<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the Fiscal year ended December 31, 1996
------------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_____ to_______________
COMMISSION FILE NUMBER 0-10853
--------
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
- -------------------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
GEORGIA 58-1458268
- ------------------------------------------ --------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
40 NORTH MAIN STREET, STATESBORO, GEORGIA 30458
- ------------------------------------------ --------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 912-764-6611
-----------------------------
- -------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $1.00 PAR VALUE
--------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES X NO
--- ---
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-K is not contained herein, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock sold, or the average bid
and asked prices of such stock, as of a specified date within the past 60 days:
$57,211,481 (as of February 28, 1997). 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 3,002,020 shares outstanding at February 28, 1997
- -------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1996 are incorporated by reference into Parts II and IV.
Portions of the Proxy Statement for the Annual Meeting of Shareholders,
scheduled to be held April 24, 1997, are incorporated by reference into Part
III.
Exhibit Index on Page 4
Page 1 of 51 Pages
---
<PAGE> 2
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.
FIRST BANKING COMPANY OF
SOUTHEAST GEORGIA
(REGISTRANT)
Date: March 28, 1997 By: /s/ James Eli Hodges
------------------ ---------------------------
JAMES ELI HODGES, PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James Eli Hodges and Dwayne E. Rocker, and each
of them, for him in his name, place and stead, in any and all capacities, to
sign any amendments to this Report on Form 10-K, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and hereby ratifies and confirms all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ James Eli Hodges
--------------------- ----------------------------
JAMES ELI HODGES
PRESIDENT & DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
Date: March 28, 1997 By: /s/ Julian C. Lane, Jr.
--------------------- -----------------------------
JULIAN C. LANE, JR VICE
PRESIDENT AND DIRECTOR
Date: March 28, 1997 By: /s/ John M. Wilson, Jr.
--------------------- -----------------------------
JOHN M. WILSON, JR.
VICE PRESIDENT AND DIRECTOR
Date: March 28, 1997 By: /s/ Dwayne E. Rocker
--------------------- -----------------------------
DWAYNE E. ROCKER
SECRETARY & TREASURER
(PRINCIPAL FINANCIAL &
ACCOUNTING OFFICER)
Date: March 28, 1997 By: /s/ E. Raybon Anderson
--------------------- -----------------------------
E. RAYBON ANDERSON, DIRECTOR
Date: March 28, 1997 By: /s/ A.M. Braswell, Jr.
--------------------- -----------------------------
A.M. BRASWELL, JR., DIRECTOR
Date: March 28, 1997 By: /s/ W. A. Crider, Jr.
--------------------- -----------------------------
W.A. CRIDER, JR., DIRECTOR
2
<PAGE> 3
Date: March 28, 1997 By: /s/ C. Arthur Howard
--------------------- ---------------------------------
C. ARTHUR HOWARD, DIRECTOR
DATE: March 28, 1997 By: /s/ Lanier A. Hunnicutt
--------------------- ---------------------------------
LANIER A. HUNNICUTT, DIRECTOR
Date: March 28, 1997 By: /s/ Joe P. Johnston
--------------------- ---------------------------------
JOE P. JOHNSTON, DIRECTOR
Date: March 28, 1997 By: /s/ Harry S. Mathews
--------------------- ---------------------------------
HARRY S. MATHEWS, DIRECTOR
Date: March 28, 1997 By: /s/ Dan J. Parrish, Jr.
--------------------- ---------------------------------
DAN J. PARRISH, JR., DIRECTOR
Date: March 28, 1997 By: /s/ Charles M. Robbins, Jr.
--------------------- ---------------------------------
CHARLES M. ROBBINS, JR., DIRECTOR
Date: March 28, 1997 BY: /s/ Larry D. Weddle
--------------------- ---------------------------------
LARRY D. WEDDLE, DIRECTOR
Date: March 28, 1997 BY: /s/ Alvin Williams
--------------------- ---------------------------------
ALVIN WILLIAMS, DIRECTOR
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE
------------------- ------------------------------------------------------------ ----
<S> <C> <C>
3.1 -- Amended and Restated Articles of Incorporation
of the Registrant (incorporated by reference
to exhibit by same number in the Registrant's
Form 10-K for the year ended December 31, 1988.) N/A
3.2 -- By-Laws of the Registrant, as amended
February 28, 1990. (1) N/A
10.1* -- Profit Sharing Plan, as restated December 29,
1994. (2) N/A
10.2* -- Trust Agreement related to the Registrant's Profit
Sharing Plan, as amended and restated December 30,
1988, effective January 1, 1989. (1) N/A
10.3* -- Target Benefit Retirement Plan, as restated
December 29, 1994.(2) N/A
10.4* -- Trust Agreement related to the Registrant's Target
Benefit Retirement Plan, as amended and restated
December 30, 1988, effective January 1, 1989. (1) N/A
10.5* -- Employment Agreement dated February 20, 1996
between James Eli Hodges and the Registrant
(incorporated herein by reference to exhibit of the
same number in the Registrant's Form 10-KSB for
the year ended December 31, 1995.) N/A
10.6* -- Employment Agreement dated April 9, 1996 between
Julian C. Lane, Jr. and the Registrant (incorporated
by reference to Exhibit 10.6 of the Registrant's
Form 10-QSB for the Quarter ended March 31, 1996.) N/A
13 -- The Registrant's Annual Report to Shareholders for
the year ended December 31, 1996 (except for
those portions specifically incorporated by
reference, the 1996 Annual Report to Shareholders
is not deemed to be filed as part of this report). ---
21 -- Subsidiaries of the Registrant ---
24 -- A Power of Attorney is set forth on the signature
pages of this Annual Report on Form 10-K. ---
27 -- Financial Data Schedule (for SEC use only)
99 -- Report of Independent Accountants (McNair, McLemore,
Middlebrooks & Co.) dated February 2, 1996, for the
years ended December 31, 1995 and 1994. ---
</TABLE>
(1) Incorporated herein by reference to exhibit of the same number in the
Registrant's Form 10-K for the year ended December 31, 1989.
(2) Incorporated herein by reference to exhibit of the same number in
the Registrant's Form 10-KSB for the year ended December 31, 1994.
* Denotes Registrant's plans, management contracts and compensatory
arrangements.
