<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
-------------------------------
For quarter ended March 31, 1996 Commission file number 0-10853
-------------- -------
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
(Exact name of small business issuer as specified in its charter)
-------------------------------
GEORGIA 58-1458268
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
40 NORTH MAIN STREET
P.O. BOX 878
STATESBORO, GEORGIA 30459
-------------------------------
(Address of Principal Executive
Offices, including Zip Code)
912-764-6611
-------------------------------
(Issuer's telephone number, including area code)
NOT APPLICABLE
-------------------------------
(Former name, former address
and former fiscal year, if
changed since last report)
-------------------------------
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirement for the past 90 days.
Yes X No
---- ----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE 2,661,711 SHARES AS OF MARCH 31, 1996
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<PAGE> 2
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-----------------------------
(thousands of dollars)
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 10,310 $ 12,171
Interest Bearing Deposits in Other Banks 21,675 12,291
Federal Funds Sold 100 1,700
Investment Securities:
Available for Sale (Cost of $67,139 in 1996
and $48,909 in 1995) 67,108 49,364
Held to Maturity (Estimated Market Value
of $32,453 in 1996 and $36,658 in 1995) 31,836 35,778
Loans 179,612 181,880
Less: Unearned Interest (18) (24)
Allowance for Loan Losses (3,508) (3,345)
-------- --------
Loans, Net 176,086 178,511
-------- --------
Interest Receivable 4,073 4,467
Premises and Equipment, Net 3,977 3,791
Other Real Estate 356 307
Other Assets 1,995 1,821
-------- --------
TOTAL ASSETS $317,516 $300,201
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 32,682 $ 33,817
Interest Bearing:
NOW Accounts 57,216 40,257
Money Market Deposit Accounts 32,454 32,422
Savings 11,811 11,273
Time ($100,000 and above) 65,365 67,185
Other Time 74,299 73,323
-------- --------
Total Deposits 273,827 258,277
Other Borrowed Money 8,617 7,234
Interest Payable 2,681 2,859
Other Liabilities 1,116 1,005
-------- --------
Total Liabilities 286,241 269,375
-------- --------
Shareholders' Equity (Note 3):
Common Stock, 2,661,711 Shares Issued and Outstanding 2,662 2,662
Surplus 5,265 5,265
Retained Earnings 23,369 22,599
Net Unrealized Gain/(Loss) on Investment
Securities Available for Sale (21) 300
-------- --------
Shareholders' Equity 31,275 30,826
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $317,516 $300,201
======== ========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 3
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1996 1995
--------------------------
(thousands of dollars)
<S> <C> <C>
INTEREST INCOME
Loans (Including fees) $ 4,828 $ 4,284
Interest Bearing Deposits 166 235
Investments:
U.S. Treasury 383 474
U.S. Government Agencies 765 275
States and Political Subdivisions 252 210
Dividend Income 29 49
Federal Funds Sold 21 35
--------- ---------
Total Interest Income 6,444 5,562
--------- ---------
INTEREST EXPENSE
NOW Accounts 437 277
Money Market Deposits Accounts 267 293
Savings 94 81
Time Deposits ($100,000 and above) 1,004 668
Other Time Deposits 1,124 883
Other 122 90
--------- ---------
Total Interest Expense 3,048 2,292
--------- ---------
NET INTEREST INCOME 3,396 3,270
Provision for Loan Losses 189 153
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,207 3,117
--------- ---------
NON-INTEREST INCOME
Service Charges on Deposits 356 358
Fees for Trust Services 38 36
Other 104 63
--------- ---------
Total Non-interest Income 498 457
--------- ---------
NON-INTEREST EXPENSE
Salaries 832 767
Other Personnel Expense 250 285
Occupancy Expense, Net 156 131
Equipment Expense 204 201
Other 597 614
--------- ---------
Total Non-interest Expense 2,039 1,998
--------- ---------
INCOME BEFORE INCOME TAXES 1,666 1,576
Provision for Income Taxes 497 485
--------- ---------
NET INCOME $ 1,169 $ 1,091
========= =========
EARNINGS PER COMMON SHARE (NOTE 3) $ .44 $ .41
========= =========
DIVIDENDS PER COMMON SHARE (NOTE 3) $ .15 $ .12
========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING (NOTE 3) 2,661,711 2,661,939
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
March 31,
1996 1995
----------------------
(thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,169 $ 1,091
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 158 138
Provision for Loan Losses 189 153
Gain on Sale of Other Real Estate (1)
Gain on Call of Securities (6) (1)
Gain on Sale of Equipment (7)
Net Amortization (Accretion) of Premiums
and Discounts on Securities (172) 7
Changes in Assets and Liabilities:
(Increase)Decrease in Interest Receivable 394 (4)
Increase in Other Assets (9) (95)
Decrease in Interest Payable (178) (33)
Increase in Other Liabilities 111 225
------- ------
Net Cash Provided by Operating Activities 1,655 1,474
