if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
LOANS - 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 ratings and for the same remaining maturities.
DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts, and
money market deposits is the amount payable on demand at the reporting date. The
fair value of certificates of deposit is estimated using the rates currently
offered for similar deposits of similar remaining maturities. The estimate of
fair value is not intended to represent market value, deposit base premium or
portfolio liquidation value.
U. S. TREASURY DEMAND NOTE - The fair value of the U.S. Treasury demand note is
the amount payable on demand at the reporting date.
<PAGE>
NOTE PAYABLE - Rates currently available to the Company for debt with similar
terms and remaining maturities are used to estimate the fair value of the note
payable.
The carrying values and estimated fair values of the Company's financial
instruments as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------------------ -----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 25,287,615 $ 25,287,615 $ 23,243,647 $ 23,243,647
Investment securities 94,145,688 95,328,040 91,348,579 91,101,671
Loans, net of unearned income 165,385,302 156,271,729
Less: Allowance for loan losses (3,531,872) (3,257,000)
------------- -------------
$ 161,853,430 $ 163,036,000 $ 153,014,729 $ 155,062,000
============= =============
Financial liabilities:
Deposits $ 259,539,731 $ 260,317,441 $ 251,029,895 $ 251,685,478
U.S. Treasury demand note 448,054 448,054 635,347 635,347
Note payable 2,525,000 2,525,000 3,500,000 3,500,000
</TABLE>
<PAGE>
NOTE 12 - CONDENSED FINANCIAL INFORMATION OF SOUTHEASTERN
BANKING CORPORATION (PARENT COMPANY ONLY)
The following represents Parent Company only financial information of
Southeastern Banking Corporation:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 1,813,032 $ 489,535
Investment in bank subsidiaries, at equity 30,983,994 28,278,048
Premises and equipment, net 114,637 124,671
Other assets 869,868 736,789
------------ ------------
Total assets $ 33,781,531 $ 29,629,043
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable $ 2,525,000 $ 3,500,000
Other liabilities 484,405 704,593
------------ ------------
Total liabilities 3,009,405 4,204,593
------------ ------------
Stockholders' equity:
Common stock 1,491,998 1,491,998
Additional paid-in capital 4,375,721 4,375,721
Retained earnings 24,690,512 21,430,096
------------ ------------
Realized stockholders' equity 30,558,231 27,297,815
Unrealized gains (losses) on investment
securities, net of tax 213,895 (1,873,365)
------------ ------------
Total stockholders' equity 30,772,126 25,424,450
------------ ------------
Total liabilities and stockholders' equity $ 33,781,531 $ 29,629,043
============ ============
</TABLE>
<PAGE>
CONDENSED STATEMENTS OF INCOME
Years Ended December 31
---------------------------------------
1995 1994 1993
----------- ----------- -----------
INCOME:
Dividends $ 3,920,000 $ 1,760,000 $ 1,560,000
Interest income 28,179 31,602 13,521
Equity in undistributed income
of bank subsidiaries 618,685 2,073,493 1,999,177
Other income 46,000 94,800
----------- ----------- -----------
Total income 4,566,864 3,911,095 3,667,498
----------- ----------- -----------
OPERATING EXPENSES:
Interest expense 254,164 43,625
Occupancy and other expenses 124,087 278,893 130,634
----------- ----------- -----------
Total expenses 378,251 322,518 130,634
----------- ----------- -----------
Income before income taxes 4,188,613 3,588,577 3,536,864
INCOME TAX BENEFIT (EXPENSE) 98,297 62,119 (11,529)
----------- ----------- -----------
Net income $ 4,286,910 $ 3,650,696 $ 3,525,335
=========== =========== ===========
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,286,910 $ 3,650,696 $ 3,525,335
Adjustments to reconcile net income
to cash provided by operating activities:
Equity in undistributed income of bank subsidiaries (618,685) (2,073,493) (1,999,177)
Depreciation and amortization 66,322 59,322 59,322
Deferred income tax benefit (2,380)
Changes in assets and liabilities:
(Increase) decrease in other assets (186,986) 10,129