4
<PAGE> 5
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
First Banking Company of Southeast Georgia:
We have audited the consolidated balance sheets of First Banking Company of
Southeast Georgia and subsidiaries (the "Company") as of December 31, 1996 and
1995 and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits. The consolidated financial statements give
retroactive effect to the merger of First Banking Company of Southeast Georgia
and FNB Bancshares, Inc., which has been accounted for as a pooling of
interests as described in Note 2 to the consolidated financial statements. We
did not audit the consolidated balance sheet of FNB Bancshares, Inc. and
subsidiary as of December 31, 1995, or the related consolidated statements of
income, stockholders' equity, and cash flows of FNB Bancshares, Inc. and
subsidiary for the years ended December 31, 1995 and 1994, which statements
reflect total assets of $50,165,516 as of December 31, 1995, and total revenues
of $4,012,435 and $2,715,332 for the years ended December 31, 1995 and 1994,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for FNB Bancshares, Inc. and subsidiary for 1995 and 1994, is based
solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31,
1996 and 1995 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
January 24, 1997
5
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and Due from Banks (Note 13) $ 21,610,743 $ 15,005,532
Interest Bearing Deposits in Other Banks 9,905,485 12,291,546
Federal Funds Sold 6,220,000 8,170,000
Investment Securities:
Available for Sale, at Fair Value (Amortized Cost of
$85,900,522 in 1996 and $53,626,635 in 1995)
(Note 3) 85,865,947 54,015,190
Held to Maturity, at Cost (Estimated Fair Value of
$18,738,071 in 1996 and $36,658,184 in 1995)
(Note 4) 18,157,744 35,778,105
Loans (Notes 5 and 10) 231,057,478 215,996,349
Less: Unearned Interest Income (15,127) (24,211)
Allowance for Loan Losses (Note 5) (4,024,539) (3,856,321)
----------- -----------
Loans -- Net 227,017,812 212,115,817
----------- -----------
Interest Receivable 5,383,067 4,956,943
Premises and Equipment, Net (Note 6) 7,193,309 5,647,071
Other Real Estate 446,500 306,500
Other Assets 2,235,375 2,079,333
----------- -----------
TOTAL ASSETS $384,035,982 $350,366,037
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES:
Deposits (Note 11):
Demand $ 43,367,783 $ 38,396,417
Interest Bearing:
NOW Accounts 56,265,610 46,478,310
Money Market Deposit Accounts 33,331,641 36,266,946
Savings 13,185,253 12,599,408
Time Certificates ($100,000 and above) 82,203,709 75,854,766
Other Time 101,293,199 94,886,719
----------- -----------
Total Deposits 329,647,195 304,482,566
Federal Funds Purchased 800,000
Repurchase Agreements 1,200,000
Other Borrowed Money (Note 11) 10,917,951 7,234,447
Interest Payable 3,279,336 3,218,002
Other Liabilities 870,739 1,303,021
----------- -----------
Total Liabilities 346,715,221 316,238,036
----------- -----------
Commitments and Contingencies (Note 5)
Shareholders' Equity (Note 9):
Common Stock, $1.00 Par Value, 10,000,000 Shares
Authorized, 3,002,020 Shares Issued and Outstanding at
December 31, 1996 and 3,002,131 Shares Issued and
Outstanding at December 31, 1995 3,002,020 3,002,131
Additional Paid-in Capital 8,022,844 8,025,545
Retained Earnings 26,318,721 22,843,878
Net Unrealized Gain (Loss) on Investment Securities
Available for Sale (22,824) 256,447
----------- -----------
Total Shareholders' Equity 37,320,761 34,128,001
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $384,035,982 $350,366,037
=========== ===========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- -------------------- --------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans (Including Fees) $ 23,593,288 $21,726,452 $17,169,542
Interest Bearing Deposits 584,746 755,892 138,028
Investment Securities:
U.S. Treasury 1,438,107 1,817,279 1,763,505
U.S. Government Agencies 3,398,383 1,865,014 1,169,051
States and Political Subdivisions 983,163 881,278 747,987
Dividend Income 151,786 133,557 55,614
Federal Funds Sold 418,504 268,331 276,119
----------- ---------- ----------
Total Interest Income 30,567,977 27,447,803 21,319,846
----------- ---------- ----------
INTEREST EXPENSE
NOW Accounts 1,793,576 1,155,231 941,906
Money Market Deposit Accounts 1,265,473 1,292,854 1,150,027
Savings 418,777 386,571 332,783
Time Certificates($100,000 and above) 4,528,026 3,998,332 2,295,819
Other Time 5,783,882 5,184,666 3,380,577
Other 617,601 400,390 170,252
----------- ---------- ----------
Total Interest Expense 14,407,335 12,418,044 8,271,364
----------- ---------- ----------
Net Interest Income 16,160,642 15,029,759 13,048,482
Provision for Loan Losses 694,911 859,300 632,073
----------- ---------- ----------
Net Interest Income after Provision
for Loan Losses 15,465,731 14,170,459 12,416,409
----------- ---------- ----------
NON-INTEREST INCOME
Service Charges on Deposit Accounts 1,918,032 1,751,415 1,631,494
Fees for Trust Services 215,946 200,236 216,375
Other 405,434 378,263 483,088
----------- ---------- ----------
Total Non-interest Income 2,539,412 2,329,914 2,330,957
----------- ---------- ----------
NON-INTEREST EXPENSE
Salaries 4,110,004 3,835,909 3,532,681
Other Personnel Expense 1,157,196 1,297,087 1,187,874
Occupancy Expense, Net 767,941 699,277 606,029
Equipment Expense 1,051,469 911,268 820,813
Other (Note 12) 3,344,054 3,098,164 3,108,928
----------- ---------- ----------
Total Non-interest Expense 10,430,664 9,841,705 9,256,325
----------- ---------- ----------
INCOME BEFORE INCOME TAXES 7,574,479 6,658,668 5,491,041
PROVISION FOR INCOME TAXES (NOTE 7) 2,400,517 1,952,700 1,658,918
----------- ---------- ----------
NET INCOME $ 5,173,962 $ 4,705,968 $ 3,832,123
=========== ========== ==========
NET INCOME PER SHARE $ 1.72 $ 1.57 $ 1.28
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,002,092 3,002,215 3,002,359
=========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,173,962 $ 4,705,968 $ 3,832,123
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 845,621 656,059 568,702
Provision for Loan Losses 694,911 859,300 632,073
Gain on Sale of Other Assets (1,619)
Gain on Sale of Other Real Estate (3,607) (26,693) (22,643)
Gain on Sale and Call of Securities (7,359) (2,723) (250)
(Gain) Loss on Sale of Premises and Equipment 11,751 (6,070) (2,025)
Net Amortization (Accretion) of Premiums and
Discounts on Securities (537,317) (126,317) 247,225
Amortization of Goodwil 37,688 37,688 37,688
Changes in Assets and Liabilities:
Increase in Interest Receivable (426,124) (1,419,086) (696,606)
Increase in Other Assets (49,864) (135,022) (328,370)
Increase in Interest Payable 61,334 1,222,327 135,998
Increase (Decrease) in Other Liabilities (432,282) 168,801 411,934
---------- ---------- ----------
Net Cash Provided by Operating Activities 5,368,714 5,932,613 4,815,849
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Interest Bearing
Deposits in Other Banks 2,386,061 746,402 (12,488,984)
Net (Increase) Decrease in Federal Funds Sold 1,950,000 (1,955,000) 9,785,000
Available For Sale Securities:
Proceeds from Calls and Maturity 46,577,991 20,535,193 12,474,706
Proceeds from Sales 350,250
Purchases (78,462,013) (24,016,143) (18,986,000)
Held To Maturity Securities:
Proceeds from Maturity 23,121,405 7,215,196 2,428,661
Purchases (5,346,240) (25,389,464) (4,970,941)
Net Increase in Loans (15,934,923) (27,060,604) (17,245,047)
Purchases of Premises and Equipment (2,405,496) (1,797,173) (1,222,328)
Proceeds from Sale of Premises and Equipment 1,886 8,660 2,300
Proceeds from Sale of Other Assets 1,621
Proceeds from Sales of Other Real Estate 201,624 138,030 20,672
---------- ---------- ----------
Net Cash Used in Investing Activities (27,909,705) (51,573,282) (29,851,711)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Deposits 25,164,629 44,968,802 26,415,111