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Interest Bearing Deposits
in Other Banks (9,384) (6,079)
Net Decrease in Federal Funds Sold 1,600 2,325
Available-for-Sale Securities:
Proceeds from Maturity 16,045 4,364
Purchases (34,197) (3,524)
Held-to-Maturity Securities:
Proceeds from Maturity 6,369 456
Purchases (2,327) (7,946)
Net Increase in Loans 2,180 (936)
Purchases of Premises and Equipment (344) (332)
Proceeds from Sale of Equipment 7
Proceeds from Sale of Other Real Estate 8
------- -------
Net Cash Used in Investing Activities (20,050) (11,665)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits 15,550 6,416
Advances from the Federal Home Loan Bank 4,766 965
Repayment of Other Borrowed Money (3,383) (89)
Dividends Paid (399) (316)
------- -------
Net Cash Provided by Financing Activities 16,534 6,976
------- -------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (1,861) (3,215)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 12,171 12,019
------- -------
CASH AND DUE FROM BANKS AT END OF PERIOD $10,310 $ 8,804
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest $ 3,226 $ 2,325
Income Taxes 7 69
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Other Real Estate Acquired through Loan Foreclosure $ 56 $ 23
(Increase) Decrease in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale 321 539
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements of First Banking Company of Southeast
Georgia (the "Company") include the financial statements of First Bulloch
Bank & Trust Company and Metter Banking Company, wholly-owned subsidiaries.
Intercompany balances and transactions have been eliminated in
consolidation.
The consolidated statements contained in this report are unaudited but
reflect all adjustments, consisting only of normal recurring accruals, which
are, in the opinion of management, necessary to a fair statement of the
results for the interim period reflected. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to applicable rules and regulations of the Securities and Exchange
Commission. The results of operations for the interim period reported
herein are not necessarily indicative of results to be expected for the full
year.
The consolidated financial statements included herein should be read in
conjunction with the financial statements and notes thereto, and the
Independent Auditors' Report included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995.
2. ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company described in the
notes to consolidated financial statements contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995. The Company has
followed those policies in preparing this report.
3. COMMON STOCK
The par value of First Banking's common stock is $1 and 5,000,000 shares are
authorized. The Banks may pay dividends to First Banking in any year up to
50% of the previous year's net income without the approval of the Georgia
Department of Banking and Finance, or $2,337,396 in 1996.
Effective May 15, 1995, the Company declared an 8-for-5 stock split of its
common stock effected in the form of a 60 percent stock dividend. All
references to number of shares and to per share amounts have been
retroactively adjusted to reflect the split.
4. EARNINGS PER SHARE
Net Income per share of common stock is based on the weighted average number
of shares of common stock outstanding during each period, after stating for
the stock split (see Note 3).
4
<PAGE> 6
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND SUMMARY OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1996
This discussion relates to the consolidated financial condition and results
of operations of First Banking Company of Southeast Georgia (the "Company") and
its wholly-owned subsidiaries, First Bulloch Bank & Trust Company ("Bulloch
Bank") and Metter Banking Company ("Metter Bank"), (the "Banks"). Since the
Company has no subsidiaries other than the Banks and no activities other than
those of the Banks, the following narrative refers to the operations of the
Banks.
FINANCIAL CONDITION
The Company functions as the sole owner of two commercial banks, and its
financial condition should be examined in terms of trends in sources and uses
of funds. The Company's primary use of funds comes from loan demand. However,
loans outstanding have decreased $2,262,000 or 1.2% since year-end. Investment
securities and interest bearing deposits in other banks have increased
$13,802,000 and $9,384,000, respectively, while federal funds sold decreased
$1,600,000 from year-end.
Total assets have increased $17,315,000 since year-end, while total funds
(deposits plus Other Borrowed Money) have increased $16,933,000. Total
deposits have increased $15,550,000 since year-end, and Other Borrowed Money
has increased $1,383,000. Demand deposits decreased $1,135,000, and savings
deposits (including NOW accounts and the liquid money market accounts) have
increased $17,529,000. Time deposits over $100,000 have decreased
approximately $1,820,000, while other time deposits have increased
approximately $976,000.