(Decrease) increase in other liabilities (244,060) 297,216 (26,680)
----------- ----------- -----------
Net cash provided by operating activities 3,301,121 1,933,741 1,568,929
----------- ----------- -----------
INVESTING ACTIVITIES:
Cash paid for acquisition (5,138,702)
Purchases of real estate for resale, net (310,000)
Proceeds from sales of real estate held for resale 250,000
----------- ----------- -----------
Net cash used in investing activities (4,888,702) (310,000)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of note payable 3,500,000
Payments on note payable (975,000)
Cash dividends paid (1,002,624) (942,943) (853,585)
----------- ----------- -----------
Net cash (used in) provided by financing activities (1,977,624) 2,557,057 (853,585)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,323,497 (397,904) 405,344
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 489,535 887,439 482,095
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,813,032 $ 489,535 $ 887,439
=========== =========== ===========
</TABLE>
<PAGE>
NOTE 13 - REGULATORY REQUIREMENTS
The Company's subsidiaries are required to maintain minimum amounts of capital
to total "risk-weighted" assets, as defined by the banking regulators. At
December 31, 1995, the subsidiaries are required to have minimum Tier 1, total
capital, and leverage ratios of 4.00%, 8.00%, and 3.00%, respectively. At
December 31, 1995, Southeastern Bank's Tier 1, total capital, and leverage
ratios were 17.21%, 18.47%, and 10.03%, respectively; Southeastern Bank of
Florida's Tier 1, total capital, and leverage ratios were 13.97%, 15.23%, and
9.31%, respectively.
State banking regulations limit the amount of dividends the Company's
subsidiaries may pay without prior approval. The amount of cash dividends
available from the subsidiary banks for payment in 1996 without such prior
approval is approximately $2,214,000.
NOTE 14 - COMMITMENTS
On September 15, 1995, the Company signed a purchase and acquisition agreement
to acquire the Callahan, Hillard, and Yulee offices of Compass Bank of
Jacksonville. Under the agreement, the Company will acquire cash, loans and
property and equipment, while assuming deposit and other liabilities.
Commitments to extend credit totaled approximately $21,085,000 and $15,852,000
at December 31, 1995 and 1994, respectively. Standby letters of credit totaled
approximately $793,000 and $425,000 at December 31, 1995 and 1994, respectively.
NOTE 15 - CONTINGENCIES
The Parent Company and its subsidiaries are parties to claims and lawsuits
arising in the course of their normal business activities. Although the ultimate
outcome of these suits cannot be ascertained at this time, it is the opinion of
management and counsel that none of these matters, when resolved, will have a
material effect on the Company's consolidated results of operations or financial
position.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
NONE
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The following table lists the names, ages, and principal occupations of
the Company's directors:
<TABLE>
<CAPTION>
YEAR
NAME AND PRINCIPAL OCCUPATION AGE ELECTED DIRECTOR(7)
----------------------------- --- -------------------
<S> <C> <C> <C>
1. Leslie H. Blair(2,3,4) 55 1978
Vice President, Gowen Timber Company
2. David H. Bluestein(3,4) 53 1984
President, Bluestein's Supermarket, Inc.
3. Gene F. Brannen(1,2,3,4) 61 1984
President, Brannen Seafood Co., Inc.
4. William Downey(1,3) 62 1976
Realtor, Golden Isles Realty Co.
Treasurer of the Company
5. Edward R. Gray, Jr.(1,3,4,6) 68 1971
President of the Company
Chairman, Southeastern Bank
Chairman, Southeastern Bank of Florida
6. Alva J. Hopkins, III(3,5) 43 1978
Attorney at Law
President, Toledo Manufacturing Co.
7. G. Norris Johnson(3,5) 60 1979
President, Johnson Bros., Inc.
8. S. Michael Little(1,2,3,4,6) 47 1973
Vice President of the Company
President, Southeastern Bank
Vice Chairman, Southeastern Bank of Florida
9. J. Clare Proctor(1,3,4) 65 1984
Tree Farmer
10. E. B. Stapleton, Jr. 77 1990
Retired
Assistant Secretary of the Company
</TABLE>
(1) Member of Executive Committee of the Company.