Borrowings from the Federal Home Loan Bank 9,041,000 5,332,000 3,910,553
Repayment of Other Borrowed Money (5,357,496) (2,727,429) (100,000)
Increase in Fed Funds Purchased 800,000
Increase in Repurchase Agreements 1,200,000
Purchase and Retirement of Fractional Shares (2,812) (3,137)
Dividends Paid (1,699,119) (1,274,321) (998,227)
---------- ---------- ----------
Net Cash Provided by Financing Activities 29,146,202 46,295,915 29,227,437
---------- ---------- ----------
INCREASE IN CASH AND DUE FROM BANKS 6,605,211 655,246 4,191,575
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 15,005,532 14,350,286 10,158,711
---------- ---------- ----------
CASH AND DUE FROM BANKS, END OF YEAR $21,610,743 $15,005,532 $14,350,286
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $14,346,000 $11,194,917 $ 8,130,528
Income Taxes 2,439,418 2,208,452 1,510,662
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
ACTIVITIES:
Other Real Estate Acquired through Loan
Foreclosure.......................................... 414,917 170,096 7,000
Loans granted to facilitate the Sale of Other Real
Estate............................................... 76,900 268,405 206,471
Change in Net Unrealized Gain (Loss) on Securities
Available for Sale................................... (279,271) 1,513,979 (1,596,190)
</TABLE>
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON
INVESTMENT
ADDITIONAL SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $3,002,359 $8,028,454 $16,578,335 $ 316,040
Net Income 3,832,123
Cash Dividends, $.30 per share (998,227)
Change in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale (1,504,101)
--------- --------- ---------- ----------
Balance at December 31, 1994 3,002,359 8,028,454 19,412,231 (1,188,061)
Net Income 4,705,968
Cash Dividends, $.375 per share (1,274,321)
Change in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale 1,444,508
Purchase & Retirement of
Fractional Shares 228 2,909
--------- --------- ---------- ----------
Balance at December 31, 1995 3,002,131 8,025,545 22,843,878 256,447
Net Income 5,173,962
Cash Dividends, $.60 per share (1,699,119)
Change in Net Unrealized Gain
(Loss) on Investment
Securities Available for Sale (279,271)
Purchase and Retirement of
Fractional Shares 111 2,701
--------- --------- ---------- ----------
Balance at December 31, 1996 $3,002,020 $8,022,844 $26,318,721 $ (22,824)
========= ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting and reporting policies of First Banking Company of Southeast
Georgia (the "Company") conform with generally accepted accounting
principles and with general practice within the banking industry. The
following is a summary of the more significant policies:
CONSOLIDATION
The consolidated financial statements of the Company include the financial
statements of First Bulloch Bank & Trust Company ("Bulloch Bank"), Metter
Banking Company ("Metter Bank") and First National Bank of Effingham
("Effingham Bank"), (collectively, the "Banks"), wholly owned
subsidiaries. Intracompany balances and transactions have been eliminated
in consolidation.
NATURE OF OPERATIONS
The Company's banks have eleven banking locations in Bulloch, Candler and
Effingham counties located in southeast Georgia. The Company's primary
source of revenue is interest from loans to businesses and individuals
located in its market area.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INTEREST RATE RISK
The Company's assets and liabilities are generally monetary in nature, and
interest rates have an impact on the Company's performance. The Company
decreases the effect of interest rates on its performance by striving to
match maturities and interest sensitivity between loans, investment
securities, deposits and other borrowings. However, a significant change
in interest rates could have an effect on the Company's results of
operations.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and demand deposits due from banks.
INVESTMENT SECURITIES AVAILABLE FOR SALE
Investments available for sale are carried at fair value, and the related
unrealized gain or loss, net of deferred income taxes, is included as a
separate component of shareholders' equity. Gains and losses on sales
and calls are based on the net proceeds and adjusted carrying amounts of
the securities sold or called, using the specific identification method.
INVESTMENT SECURITIES HELD TO MATURITY
Investment securities held to maturity are stated at cost adjusted for
amortization of premiums and accretion of discounts, which are recognized
as adjustments to interest income. The Company has the intent and ability
to hold these investment securities to maturity.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level estimated to be
adequate to absorb potential losses in the loan portfolio. Management's
estimate of the adequacy of the allowance is based upon reviews of
individual loans, recent loss experience, the estimated value of any
underlying collateral, current economic conditions, the risk
characteristics of the various categories of loans and other pertinent
factors. Loans deemed uncollectible are charged to the allowance.
Provisions for loan losses and recoveries on loans previously charged off
are added to the allowance.
10
<PAGE> 11
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using accelerated and straight line methods over the
estimated useful life of each asset. Significant additions and improvements are
capitalized. Maintenance and repairs are charged to expense. The Company
evaluates the estimated useful lives of assets on a periodic basis to determine
whether events or circumstances warrant revised estimated useful lives or
whether any impairment exists. Management believes no material impairment of
premises and equipment exists at December 31, 1996.
INTEREST INCOME ON LOANS
Interest income on commercial, real estate and simple interest installment
loans is recognized based upon the principal amount outstanding. The Banks
discontinue accruing interest income on loans when, in the opinion of
management, the interest is not collectible currently.
OTHER REAL ESTATE
Other real estate represents properties acquired through foreclosure and is
carried at the lower of cost or estimated fair market value less estimated costs
to sell.
GOODWILL
Goodwill is included in other assets and is being amortized over 25 years.
The carrying value of goodwill is periodically reviewed to assess recoverability
based on expected undiscounted cash flows and operating income for the Company.
Impairments would be recognized in operating results if a permanent diminution
in value was expected. The Company also evaluates the amortization period to
determine whether events or circumstances warrant revision to the amortization
period. Management believes no material impairment of goodwill exists at
December 31, 1996.
INCOME TAXES
Provisions for income taxes are based upon amounts reported in the statements
of income (after exclusion of non-taxable income such as interest on state and
municipal securities) and include deferred taxes for temporary differences
between financial statement and tax bases of assets and liabilities using
enacted tax rates for the year in which the temporary differences are expected
to reverse.
NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of common
shares outstanding during the year.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the 1996 presentation.
NEW ACCOUNTING PRONOUNCEMENT
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities".
SFAS 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities. The Company
plans to adopt SFAS 125 effective January 1, 1997. The Company has not
completed the process of evaluating the impact that will result from adopting
SFAS 125 and is therefore unable to disclose the impact that such adoption will
have on its financial position or results of operations.