Of the overall increase in deposits, $15,845,000 is directly attributable
to one new public fund NOW account obtained through competitive bid and opened
on January 2, 1996. Because state banking regulations require this account to
be secured by the pledging of investment securities to the public entity,
additional investment securities were purchased in an amount adequate to
satisfy the regulatory pledging requirement, thus accounting for the increase
in investment securities since year-end.
5
<PAGE> 7
Effective May 15, 1995, the Company declared an 8-for-5 stock split of its
common stock effected in the form of a 60 percent stock dividend. All
references to number of shares and to per share amounts have been retroactively
adjusted to reflect the split.
CAPITAL RESOURCES
The Company's ratio of shareholders' equity to total assets was 9.8% at
March 31, 1996 and 10.3% at December 31, 1995. This ratio of shareholders'
equity to assets is considered adequate to support the operations of the
Company.
The Banks are also required to maintain minimum amounts of capital to total
"risk-weighted" assets, as defined by the banking regulators. At March 31, 1995
the Banks were required to have minimum Tier 1 and Total Capital ratios of 4%
and 8%, respectively, and a leverage ratio of at least 3%. At that date the
Banks' actual ratios were as follows:
<TABLE>
<CAPTION>
Bulloch Bank Metter Bank
------------ -----------
<S> <C> <C>
Tier 1 Capital ratio 17.8% 15.1%
Total Capital ratio 19.1 16.4
Leverage ratio 9.8 9.5
</TABLE>
These ratios qualify each bank for the "well-capitalized" classification as
defined by the banking regulators.
LIQUIDITY
The percentage of net loans to total funds was 63.6% at March 31, 1996 and
68.5% at December 31, 1995. At March 31, 1996 the Banks had $32,085,000
in Cash and Due from Banks, Interest Bearing Deposits in Other Banks, and
Federal Funds Sold as compared with $26,162,000 at December 31, 1995. The
Banks' Liquidity Policies require that the ratio of cash and certain short-term
investments to net withdrawable deposit accounts be at least 20.0%. At March 31,
1996 both banks exceeded this ratio. The liquidity of the Company and the Banks
is considered adequate to repay deposits and other obligations, meet expected
loan demand and pay dividends.
Presented below is an interest rate sensitivity analysis of the Company at March
31, 1996.
6
<PAGE> 8
Interest Rate Sensitivity Analysis - March 31, 1996
<TABLE>
<CAPTION>
Term to Repricing or Maturity
------------------------------------------------------------------------
Over Three Over One Over Five
Less Than Months through Year through years and
Three Months One Year Five years Insensitive Total
------------------------------------------------------------------------
Interest Earning Assets:
<S> <C> <C> <C> <C> <C>
Interest Bearing
Deposits in Other
Banks $ 21,675 $ 21,675
Investment Securities 18,567 $23,407 $40,577 $16,393 98,944
Federal Funds Sold 100 100
Loans 86,592 42,102 36,266 14,652 179,612
-------- ------- ------- ------- --------
Total Interest
Earning Assets 126,934 65,509 76,843 31,045 300,331
Noninterest Earning
Assets 17,185 17,185
-------- ------- ------- ------- --------
TOTAL ASSETS $126,934 $65,509 $76,843 $48,230 $317,516
======== ======= ======= ======= ========
Interest Bearing Liabilities:
Interest Bearing
Deposits $140,620 $80,111 $20,414 $241,145
Other Borrowed Money 165 677 3,597 $ 4,178 8,617
-------- ------- ------- ------- --------
Total Interest
Bearing Liabilities 140,785 80,788 24,011 4,178 249,762
Interest Free Deposits 32,682 32,682
Other Interest Free
Liabilities and Equity 35,072 35,072
-------- ------- ------- ------- --------
TOTAL LIABILITIES
AND EQUITY $140,785 $80,788 $24,011 $71,932 $317,516
======== ======= ======= ======= ========
Net Interest Rate
Sensitivity Gap $(13,851) $(15,279) $52,832 ($23,702)
Cumulative gap $(13,851) $(29,130) $23,702
Net Interest Rate
Sensitivity Gap as
a Percent of Interest
Earning Assets (10.91) (23.32) 68.75
Cumulative Gap as a
Percent of Cumulative
Interest Earning Assets (10.91) (15.14) 8.80
</TABLE>
7
<PAGE> 9
SUMMARY OF OPERATIONS
INTEREST INCOME
Total interest income increased $882,000 (15.9%) in the first three
months of 1996 as compared to the first three months of 1995. Interest on loans
increased $544,000 in the first three months of 1996 as compared to the first
three months of 1995, as a result of higher interest rates on loans outstanding
as well as an increase in the average loan portfolio of $16,459,000. Interest
on investments increased $421,000, primarily as a result of an increase of
$29,156,000 in the average carrying amount of investments as well as higher
yields within the portfolio.