(2) Member of Profit-Sharing Committee of the Company.
(3) Director of Southeastern Bank.
(4) Member of Executive Committee of Southeastern Bank.
(5) Member of Audit Committee of Southeastern Bank.
(6) Director of Southeastern Bank of Florida and member of its Executive
Committee.
(7) Date of election, if prior to incorporation of the Company, is date
first elected director of Southeastern Bank (formerly The Citizens
Bank).
All of the directors have been engaged in their respective principal
occupation and have been associated with their respective employers for the last
five years. All directors have served continuously since their first election.
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the name of each executive officer of
the Company and its subsidiaries and the principal positions and offices he
holds with the Company. Unless otherwise indicated, each of these officers has
served as an executive officer of the Company or its subsidiaries for at least
five years. All executive officers serve at the pleasure of the Company's Board
of Directors.
<TABLE>
<CAPTION>
NAME INFORMATION ABOUT EXECUTIVE OFFICERS
<S> <C>
Edward R. Gray, Jr. President of the Company. He is also Chairman of the Board of both Southeastern Bank and
Southeastern Bank of Florida.
S. Michael Little Vice President of the Company. He is also President of Southeastern Bank and Vice
Chairman of Southeastern Bank of Florida.
John C. Williams Executive Vice President of Southeastern Bank. Mr. Williams is 52.
W. Daniel Burkhalter President of Southeastern Bank of Florida and Senior Vice President of Southeastern Bank.
Mr. Burkhalter is 42.
Warren R. Stamp Vice President & Cashier of Southeastern Bank of Florida. He became an executive officer
of the Company upon the acquisition of Alachua.(1) Mr. Stamp is 48.
</TABLE>
(1) The Company acquired United Citizens Bank of Alachua County, Alachua,
Florida, under the name Southeastern Bank of Florida on October 14,
1994. See Note 2 to the Consolidated Financial Statements for
information regarding business combinations.
There are no family relationships among the directors or executive
officers; however, Carolyn T. Gray, wife of Edward R. Gray, Jr., is a director
of Southeastern Bank and Assistant Secretary of the Holding Company. None of the
directors or executive officers have been involved in legal proceedings relating
to the Bankruptcy Act, criminal proceedings, or securities laws violations.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Because executive officers are compensated by the respective
subsidiaries, the Company paid no salaries or fees to any officer during 1995.
The following table sets forth the remuneration of executive officers of the
Company's subsidiaries whose aggregate remuneration during the year ended
December 31, 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
CASH & CASH-EQUIVALENT
FORMS OF REMUNERATION
------------------------------
NAME OF PRINCIPAL ALL OTHER
EXECUTIVE OFFICER POSITION YEAR SALARY BONUS COMPENSATION(1,2,3)
----------------- -------- ---- ------ ----- ------------
<S> <C> <C> <C> <C> <C>
Edward R. Gray, Jr. President of the 1995 $173,000.00 $49,250.11 $24,915.44
Company 1994 165,000.00 55,144.99 27,359.61
1993 155,000.00 72,180.30 27,718.57
S. Michael Little Vice President of the 1995 $133,000.00 $45,916.76 $16,838.84
Company 1994 125,000.00 70,416.68 18,418.25
1993 115,000.00 68,846.96 15,956.39
John C. Williams Executive Vice 1995 $87,000.00 $44,250.00 $16,036.64
President of 1994 81,000.00 53,750.00 14,622.73
Southeastern Bank 1993 73,500.00 50,615.55 12,234.25
W. Daniel Burkhalter President of 1995 $78,000.00 $43,500.00 $13,140.76
Southeastern Bank 1994 70,000.00 52,833.34 11,783.13
of Florida 1993 62,500.00 49,698.88 9,748.70
</TABLE>
(1) The Company's subsidiaries maintain a qualified profit-sharing plan
which covers officers and other employees who have completed one
calendar year of service. A participant's interest vests 20% each year,
beginning after the third year of service, with 100% vesting at the end
of the seventh year. The amount in this column includes the
profit-sharing contribution amount set aside for these executive
officers: In 1995, the total contribution for these officers was
approximately $46,000.00. In 1995, the total contribution for all
participants was $282,000.00.