In December 1996, the FASB issued SFAS No. 127, "Deferrral of the Effective
Date of Certain Provisions of SFAS No. 125". SFAS No. 127 defers the effective
date of certain provisions of SFAS 125 until December 31, 1997.
11
<PAGE> 12
2. ACQUISITION
Effective August 27, 1996, the Company consummated its merger of the
Effingham Bank into the Company. The Company exchanged 340,309 shares of its
common stock and cash of approximately $2,800 for all the outstanding common
stock and options to acquire common stock of FNB Bancshares, Inc. ("FNB"),
parent company of Effingham Bank. The merger was accounted for as a
pooling-of-interests. The financial statements of the Company for the years
ended December 31, 1995 and 1994 have been restated to include FNB and the
Effingham Bank.
The results of operations for the twelve months ended December 31, 1996
include the consolidated FNB results of operations prior to the consummation
date as follows:
<TABLE>
<CAPTION>
TOTAL REVENUE NET INCOME
------------- ----------
<S> <C> <C>
Company $29,411,930 $4,877,984
FNB 3,695,459 295,978
---------- ---------
Combined $33,107,389 $5,173,962
========== =========
</TABLE>
A reconciliation of consolidated revenues, net income, and net income per
share as previously reported with restated amounts for the years ended December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
NET INCOME PER
TOTAL REVENUE NET INCOME COMMON SHARE
------------------------- ----------------------- ---------------
1995 1994 1995 1994 1995 1994
----------- ----------- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Company, as previously
reported $25,765,282 $20,935,471 $4,536,693 $3,449,274 $1.70 $1.30
FNB 4,012,435 2,715,332 169,275 382,849
----------- ----------- ---------- ----------
Company, as restated $29,777,717 $23,650,803 $4,705,968 $3,832,123 $1.57 $1.28
=========== =========== ========== ==========
</TABLE>
3. INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost, estimated fair value and gross unrealized gains and
losses of investment securities available for sale are as follows:
<TABLE>
<CAPTION>
GROSS GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
U.S. Treasury $22,150,564 $ 39,534 $ 33,696 $22,156,402
U.S. Government Agencies 55,803,683 109,467 234,989 55,678,161
States and Political Subdivisions 5,336,723 100,581 15,472 5,421,832
Equity securities 2,609,552 2,609,552
----------- -------- -------- -----------
Total $85,900,522 $249,582 $284,157 $85,865,947
=========== ======== ======== ===========
DECEMBER 31, 1995
U.S. Treasury $22,470,406 $141,251 $ 17,109 $22,594,548
U.S. Government Agencies 24,756,226 265,416 97,775 24,923,867
States and Political Subdivisions 4,802,551 118,582 21,810 4,899,323
Equity securities 1,597,452 1,597,452
----------- -------- -------- -----------
Total $53,626,635 $525,249 $136,694 $54,015,190
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated fair value of these securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because the borrower may have the right to
call or prepay obligations with or without call or prepayment penalties.
Mortgage-backed securities, which are included above in U. S. Government
Agencies, are included in the year of their final maturity. Equity securities
are included in the category "Due after ten years".
12
<PAGE> 13
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
<S> <C> <C>
Due in one year or less $34,589,100 $34,615,101
Due after one year through five years 41,576,378 41,454,137
Due after five years through ten years 4,405,750 4,449,925
Due after ten years 5,329,294 5,346,784
---------- ----------
Total $85,900,522 $85,865,947
========== ==========
</TABLE>
During 1996, 1995, and 1994, there were realized gains of $991, $2,723 and
$250 from sales and calls of securities of $800,991, $50,000 and $350,250,
respectively.
Securities with a fair value of $62,944,274 at December 31, 1996 were
pledged as collateral for public deposits and trust assets.
4.INVESTMENT SECURITIES HELD TO MATURITY
The amortized cost, estimated fair value and gross unrealized gains and
losses of investment securities held to maturity are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
DECEMBER 31, 1996
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,999,082 $ 6,548 $ 2,005,630
U.S. Government Agencies 2,377,268 53,329 2,430,597
States and Political Subdivisions 13,781,394 532,680 $ 12,230 14,301,844
---------- --------- ------ ----------
Total $18,157,744 $ 592,557 $ 12,230 $18,738,071
========== ========= ====== ==========
DECEMBER 31, 1995
U.S. Treasury $ 6,985,104 $ 58,656 $ 7,043,760
U.S. Government Agencies 17,221,506 150,657 $ 2,766 17,369,397
States and Political Subdivisions 11,571,495 675,674 2,142 12,245,027
---------- --------- ------ ----------
Total $35,778,105 $ 884,987 $ 4,908 $36,658,184
========== ========= ====== ==========
</TABLE>
The amortized cost and estimated fair value of these securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because the borrower may have the right to
call or prepay obligations with or without call or prepayment penalties.
Mortgage-backed securities, which are included above in U. S. Government
Agencies, are included in the year of their final maturity.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
<S> <C> <C>
Due in one year or less $ 4,503,742 $ 4,521,122
Due after one year through five years 6,460,896 6,675,316
Due after five years through ten years 3,763,000 3,941,801
Due after ten years 3,430,106 3,599,832
---------- ----------
Total $18,157,744 $18,738,071
========== ==========
</TABLE>
During 1996, there were realized gains of $6,368 from total proceeds from
calls of securities of $396,800. There were no sales or calls of held to
maturity securities in 1995 and 1994 and, therefore, no gains or losses.
Securities with a carrying amount of $12,963,727 at December 31, 1996 were
pledged as collateral for public deposits and trust assets.
13
<PAGE> 14
5.LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
<S> <C> <C>
Real Estate:
Construction $ 17,366,129 $ 12,505,746
Other 141,015,449 127,203,963
Commercial and Agricultural 49,837,280 54,600,117
Installment and Other Consumer 22,838,620 21,686,523
----------- -----------
Total $231,057,478 $215,996,349
=========== ===========
</TABLE>
The Banks' loans are concentrated with customers in the Banks' market area
of southeast Georgia, primarily in Bulloch, Candler, Effingham and contiguous
counties.
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance, Beginning of Year................................. $3,856,321 $3,274,587 $2,852,533
Provision for Loan Losses.................................. 694,911 859,300 632,073
Loans Charged Off.......................................... (659,159) (342,070) (326,770)
Recoveries................................................. 132,466 64,504 116,751
--------- --------- ---------
Balance, End of Year....................................... $4,024,539 $3,856,321 $3,274,587
========= ========= =========
</TABLE>
Nonperforming loans were $1,416,324 at December 31, 1996 and $1,667,510 at
December 31, 1995. These loans included those on a non-accrual status of
$353,389 and $549,297, accruing loans contractually past due at least 90 days of
$207,420 and $367,663, and restructured loans of $855,515 and $750,550 at
December 31, 1996 and 1995, respectively. Interest income that would have been
recorded on these nonperforming loans in accordance with their original terms
was $171,952 in 1996 and $110,345 in 1995, compared with amounts received of
$52,193 and $53,462, respectively.