During the first three months of 1996, interest on federal funds sold
decreased $14,000 from the first three months of 1995, and interest on
Interest-bearing Deposits in Other Banks decreased $69,000. These decreases
resulted from an overall decrease in total funds available for short-term
investment.
INTEREST EXPENSE
During the first three months of 1996, total interest expense increased
$756,000 (33.0%) from the first three months of 1995. Interest on deposits
increased $724,000 (32.9%) in the first three months of 1996 from the first
three months of 1995. This increase is attributable to higher interest rates
paid on deposits outstanding in 1996 as compared to 1995 as well as an increase
in the average amount of interest bearing deposits of $32,953,000. Interest on
Other Borrowed Money increased $32,000 in the first three months of 1996 from
the first three months of 1995. This increase is the result of an increase of
$2,375,000 in the average balance outstanding of Other Borrowed Money at a lower
average interest rate of 6.5% from 7.1%.
PROVISIONS FOR LOAN LOSSES
Provisions for loan losses for the first three months of 1996 increased
$36,000 from the first three months of 1995. After considering the credit
worthiness of the loan portfolios, it is the opinion of the management of the
Banks that the allowance for loan losses is adequate. At March 31, 1995 the
allowance for loan losses was 1.95% of outstanding loans less unearned interest.
8
<PAGE> 10
Nonperforming loans were $1,211,000 at March 31, 1996 and $1,330,000 at
December 31, 1995. These loans included those on a nonaccrual status of
$326,000 and $403,000, accruing loans contractually past due at least 90 days
of $298,000 and $176,000, and restructured loans of $587,000 and $1,040,000 at
March 31, 1996 and December 31, 1995, respectively. Net loans charged off
totaled $26,000 during the first quarter of 1996 as compared to $15,000 during
the first quarter of 1995.
OTHER INCOME AND EXPENSE
Other income increased $41,000 in the first three months of 1996 from the
first three months of 1995, primarily as a result of an increase in credit life
and A & H commission income and an increase in origination income from long-term
mortgage loans, which are acquired by other banks on a non-recourse basis
concurrent with the closing of the loan. Other expense increased $41,000 in the
first three months of 1996 compared to the first three months of 1995, primarily
as a result of an increase in salary and personnel expense of $30,000, an
increase in occupancy and equipment expense of $28,000, and a decrease in Other
Expense of $17,000.
SUBSEQUENT EVENT
On March 13, 1996, the Company entered into an Agreement and Plan of Merger
(the "Agreement") with FNB Bancshares, Inc. ("FNB"), pursuant to which FNB will
be merged with and into the Company (the "Merger"), with the Company surviving
the Merger.
In the Merger, each share of FNB common stock (excluding shares held by
FNB or the Company or any of their respective subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted)
issued and outstanding will be converted into and exchanged for the right to
receive 0.892 shares of Company common stock. Each outstanding option or
warrant to purchase FNB common stock will be converted into and exchanged for
the right to receive 0.466 shares of Company common stock for each share subject
to the option or warrant.
Consummation of the Merger is subject to several conditions, including
approval by the FNB shareholders, effectiveness of the Company's registration
statement regarding the shares
9
<PAGE> 11
of common stock to be issued in the Merger, confirmation that the transaction
will be treated as a pooling of interests and other customary closing
conditions. Management presently anticipates that the Merger will be
consummated during the third quarter of 1996.
10
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Registrant nor either of its subsidiaries is a party to, nor
is any of their property the subject of, any material pending legal
proceedings, other than ordinary routine proceedings incidental to the
business of banks, nor to the knowledge of management are any such
proceedings contemplated or threatened against the Registrant or its
subsidiaries.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 1 - Agreement and Plan of Merger dated March 13, 1996 By and
Between First Banking Company of Southeast Georgia and
FNB Bancshares, Inc. Incorporated by reference to Form
S-4 filed May 14, 1996.
Exhibit 10.6 - Employment Agreement dated April 9, 1996 between
Julian C. Lane, Jr. and the Registrant.
Exhibit 27 - Financial Data Schedule(for SEC use only).
(b) Reports on Form 8-K: The Registrant did not file any reports on Form
8-K during the quarter for which this report is filed.