(2) The Company provides group medical and life insurance for officers and
employees. Additionally, all of these executive officers are entitled
to a $100,000 executive life insurance policy. The premium amount for
these policies is included in this total.
(3) This compensation amount does not include the value of any personal
benefit that might be derived from the use of an automobile.
<PAGE>
COMPENSATION PURSUANT TO PLANS
Southeastern Bank and Southeastern Bank of Florida maintain an Employee
Profit-Sharing Plan (the Plan). The purpose of the Plan is to provide employees
with an opportunity to share in the profits generated by the subsidiary banks.
All employees are eligible to participate in the Plan as of the first day of the
year coincident with or next following the date of hire.
A participating employee's (the "Participant") eligibility for benefits
is determined by his or her period of service. A Participant's period of service
begins on the commencement date of his employment and continues through (i)
periods of temporary illness; (ii) periods of temporary lay-off; (iii)
authorized leaves of absence; (iv) periods of termination of employment lasting
less than one year; and (v) certain periods of transfer to a member of the
controlled group of corporations of which the Company may become a part, as
defined by the Employee Retirement Income Security Act and regulations issued
thereunder.
Contributions are made each year in an amount determined by each Bank's
Board of Directors, subject to certain limitations regarding earnings. No
contributions by Participants are required or permitted. Contributions are
placed in a trust account, which is administered by a corporate entity
determined by the Company's Board of Directors.
Although records of the trust are maintained for each Participant's
account for accounting purposes, the assets of the trust are not segregated as
to individual Participant's accounts. The balances in a Participant's account
are adjusted annually to reflect contributions to the trust, income received
from trust assets, and any forfeitures which become available during the year.
A Participant's interest in his account vests 100% when his employment
is terminated (i) at or after the Participant attains age 65; (ii) at or after
the Participant attains age 59 1/2, has 10 years of service, and early
retirement is approved by the Board of Directors; or (iii) due to disability. If
termination is caused by a Participant's death, the Participant's beneficiary
becomes vested in the Participant's account as of the date of the Participant's
death. If a Participant's employment is terminated for any reason other than
those set out above, vesting in the Participant's account is determined
according to the following schedule:
VESTED FORFEITED
YEARS OF SERVICE PERCENTAGES PERCENTAGES
- ---------------- ----------- -----------
Less than 3 years 0% 100%
3 but less than 4 20 80
4 but less than 5 40 60
5 but less than 6 60 40
6 but less than 7 80 20
7 or more 100 0
A Participant may choose to receive his benefits in a lump sum, in
periodic payments, or by the purchase of an annuity contract.
The Plan is administered solely by the Profit-Sharing Committee
appointed by the Board of Directors. A trustee appointed by the Company has the
sole responsibility to administer the trust assets. Both the Profit-Sharing
Committee and the trustee are considered fiduciaries of the Plan and have the
corresponding duties, obligations, and responsibilities.
BOARD COMPENSATION
Each director of the Company who is not an employee is paid a
director's fee of $500.00 per meeting. Additionally, each director of
Southeastern Bank who is not an employee is paid a director's fee of $400.00 per
month, and, if on the Executive Committee, an additional $350.00 per month. Each
director of Southeastern Bank of Florida who is not an employee is paid a
director's fee of $250.00 per month, and, if on the Executive Committee, an
additional $100.00 per meeting attended.