The Company adopted Statement of Financial Accounting Standards Nos. 114
and 118 (the "Statements") as of January 1, 1995. The Company considers a loan
to be impaired when it is probable that it will be unable to collect all amounts
due according to the original terms of the loan agreement. The Company measures
impairment of a loan on a loan by loan basis for real estate, commercial and
agricultural loans. Installment and other consumer loans are considered smaller
balance, homogeneous loans. Amounts of impaired loans that are not probable of
collection are charged off immediately. The Company had impaired loans of
$353,389 and $549,297 as of December 31, 1996 and December 31, 1995,
respectively. The average amount of impaired loans during 1996 was $451,343. No
specific allowance was necessary for such loans under the provisions of the
Statements. The interest income recognized on such loans was $5,562 and $17,649
in 1996 and 1995 as compared to $5,562 and $2,635, respectively, of interest
received on a cash basis.
The Banks are parties to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
lines of credit. The Banks' exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit and standby lines of credit is represented by the contractual
amount of those instruments. The Banks use the same credit policies in making
these commitments as they do for on-balance-sheet instruments. The Banks expect
no loss from loan commitments of $24,837,764 and $26,704,692 and standby lines
of credit of $1,070,250 and $757,450 at December 31, 1996 and 1995,
respectively. The loan commitments and standby lines of credit include
$9,066,179 and $1,070,250, respectively, of fixed rate commitments at December
31, 1996. The Banks evaluate each customer's credit-worthiness on a case-by-case
basis. The amount of collateral obtained for these commitments, if deemed
necessary by the Banks, is based on management's credit evaluation of the
customer. Collateral held varies, but may include inventory, equipment, and real
estate.
14
<PAGE> 15
6.PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
<S> <C> <C>
Land $ 923,253 $ 923,253
Buildings 4,471,265 4,113,130
Leasehold Improvements 527,279 92,133
Furniture and Equipment 6,886,549 5,846,517
---------- ----------
Total 12,808,346 10,975,033
Less: Accumulated Depreciation 5,615,037 5,327,962
---------- ----------
Premises and Equipment, Net $ 7,193,309 $ 5,647,071
========== ==========
</TABLE>
7.INCOME TAXES
The Company provides deferred income taxes based on temporary differences
between financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the temporary differences are
expected to reverse. The provisions for income taxes for the years ended
December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $2,433,517 $2,262,981 $1,533,436
Deferred (33,000) (310,281) 125,482
--------- --------- ---------
Total $2,400,517 $1,952,700 $1,658,918
========= ========= =========
</TABLE>
At December 31, 1996 and 1995, the significant components of the Company's
net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C>
Deferred Tax Assets:
Allowance for Possible Loan Losses........................ $1,255,000 $1,147,000
State Tax Carryforward.................................... 64,000
Other Postretirement Benefits............................. 106,000 131,000
Other Liabilities......................................... 17,000 39,000
Unrealized Loss on Investment Securities Available for
Sale................................................... 12,000
--------- ---------
Total Deferred Tax Assets.............................. 1,390,000 1,381,000
--------- ---------
Deferred Tax Liabilities:
Accumulated Depreciation.................................. (55,000) (112,000)
Other Assets.............................................. (117,000) (96,000)
Unrealized Gain on Investment Securities Available for
Sale................................................... (132,000)
--------- ---------
Total Deferred Tax Liabilities......................... (172,000) (340,000)
--------- ---------
Net Deferred Tax Assets..................................... $1,218,000 $1,041,000
========= =========
</TABLE>
No valuation allowance has been recorded by the Company, as management
considers it more likely than not that all deferred tax assets will be
recognized.
The provision for income taxes is less than that computed by applying the
federal statutory rate of 34% to pretax income as indicated by following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income Tax Computed at Statutory Rate...................... $2,573,323 $2,263,947 $1,866,953
Increases (Decreases) Resulting from:
Tax Exempt Interest...................................... (303,852) (375,512) (286,546)
Other.................................................... 131,046 64,265 78,511
--------- --------- ---------
Income Tax Expense.................................... $2,400,517 $1,952,700 $1,658,918
--------- --------- ---------
</TABLE>
15
<PAGE> 16
8.BENEFIT PLANS
At December 31, 1996 and 1995, the Company had recorded liabilities of
approximately $279,451 and $344,208, respectively, for other post-retirement
benefits and recognized expenses during each of the years ended December 31,
1996, 1995 and 1994 of approximately $8,919, $23,600 and $20,000, respectively.
A discount of 7.5% and an annual medical insurance cost trend rate of 12%
reduced by 1% each year until 6.5% were used in calculating the other
post-retirement benefit obligation. If the annual medical insurance cost trend
rate assumption were increased by 1%, the liability would be increased by 8% at
December 31,1996.
The Company sponsors a contributory profit sharing plan under Internal
Revenue Code Section 401(k), (the "401(k) plan") which covers substantially all
employees of the Banks. Employees may contribute up to 10% of their compensation
to the 401(k) plan, up to a maximum amount of $9,500 in 1996. The Banks
contribute between 50% and 187.5% of the participant's initial 4% contribution.
The Banks may make an additional contribution each year under certain
circumstances.
The Company also sponsors a Target Benefit Plan which covers substantially
all employees of the Banks. Under the terms of this plan, a participant's target
benefit will be based on service of up to twenty years subsequent to January 1,
1986 for employees of the Bulloch Bank, subsequent to January 1, 1989 for
employees of the Metter Bank, and subsequent to January 1, 1997 for employees of
the Effingham Bank. For each year of service performed, the Banks contribute
percentages of the participant's compensation as set forth in the plan.
A summary of profit-sharing and target benefit expenses follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Profit-Sharing Plan......................................... $283,198 $288,284 $338,901
Target Benefit Plan......................................... 113,027 134,331 129,203
------- ------- -------
Total..................................................... $396,225 $422,615 $468,104
======= ======= =======
</TABLE>
9.SHAREHOLDERS' EQUITY
Effective May 15, 1995, the Company declared an 8-for-5 stock split of its
common stock effected in the form of a 60% stock dividend. All references to
share and per share amounts have been retroactively adjusted to reflect the
split. Additional paid-in capital has been charged and common stock has been
credited retroactively with $998,227 to reflect the stock split.
The primary source of funds for payment of dividends by the Company to its
shareholders is dividends received from the Banks. The Banks may pay dividends
to the Company in any year in an amount up to 50% of the previous year's net
income, or $2,823,981 in 1997, without the approval of the Georgia Department of
Banking and Finance.
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines the Company and the Banks must meet specific capital
guidelines that involve quantitative measures of the Company's and the Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's and the Banks' capital amounts
and the Bank's classifications under the regulatory framework for prompt
corrective action are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Banks to maintain minimum amounts and ratios of
total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to
average assets, as defined in the regulations and as set forth in the table
below. Management believes that as of December 31, 1996 the Company and the
Banks meet all capital adequacy requirements to which they are subject.