11
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
DATE: May 15, 1996 BY: /s/ James Eli Hodges
----------- --------------------------------------
JAMES ELI HODGES
PRESIDENT
DATE: May 15, 1996 BY: /s/ Dwayne E. Rocker
----------- --------------------------------------
DWAYNE E. ROCKER
SECRETARY-TREASURER
(PRINCIPAL FINANCIAL OFFICER)
12
<PAGE> 14
INDEX TO EXHIBITS
Exhibit 1 - Agreement and Plan of Merger dated March 13, 1996 By and Between
First Banking Company of Southeast Georgia and FNB Bancshares,
Inc. Incorporated by reference to Form S-4 filed May 14, 1996.
Exhibit 10.6 - Employment Agreement dated April 9, 1996 between
Julian C. Lane, Jr. and the Registrant.
Exhibit 27 Financial Data Schedule (for SEC use only)
13
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 9th day of APRIL, 1996, between Metter Banking
Company (the "Bank"), a commercial bank chartered by the State of Georgia, and
First Banking Company of Southeast Georgia (the "Company"), the parent bank
holding company of the Bank (collectively, the "Employer"), and Julian C. Lane,
Jr., a resident of the state of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the President of the Employer
and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements hereinafter
set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and
their variant forms shall have the meaning set forth below:
1.1 "Agreement" shall mean this Agreement and any Exhibits incorporated
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "Affiliate" shall mean any business entity which controls the
Employer, is controlled by, or is under common control with the Employer.
1.3 "Area" shall mean the geographic area within the boundaries of
Bulloch and Candler County. It is the express intent of the parties that the
Area as defined herein is the area where the Employee performs or performed
services on behalf of the Employer under this Agreement as of, or within a
reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "Business of the Employer" shall mean the business conducted by the
Employer, which is commercial banking.
1.5 "Cause" shall mean:
1.5.1 With respect to termination by the Employer:
(a) A material breach of the terms of this Agreement by the
Employee, including, without limitation, failure by the Employee to
perform his duties and responsibilities in the manner and to the
extent required under this Agreement, or a breach of any
representation or warranty of the Employee set forth herein;
(b) Conduct by the Employee that amounts to fraud, dishonesty
or wilful misconduct in the performance of his duties and
responsibilities hereunder;
(c) The conviction of the Employee of a felony;
(d) Conduct by the Employee that amounts to gross and willful
insubordination or inattention to his duties and responsibilities
hereunder; or
(e) Conduct by the Employee that results in removal from his
position as an officer or employee of the Employer pursuant to a
written order by any regulatory agency with authority or
jurisdiction over the Employer.
14
<PAGE> 2
1.5.2 With respect to termination by the Employee, a material
diminution in the powers, responsibilities or duties of Employee
hereunder, or the failure of the Board of Directors of the Bank and the
Company to elect him as President, or a material breach of the terms of
this Agreement by the Employer which remains uncured after the expiration
of thirty (30) days following the delivery of written notice of such
breach to the Employer by the Employee.
1.6 "Change in Control" of the Employer shall mean any transaction
wherein fifty percent (50%) of the shares of the Bank or the Company, plus one
share are directly or indirectly transferred by sale, gift, merger, exchange or
any other means to new owners other than an Affiliate of such person or entity
transferring such shares or if a majority of the members of the Board of
Directors of the Bank or the Company are replaced.
1.7 "Initial Term" shall mean that period of time commencing on the date
of execution of this Agreement by the Employer and the Employee and running
until the earlier of three (3) years thereafter or any termination of
employment of the Employee under this Agreement as provided for in Section 3.
1.8 "Permanent Disability" shall mean the total inability of the
Employee to perform his duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee. If Employee is covered by a disability
insurance policy, the term "permanent disability" shall have the meaning set
forth in such policy.
1.9 "Proprietary Information" shall mean:
(a) Information related to the Employer or any Affiliate,
(i) Which derives economic value, actual or potential, from
not being generally known to or readily ascertainable by other
persons who can obtain economic value from its disclosure or
use; and
(ii) Which is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy; and
(b) All tangible reproductions or embodiments of such information.
Assuming the criteria in (a)(i) and (a)(ii) above are satisfied, Proprietary
Information includes, but is not limited to, technical and nontechnical data
related to the compilations, programs, methods, techniques, finances, actual or
potential customers and suppliers, existing and future products, and employees
of the Employer or its Affiliates. Proprietary Information also includes
information which has been disclosed to the Employer or its Affiliates by a
third party and which the Employer or any Affiliate is obligated to treat as
confidential.
1.10 "Term" shall mean the Initial Term and all subsequent renewal
periods.
2. DUTIES.
2.1 The Employee is employed initially as the Chief Executive Officer of
the Employer and, subject to the direction of the Board, or its designee, shall
perform and discharge well and faithfully the duties which may be assigned to
him from time to time by the Employer in connection with the conduct of its
business. The duties and responsibilities of the Employee are set forth on
Exhibit A attached hereto.