STOCK OPTIONS, WARRANTS, OR RIGHTS
The Company and its subsidiaries have not issued and do not have
outstanding any options, warrants, or rights.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the beneficial ownership of the
Company's only outstanding class of securities, common stock, $1.25 par value,
by (i) the Company's directors and certain executive officers and by all
directors and executive officers as a group (13 persons), and by (ii) persons
who beneficially own more than 5% of the Company's outstanding common stock as
of January 31, 1996:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name of Beneficial Owner Beneficial Ownership(1) Of Class
-------------- ------------------------ ----------------------- --------
<S> <C> <C> <C>
Common Leslie H. Blair 2,780 0.23%
Common David H. Bluestein 4,382 0.37
Common Gene F. Brannen 7,883 0.66
Common William Downey 65,453 5.48
Common Edward R. Gray, Jr. 272,842 22.86
Common Alva J. Hopkins, III 11,466 0.96
Common G. Norris Johnson 2,750 0.23
Common S. Michael Little 32,171 2.70
Common J. Clare Proctor 43,622 3.65
Common E. B. Stapleton, Jr. 20,865 1.75
Common John C. Williams 3,263 .27
Common W. Daniel Burkhalter 5,534 .46
All Directors and Executive 473,011 39.62
Officers as a Group
</TABLE>
(1) Unless otherwise indicated, all shares are owned outright without
shared voting and investment power. Shared voting or investment power
comes from shares beneficially owned in joint or singular names of
spouses or dependents. The number of shares as to which each person has
shared powers is as follows: Leslie H. Blair - 1,000 shares; Gene F.
Brannen - 6,032; William Downey - 12,389; Edward R. Gray, Jr. - 71,495;
Alva J. Hopkins, III - 660; S. Michael Little - 3,671; J. Clare Proctor
- 42,742, E. B. Stapleton, Jr. - 1,928, John C. Williams - 22, and W.
Daniel Burkhalter - 100.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1995, the Company's subsidiaries engaged in customary banking
transactions and had outstanding loans to directors, executive officers,
principal shareholders, and their affiliates. Such transactions were made in the
ordinary course of business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other customers and did not, in the opinion of
management, involve more than normal credit risk or present other unfavorable
features. Additionally, in the ordinary course of business, the Company buys
goods and services from directors who are not employees. These purchases were
not significant during 1995. See Note 5 to the Consolidated Financial
Statements.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. and 2. - Financial Statements and Schedules
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
In Annual
Report
<S> <C>
SOUTHEASTERN BANKING CORPORATION AND SUBSIDIARIES
Audited Financial Statements:
Independent Auditors' Report 25
Consolidated Balance Sheets at December 31, 1995 and
1994 26
Consolidated Statements of Income for each of
the three years ended December 31, 1995 27
Consolidated Statements of Stockholders' Equity for each of
the three years ended December 31, 1995 28
Consolidated Statements of Cash Flows for each of
the three years ended December 31, 1995 29
Notes to Consolidated Financial Statements 30
Financial Statement Schedules - NONE
(b) Reports on Form 8-K - NONE
(c) Index to Exhibits:
Exhibit Table Page
- --------------------------------------- -------------------------------
Articles of Incorporation and By-Laws Incorporated by reference from
Form 10-K filed for year ended
December 31, 1990.
Exhibit 22 Subsidiaries of Registrant
Exhibit 27 Financial Data Schedule
Submitted in electronic format only.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SOUTHEASTERN BANKING CORPORATION
(Registrant)
By: /s/ Edward R. Gray, Jr.
Edward R. Gray, Jr., President
By: /s/ S. Michael Little
S. Michael Little, Vice President
Date: March 12, 1996
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
/s/ Leslie H. Blair Date: March 12, 1996
Leslie H. Blair, Director
/s/ David H. Bluestein Date: March 12, 1996
David H. Bluestein, Director
/s/ Gene F. Brannen Date: March 12, 1996
Gene F. Brannen, Director
/s/ William Downey Date: March 12, 1996
William Downey, Director
/s/ Edward R. Gray, Jr. Date: March 12, 1996
Edward R. Gray, Jr., Director
/s/ Alva J. Hopkins, III Date: March 12, 1996
Alva J. Hopkins, III, Director
/s/ G. Norris Johnson Date: March 12, 1996
G. Norris Johnson, Director
/s/ S. Michael Little Date: March 12, 1996
S. Michael Little, Director
/s/ J. Clare Proctor Date: March 12, 1996
J. Clare Proctor, Director
/s/ E. B. Stapleton, Jr. Date: March 12, 1996
E. B. Stapleton, Jr., Director
EXHIBIT 22.
Subsidiaries of the Company:
Southeastern Bank, Darien, Georgia
Southeastern Bank of Florida, Alachua, Florida
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