As of December 31, 1996 and 1995, the most recent notifications from the
Federal Deposit Insurance Corporation categorized Bulloch Bank and Metter Bank
as "well-capitalized" and Effingham Bank as "adequately capitalized" under the
regulatory framework for prompt corrective action. As a result, Effingham Bank
is not allowed to accept brokered deposits without
16
<PAGE> 17
regulatory approval. To be categorized as "well-capitalized", Bulloch Bank and
Metter Bank must maintain minimum total risk-based, Tier I risk-based, and Tier
1 leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed such institutions'
categories.
The Company's and the Banks' actual capital amounts and ratios as of
December 31, 1996 and 1995 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
--------------- --------------- ---------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk-weighted Assets):
Company $39,831 17.0 $18,730 8.0% Not Applicable
Bulloch Bank 25,603 19.3% 10,585 8.0% $13,232 10.0%
Metter Bank 10,164 16.6% 4,899 8.0% 6,124 10.0%
Effingham Bank 3,994 9.7% 3,278 8.0% 4,097 10.0%
Tier I Capital (to Risk-weighted Assets):
Company $36,891 15.8% $9,365 4.0% Not Applicable
Bulloch Bank 23,940 18.1% 5,293 4.0% $7,939 6.0%
Metter Bank 9,393 15.3% 2,450 4.0% 3,675 6.0%
Effingham Bank 3,584 8.7% 1,639 4.0% 2,458 6.0%
Tier I Capital (to Average Assets):
Company $36,891 9.8% $14,959 4.0% Not Applicable
Bulloch Bank 23,940 10.8% 6,624 3.0% $11,040 5.0%
Metter Bank 9,393 9.8% 2,863 3.0% 4,772 5.0%
Effingham Bank 3,584 6.2% 2,326 4.0% 2,908 5.0%
As of December 31, 1995:
Total Capital (to Risk-weighted Assets):
Company $36,063 16.9% $17,065 8.0% Not Applicable
Bulloch Bank 23,232 19.2% 9,677 8.0% $12,096 10.0%
Metter Bank 9,094 16.4% 4,424 8.0% 5,530 10.0%
Effingham Bank 3,695 9.9% 2,971 8.0% 3,714 10.0%
Tier I Capital (to Risk-weighted Assets):
Company $33,382 15.6% $8,532 4.0% Not Applicable
Bulloch Bank 21,711 17.9% 4,839 4.0% $7,258 6.0%
Metter Bank 8,397 15.2% 2,212 4.0% 3,318 6.0%
Effingham Bank 3,230 8.7% 1,486 4.0% 2,228 6.0%
Tier I Capital (to Average Assets):
Company $33,382 9.9% $13,472 4.0% Not Applicable
Bulloch Bank 21,711 10.7% 6,062 3.0% $10,104 5.0%
Metter Bank 8,397 9.7% 2,584 3.0% 4,307 5.0%
Effingham Bank 3,230 6.7% 1,931 4.0% 2,414 5.0%
</TABLE>
10. RELATED PARTY TRANSACTIONS
Certain directors, executive officers and principal shareholders of the
Company and the Banks, including their associates and companies in which they
are principal owners, were loan customers of the Banks during 1996 and 1995.
Such loans are made in the ordinary course of business at the Banks' normal
credit terms, including interest rates and collateralization, and do not
represent more than a normal risk of collection. An analysis of the activity in
loans to executive officers, directors, and principal shareholders is as
follows:
17
<PAGE> 18
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
Balance, Beginning of Year $ 9,573,707 $ 9,978,125
Amounts Advanced 25,265,098 26,800,717
Repayments (23,721,005) (27,205,135)
---------- ----------
Balance, End of Year $11,117,800 $ 9,573,707
========== ==========
</TABLE>
11.DEPOSITS AND OTHER BORROWED MONEY
At December 31, 1996, the scheduled maturities of time deposits were as
follows:
<TABLE>
<S> <C>
Within three months $ 57,471,440
Over three months through six months 43,424,490
Over six months through one year 49,437,668
Over one year 33,163,310
-----------
Total $183,496,908
===========
</TABLE>
Other borrowed money at December 31, 1996 and 1995 consists of
$10,917,951 and $7,234,447, respectively, advanced from the Federal Home Loan
Bank of Atlanta to the Banks. Contractual repayments of these advances are
$2,271,030 in 1997, $982,832 in 1998, $1,373,556 in 1999, $937,261 in 2000,
$933,492 in 2001, and $4,419,780 in 2002 and beyond. Average interest rates on
such advances outstanding were 6.98% at December 31, 1996 and 7.02% at December
31, 1995.
12. OTHER EXPENSE
Items comprising other expense for the years ended December 31, 1996,
1995 and 1994 follow:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
<S> <C> <C> <C>
Office Supplies $ 441,952 $ 400,785 $ 303,819
Outside Services 568,065 533,259 431,456
Computer Services 164,753 143,455 148,232
Advertising and Public Relations 526,176 512,102 429,058
Directors' Fees 195,860 192,800 184,100
Postage 247,450 224,382 201,049
FDIC Assessment 8,521 257,578 469,600
Other 1,191,277 833,803 941,614
--------- --------- ---------
Total $3,344,054 $3,098,164 $3,108,928
========= ========= =========
</TABLE>
13.CASH RESTRICTIONS
The Federal Reserve System requires that a certain level of average cash be
maintained. At December 31, 1996 and 1995, such required balances were
$3,120,000 and $1,826,000, respectively.
14.FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS 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.
18
<PAGE> 19
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------ --------------- --------------- --------------- ---------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and Due from Banks $21,611........................ $ 21,611 $ 15,006 $ 15,006 $ 15,006
Interest Bearing Deposits in Other Banks 9,905......... 9,905 12,292 12,292 12,292
Federal Funds Sold 6,220............................... 6,220 8,170 8,170 8,170
Investment Securities 104,024.......................... 104,604 89,793 90,673 90,673
Loans 231,042.......................................... 226,121 215,972 213,275 213,275
Liabilities:
Deposits 329,647....................................... 332,138 304,483 306,850 306,850
Other Borrowed Money 12,918............................ 13,419 7,234 7,741 7,741
Off-Balance-Sheet Instruments:
Commitments to Extend Credit........................... 24,838 26,705
Standby Letters of Credit.............................. 1,070 757
</TABLE>
The carrying amounts of cash and due from banks, interest bearing deposits
in other banks, and federal funds sold are a reasonable estimate of their fair
value due to the short-term nature of these financial instruments. The fair
value of investment securities is based on quoted market prices and dealer
quotes. The fair value of loans, deposits, and other borrowed money is estimated
by discounting the future cash flows using the Banks' current interest rates for
such financial instruments. No adjustment was made to the entry-value interest
rates for changes in credit of performing loans for which there are no known
credit concerns. Management segregates loans in appropriate risk categories.