15
<PAGE> 3
2.2 In addition to the duties and responsibilities specifically assigned
to the Employee pursuant to Section 2.1 hereof, the Employee shall: (1) devote
substantially all of his time, energy and skill during regular business hours
to the performance of the duties of his employment (reasonable vacations and
reasonable absences due to illness excepted), and faithfully and industriously
perform such duties; (2) diligently follow and implement all management
policies and decisions communicated to him by the Board; and (3) timely prepare
and forward to the Board all reports and accounting as may be requested of the
Employee.
2.3 The Employee shall devote his entire business time, attention and
energies to the Business of the Employer and shall not during the term of this
Agreement be engaged (whether or not during normal business hours) in any other
business or professional activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing the Employee from (1) investing his personal assets in businesses
which (subject to item (2) below) are not in competition with the Business of
the Employer and which will not require any services on the part of the
Employee in their operation or affairs and in which his participation is solely
that of an investor, (2) purchasing securities in any corporation whose
securities are regularly traded provided that such purchase shall not result in
his collectively owning beneficially at any time five percent (5%) or more of
the equity securities of any business in competition with the Business of the
Employer, and (3) participating in civic and professional affairs and
organizations and conferences, preparing or publishing papers or books or
teaching so long as the Board approves of such activities prior to the
Employee's engaging in them. Prior to commencing any activity described in
clause (3) above, the Employee shall inform the Board, in writing, of any such
activity.
3. TERM AND TERMINATION.
3.1 Term. This Agreement shall remain in effect for the Initial Term.
At the end of the first twelve-month period hereunder and at the end of each
successive twelve-month period, this Agreement shall automatically be extended
for a successive 12-month period following the then two-year remaining term
unless either party gives written notice to the other of its intent not to
extend this Agreement with such written notice to be given not less than 90
days prior to the end of such twelve-month period. In the event such notice of
non-extension is properly given, this Agreement shall terminate at the end of
the remaining term then in effect. However, notwithstanding the provisions of
this Section 3.1, (i) no extension shall be granted that would extend the term
of this Agreement beyond the last day of the month during which the Employee
attains age 65, and (ii) this Agreement shall terminate upon the death or
permanent disability of Employee.
3.2 Termination. During the Term, the employment of the Employee under
this Agreement may be terminated only as follows:
3.2.1 By the Employer:
(a) For Cause, upon written notice to the Employee; or
(b) Without Cause at any time, provided that the Employer
shall give the Employee thirty (30) days prior written notice of its
intent to terminate.
3.2.2 By the Employee:
(a) For Cause, with no prior notice except as provided in
Section 1.5.
16
<PAGE> 4
(b) Without Cause, provided that the Employee shall give the
Company sixty (60) days prior written notice of his intent to
terminate.
3.2.3 By the Employee within six months following a Change in
Control of the Employer, provided that the Employee shall give
written notice to the Employer of his intention to terminate this
Agreement.
3.2.4 At any time upon mutual, written agreement of the parties.
3.3 Effect of Termination. The effect of termination of the employment
of the Employee pursuant to Section 3.2 shall be as follows:
3.3.1 In the event of termination by the Employer:
(a) For Cause, pursuant to Section 3.2.1(a), the Employer
shall have no further obligation to the Employee except for the
payment of any amounts due and owing under Section 4 on the
effective date of termination;
(b) Without Cause, pursuant to Section 3.2.1(b), the Employer
shall be required to continue to meet its obligations to the
Employee under Section 4.1 for a period of twenty-four (24) months
following termination.
3.3.2 In the event of termination by the Employee:
(a) For Cause, pursuant to Section 3.2.2(a), the Employer
shall be required to continue to meet its obligations to the
Employee under Section 4.1 for a period of twenty-four (24) months
following termination.
(b) Without Cause, pursuant to Section 3.2.2(b), the Employer
shall have no further obligation to the Employee except future
payment of any amounts due and owing under Section 4 on the
effective date of the termination.
3.3.3 In the event of termination by the Employee in connection
with a Change in Control pursuant to Section 3.2.3, the Employer
shall be required to pay to continue to meet its obligations to
Employee under Section 4.1 for a period of twenty-four (24) months
after termination.
3.3.4 In the event of termination upon mutual agreement of the
parties pursuant to Section 3.2.4, the Employer shall have no
further obligation to the Employee except for the payment of any
amounts due and owing under Section 4.1 on the effective date of
termination unless otherwise set forth in the written agreement.