Management believes that the risk factor embedded in the entry-value interest
rates along with the general reserves applicable to the performing loan
portfolio for which there are no known credit concerns result in a fair
valuation of such loans on an entry-value basis. The fair value of nonperforming
loans with a recorded book value of $1,123,555 at December 31, 1996 and
$1,667,510 at December 31, 1995 has been estimated to be the recorded book value
based on the fair value of the underlying collateral.
As required by SFAS 107, demand deposits are shown at their face value. No
additional value has been ascribed to core deposits, which generally bear a low
rate of or no interest and do not fluctuate in response to changes in interest
rates. The fair value of commitments to extend credit and standby letters of
credit is estimated to approximate the amount outstanding (see Note 5). The fair
value has been estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1996. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and, therefore, current estimates
of fair value may differ significantly from the amounts presented herein.
19
<PAGE> 20
15.CONDENSED FINANCIAL STATEMENTS OF FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
(PARENT ONLY)
The condensed financial statements of First Banking Company of Southeast
Georgia (parent only) are as follows:
Condensed Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 2,338 $ 18,548
Investment in Subsidiaries 37,345,826 34,085,065
Other Assets 51,287 121,386
---------- ----------
Total Assets $37,399,451 $34,224,999
========== ==========
LIABILITIES
Other Liabilities $ 78,690 $ 96,998
--------- ----------
Total Liabilities 78,690 96,998
---------- ----------
SHAREHOLDERS' EQUITY Common Stock 3,002,020 3,002,131
Additional Paid-in Capital 8,022,844 8,025,545
Retained Earnings 26,318,721 22,843,878
Net Unrealized Gain (Loss) on Investment
Securities Available for Sale (22,824) 256,447
---------- ----------
Total Shareholders' Equity 37,320,761 34,128,001
---------- ----------
Total Liabilities and Shareholders' Equity $37,399,451 $34,224,999
========== ==========
</TABLE>
Condensed Statements of Income
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Dividends from Subsidiaries $2,070,243 $1,489,895 $1,134,377
Fees from Subsidiaries 436,116 381,742
--------- --------- ---------
Total Income 2,070,243 1,926,011 1,516,119
General and Administrative Expenses 738,595 649,542 625,748
--------- --------- ---------
Income Before Income Taxes and Equity in Undistributed
Income of Subsidiaries 1,331,648 1,276,469 890,371
Income Tax Benefit 264,594 59,139 67,000
--------- --------- ---------
Income Before Equity in Undistributed Income of
Subsidiaries 1,596,242 1,335,608 957,371
Equity in Undistributed Income of Subsidiaries 3,577,720 3,370,360 2,874,752
--------- --------- ---------
Net Income $5,173,962 $4,705,968 $3,832,123
========= ========= =========
</TABLE>
20
<PAGE> 21
Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $5,173,962 $ 4,705,968 $ 3,449,274
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Amortization of Goodwill 37,688 37,688 37,688
Earnings of Subsidiaries (5,647,962) (4,860,256) (3,626,279)
Changes in Assets and Liabilities:
Decrease in Other Assets 70,099 (98,819) 82,600
Increase(Decrease) in Other
Liabilities (18,308) 16,718 17,474
---------- --------- ----------
Net Cash Used by Operating Activities (384,521) (198,701) (39,243)
---------- --------- ----------
Cash Flows From Investing Activities:
Dividends Received from Subsidiaries 2,070,243 1,489,895 1,134,377
---------- --------- ----------
Cash Flows From Financing Activities:
Repayment of Note Payable (100,000)
Purchase and Retirement of
Fractional Shares (2,813) (3,137)
Dividends Paid (1,699,119) (1,274,321) (998,227)
---------- --------- ----------
Net Cash Used by Financing Activities (1,701,932) (1,277,458) (1,098,227)
---------- --------- ----------
Increase(Decrease)in Cash and
Due From Banks (16,210) 13,736 (3,093)
Cash and Due From Banks,
Beginning of Year 18,548 4,812 7,905
---------- --------- ----------
Cash and Due From Banks, End of Year $2,338 $ 18,548 $ 4,812
========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid (Received) During the Year for:
Interest $ 1,617
Income Taxes $(227,063) $ (67,950) (29,329)
</TABLE>
21
<PAGE> 22
16.QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended December 31, 1996 and 1995 is
summarized as follows (thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Interest Income $7,497 $7,490 $7,740 $7,841
Interest Expense 3,619 3,495 3,603 3,690
------ ------ ------ ------
Net Interest Income 3,878 3,995 4,137 4,151
Provision for Loan Losses 228 233 169 65
------ ------ ------ ------
Net Interest Income after Provision for Loan Losses 3,650 3,762 3,968 4,086
Non-Interest Income 600 662 602 675
Non-Interest Expense 2,426 2,447 2,885 2,673
------ ------ ------ ------
Income Before Income Taxes 1,824 1,977 1,685 2,088
Provision for Income Taxes 547 582 549 722
------ ------ ------ ------
Net Income $1,277 $1,395 $1,136 $1,366
====== ====== ====== ======
Net Income Per Share $ 0.42 $ 0.46 $ 0.38 $ 0.46
====== ====== ====== ======
1995
Interest Income $6,290 $6,688 $7,066 $7,404
Interest Expense 2,596 2,964 3,312 3,546
------ ------ ------ ------
Net Interest Income 3,694 3,724 3,754 3,858
Provision for Loan Losses 168 189 177 325
------ ------ ------ ------
Net Interest Income after Provision for Loan Losses 3,526 3,535 3,577 3,533
Non-Interest Income 542 595 568 625
Non-Interest Expense 2,358 2,430 2,314 2,740
------ ------ ------ ------
Income Before Income Taxes 1,710 1,700 1,831 1,418
Provision for Income Taxes 530 530 547 346
------ ------ ------ ------
Net Income $1,180 $1,170 $1,284 $1,072
====== ====== ====== ======
Net Income Per Share $ 0.39 $ 0.39 $ 0.43 $ 0.36
====== ====== ====== ======
</TABLE>
22
<PAGE> 23
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest Income $30,567,977 $ 27,447,803 $ 21,319,846 $ 19,192,984 $ 20,166,583
Interest Expense 14,407,335 18,418,044 8,271,364 7,557,384 9,196,297
---------- ----------- ----------- ----------- -----------
Net Interest Income 16,160,642 15,029,759 13,048,482 11,635,600 10,970,286
---------- ----------- ----------- ----------- -----------
Provision for Loan
Losses 694,911 859,300 632,073 726,768 902,530
Net Interest Income
After Provision 15,465,731 14,170,459 12,416,409 10,908,832 10,067,756
Non-Interest Income 2,539,412 2,329,914 2,330,957 2,265,727 2,109,296
Non-Interest Expense 10,430,664 9,841,705 9,256,325 8,459,465 7,991,778
---------- ----------- ----------- ----------- -----------
Income Before Income Taxes 7,574,479 6,658,668 5,491,041 4,715,094 4,185,274
--------- ----------- ----------- ----------- -----------
Provision for Income Taxes 2,400,517 1,952,700 1,658,918 1,340,865 1,166,954
--------- ----------- ----------- ----------- -----------
Net Income $5,173,962 $ 4,705,968 $ 3,832,123 $ 3,374,229 $ 3,018,320
========= =========== =========== =========== ===========
Net Income per Share $1.72 $ 1.57 $ 1.28 $ 1.12 $ 1.01
========= =========== =========== =========== ===========
Cash Dividends:
Declared $ 1,699,119 $ 1,274,321 $ 998,227 $ 798,582 $ 565,661
Per Share $ 0.60 $ 0.48 $ 0.375 $ 0.30 $ 0.21
Book Yalue at Year
End-Per Share $ 12.43 $ 11.37 $ 9.74 $ 9.30 $ 8.27
Weighted Average Shares
Outstanding 3,002,092 3,002,215 3,002,359 3,002,359 3,002,359
Total Assets $384,035,982 $350,366,037 $296,510,542 $264,499,807 $250,285,706
Other Borrowed
Money $ 10,917,951 $ 7,234,447 $ 4,629,876 $ 819,323 $ 485,000
</TABLE>
The book value per share, cash dividends, and average shares outstanding
have been restated to reflect the 8-for-5 stock split effected in the form of a
60% stock dividend effective May 15, 1995 and the acquisition of Effingham Bank.