4. COMPENSATION. The Employee shall receive the following salary and
benefits:
4.1 Base Salary. During the Initial Term, the Employee shall be
compensated at a base rate of $100,000 per annum (the "Base Salary"). The
Employee's salary shall be reviewed by the Board annually, and the Employee
shall be entitled to receive annually an increase in such amount, if any, as
may be determined by the Board. Such salary shall be payable in accordance
with the Employer's normal payroll practices.
4.2 Incentive Compensation. The Employee shall be entitled to
participate in such option, bonus, incentive and other executive compensation
programs as are made available to senior management of the Employer from time
to time
17
<PAGE> 5
4.3 Benefits.
(a) In addition to the Base Salary and Incentive Compensation,
the Employee shall be entitled to such benefits as may be available
from time to time for executives of the Employer similarly situated
to the Employee. All such benefits shall be awarded and
administered in accordance with the Employer's standard policies and
practices. Such benefits may include, by way of example only,
profit sharing plans, retirement or investment funds, dental,
health, life and disability insurance benefits, and such other
benefits as the Employer deems appropriate.
(b) The Employer specifically agrees to reimburse the Employee
for reasonable business expenses incurred by him in performance of
his duties hereunder, as approved from time to time by the Board;
provided that the Employee shall, as a condition of reimbursement,
submit verification of the nature and amount of such expenses in
accordance with reimbursement policies from time to time adopted by
the Employer and in sufficient detail to comply with Internal
Revenue Service Regulations.
(c) On a non-cumulative basis the Employee shall be entitled
to four (4) weeks of vacation in each year of this Agreement, during
which his compensation shall be paid in full. At least two
consecutive weeks each year must be taken by the Employee for
vacation, with other vacation to be taken at the time the Employer
determines appropriate, taking into account the requirements of the
Employer.
4.4 Withholding. The Employer may deduct from each payment of
compensation hereunder all amounts required to be deducted and withheld in
accordance with applicable federal and state income, FICA and other withholding
requirements.
5. PROPRIETARY INFORMATION.
5.1 Ownership of Proprietary Information. All Proprietary Information
received or developed by the Employee while employed by the Employer will
remain the sole and exclusive property of the Employer.
5.2 Obligations of Employee. Employee will hold the Proprietary
Information in trust and strictest confidence, and will not use, reproduce,
distribute, disclose or otherwise disseminate the Proprietary Information
except to the extent necessary to perform the duties assigned to him by the
Employer.
5.3 Delivery upon Termination. Upon termination of his employment with
the Employer, the Employee will promptly deliver to the Employer all property
belonging to the Employer, including without limitation all Proprietary
Information then in his possession or control.
6. NON-COMPETITION. The Employee agrees that during his employment by the
Employer hereunder and, in the event of his termination other than pursuant to
Sections 3.2.1(b) or 3.2.2(a), for a period of six (6) months thereafter, he
will not (except on behalf of or with the prior written consent of the
Employer), within the Area, either directly or indirectly, on his own behalf or
in the service or on behalf of others, as a principal, partner, officer,
director, manager, supervisor, administrator, consultant, executive employee,
or in any other capacity which involves duties and responsibilities similar to
those undertaken for the Employer, engage in any business which is the same as
or essentially the same as the Business of the Employer.
18
<PAGE> 6
7. NON-SOLICITATION OF CLIENTS. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than pursuant to Sections 3.2.1(b) or 3.2.2(a), for a period of six (6) months
thereafter, he will not (except on behalf of or with the prior written consent
of the Employer), within the Area, on his own behalf or in the service or on
behalf of others, solicit, divert or appropriate, or attempt to solicit, divert
or appropriate, directly or by assisting others, any business from any of the
Employer's customers, including actively sought prospective customers, with
whom the Employee has or had material contact during the last two (2) years of
his employment, for purposes of providing products or services that are
competitive with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than pursuant to Sections 3.2.1(b) or 3.2.2(a), for a period of six (6) months
thereafter, he will not, on his own behalf or in the service or on behalf of
others, solicit, recruit or hire away, or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer, and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests
and properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Employee agrees and consents that, in addition to all the remedies provided by
law or in equity, the Employer shall be entitled to a temporary restraining
order and temporary and permanent injunctions to prevent a breach or
contemplated breach of any of the covenants. The Employer and the Employee
agree that all remedies available to the Employer or the Employee, as
applicable, shall be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
this Agreement is separate, distinct, and severable from the other provisions
of this Agreement, and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or enforceability of any other
provision of this Agreement. Further, if any provision of this Agreement is
ruled invalid or unenforceable by a court of competent jurisdiction because of
a conflict between the provision and any applicable law or public policy, the
provision shall be redrawn to make the provision consistent with and valid and
enforceable under the law or public policy.
11. NO SET-OFF BY EMPLOYEE. The existence of any claim, demand, action or
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail
or certified mail, return receipt requested, shall be deemed to have been
received on the earlier of the date shown on the receipt or three (3) business
days after the postmarked date thereof. In addition, notices hereunder may be
delivered by hand, facsimile transmission or overnight courier, in which event
the notice shall be deemed effective when delivered or transmitted. All
notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:
19
<PAGE> 7
(i) If to the Employer, to it at:
First Banking Company of Southeast Georgia
40 North Main Street
P. O. Box 878
Statesboro, Georgia 30458
Attn: President
(ii) If to the Employee, to him at:
Julian C. Lane, Jr.
347 South College
Metter, Georgia 30439
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
Employee shall not be effective unless in writing, and no waiver shall operate
or be construed as a waiver of the same or another breach on a subsequent
occasion.
15. ATTORNEYS' FEES. In the event of litigation between the parties
concerning this Agreement, the party prevailing in such litigation shall be
entitled to receive from the other party all reasonable costs and expenses,
including without limitation attorneys' fees, incurred by the prevailing party
in connection with such litigation, and the other party shall pay such costs
and expenses to the prevailing party promptly upon demand by the prevailing
party.
16. APPLICABLE LAW. This Agreement shall be construed and enforced under and
in accordance with the laws of the state of Georgia.
17. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement
of the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Employer or
the Employee unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
18. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
19. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
and 9
20
<PAGE> 8
shall survive the termination of the employment of the Employee hereunder.
20. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
hereunder shall be joint and several.
IN WITNESS WHEREOF, the Employer and the Employee have executed and
delivered this Agreement as of the date first shown above.
THE EMPLOYER:
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
By: /s/ James Eli Hodges
------------------------------------------
Name: James Eli Hodges
------------------------------------------
Title: President
------------------------------------------
METTER BANKING COMPANY
By: /s/ James Eli Hodges
------------------------------------------
Name: James Eli Hodges
------------------------------------------
Title: Director & Administrative Committee member
------------------------------------------
THE EMPLOYEE:
/s/ Julian C. Lane, Jr.
-------------------------------------------------
JULIAN C. LANE, JR.
21
<PAGE> 9
Exhibit A
Initial Duties of the Employee
The initial duties of the Employee shall include, in addition to any other
duties assigned the Employee by the Board of Directors of the Employer or its
designee, the following:
. Foster a corporate culture that promotes ethical practices, encourages
individual integrity, fulfills social responsibility, and is conducive to
attracting, retaining and motivating a diverse group of top-quality
employees at all levels.
. Work with the Board of Directors to develop a long-term strategy for the
company that creates shareholder value.
. Develop and recommend to the Board annual business plans and budgets that
support the company's long-term strategy.
. Manage the day-to-day business affairs of the company appropriately.
. Use best efforts to achieve the company's financial and operating goals
and objectives.
. Improve the quality and value of the products and services provided by the
company.
. Insure that the company maintains a satisfactory competitive position
within its industry.
. Develop an effective management team and an active plan for its
development and succession, and make recommendations to the Board
regarding hiring, firing and compensation.
. Implement major corporate policies.
22
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST BANKING COMPANY OF SOUTHEAST GEORGIA FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANICIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,310
<INT-BEARING-DEPOSITS> 21,675
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,108
<INVESTMENTS-CARRYING> 31,836
<INVESTMENTS-MARKET> 32,453
<LOANS> 179,594
<ALLOWANCE> 3,508
<TOTAL-ASSETS> 317,516
<DEPOSITS> 273,827
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,797
<LONG-TERM> 8,617
0
0
<COMMON> 2,662
<OTHER-SE> 28,613
<TOTAL-LIABILITIES-AND-EQUITY> 317,516
<INTEREST-LOAN> 4,828
<INTEREST-INVEST> 1,429
<INTEREST-OTHER> 187
<INTEREST-TOTAL> 6,444
<INTEREST-DEPOSIT> 2,926
<INTEREST-EXPENSE> 3,048
<INTEREST-INCOME-NET> 3,396
<LOAN-LOSSES> 189
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 2,039
<INCOME-PRETAX> 1,666
<INCOME-PRE-EXTRAORDINARY> 1,666
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,169
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 4.83
<LOANS-NON> 326
<LOANS-PAST> 298
<LOANS-TROUBLED> 587
<LOANS-PROBLEM> 1,211
<ALLOWANCE-OPEN> 3,345
<CHARGE-OFFS> 47
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 3,508
<ALLOWANCE-DOMESTIC> 3,508
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