RETURN ON EQUITY AND ASSETS
The ratio of net income to average shareholders' equity and to average
total assets, and certain other ratios are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- ------------ --------
<S> <C> <C> <C>
Percentage of Net Income to:
Average Total Assets 1.42% 1.49% 1.41%
Average Shareholders' Equity 14.52 14.73 13.40
Percentage of Dividends Declared per Common Share to Net
Income per Common Share 34.88 30.57 29.30
Percentage of Average Shareholders' Equity to Average Total
Assets 9.81 10.10 10.50
</TABLE>
MARKET FOR STOCK AND RELATED SHAREHOLDER MATTERS
The common stock of First Banking Company is traded on the Nasdaq Stock
Market ("Nasdaq") under the symbol FBCG. At December 31, 1996 First Banking
Company had 1,077 shareholders of record. The following table sets forth on a
per share basis the high and low sale prices of the Company's
23
<PAGE> 24
common stock and the cash dividends paid by the Company on a quarterly basis for
1996 and 1995, adjusted for the 60% stock dividend paid in May 1995.
<TABLE>
<CAPTION>
1996 HIGH LOW DIVIDEND
<S> <C> <C> <C>
First Quarter $ 27.00 $ 20.00 $0.15
Second Quarter 28.00 26.00 0.15
Third Quarter 27.50 24.00 0.15
Fourth Quarter 25.50 22.63 0.15
1995
First Quarter $ 13.13 $ 11.56 $0.12
Second Quarter 18.50 13.13 0.12
Third Quarter 19.50 16.50 0.12
Fourth Quarter 20.75 18.00 0.12
</TABLE>
24
<PAGE> 25
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ORGANIZATION
First Banking Company of Southeast Georgia (the "Company") owns all of the
outstanding stock in First Bulloch Bank & Trust Company, Metter Banking Company
and First National Bank of Effingham("the Banks"). Effective August 27, 1996,
the Company consummated its merger of the Effingham Bank into the Company. The
Company exchanged 340,309 shares of its common stock and cash of approximately
$2,800 for all of the outstanding common stock and options to acquire common
stock of FNB Bancshares, Inc. (FNB), parent company of Effingham Bank. The
merger was accounted for as a pooling-of-interests. The financial statements of
the Company for the years ended December 31, 1995 and 1994 have been restated to
include FNB and the Effingham Bank. All of the operations of the Company are
conducted by the Banks. Management's discussion and analysis, which follows,
relates primarily to the Banks.
CAPITAL RESOURCES
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines the Company and the Banks must meet specific capital
guidelines that involve quantitative measures of the Company's and the Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's and the Banks' classifications
under the regulatory framework for prompt corrective action are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Banks to maintain minimum amounts and ratios of
total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to
average assets, as defined in the regulations and as set forth in the table
below. Management believes that as of December 31, 1996 the Company and the
Banks meet all capital adequacy requirements to which they are subject.
As of December 31, 1996 and 1995, the most recent notifications from the
Federal Deposit Insurance Corporation categorized Bulloch Bank and Metter Bank
as "well-capitalized" and Effingham Bank as "adequately capitalized" under the
regulatory framework for prompt corrective action. As a result, Effingham Bank
is not allowed to accept brokered deposits without regulatory approval. To be
categorized as "well-capitalized", Bulloch Bank and Metter Bank must maintain
minimum total risk-based, Tier I risk-based, and Tier 1 leverage ratios as set
forth in the table. There are no conditions or events since that notification
that management believes have changed such institutions' category.
The Company's and the Banks' actual capital amounts and ratios as of
December 31, 1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk-weighted Assets):
Company $39,831 17.0% $18,730 8.0% Not Applicable
Bulloch Bank 25,603 19.3% 10,585 8.0% $13,232 10.0%
Metter Bank 10,164 16.6% 4,899 8.0% 6,124 10.0%
Effingham Bank 3,994 9.7% 3,278 8.0% 4,097 10.0%
Tier I Capital (to Risk-weighted Assets):
Company $36,891 15.8% $ 9,365 4.0% Not Applicable
Bulloch Bank 23,940 18.1% 5,293 4.0% $7,939 6.0%
Metter Bank 9,393 15.3% 2,450 4.0% 3,675 6.0%
Effingham Bank 3,584 8.7% 1,639 4.0% 2,458 6.0%
Tier I Capital (to Average Assets):
Company $36,891 9.8% $14,959 4.0% Not Applicable
Bulloch Bank 23,940 10.8% 6,624 3.0% $11,040 5.0%
Metter Bank 9,393 9.8% 2,863 3.0% 4,772 5.0%
Effingham Bank 3,584 6.2% 2,326 4.0% 2,908 5.0%
</TABLE>
25
<PAGE> 26
LIQUIDITY
The percentage of net loans to deposits was 68.9% at December 31, 1996 and
69.7% at December 31, 1995. At December 31, 1996, the Banks held $37,736,228 in
cash and due from banks, interest bearing deposits and federal funds sold as
compared to $35,467,078 at December 31, 1995. The Banks' liquidity policies
require a minimum ratio of 20.0% of cash and certain investments to net
withdrawable deposits and short-term maturities of other borrowed money. At
December 31, 1996, each Bank's liquidity ratio exceeded 20.6%. Management
considers the Company and the Banks' liquidity to be adequate to repay deposits
and other obligations, to meet expected loan demands, and to pay cash dividends.
Operating activities provided cash to the Company of $5,368,714 and
$5,932,613 in 1996 and 1995, respectively. Investing activities, which primarily
consist of granting loans to customers and purchasing investment securities,
used cash of $27,909,705 and $51,573,282 in 1996 and 1995, respectively. The
Banks invested $2,405,496 and $1,797,173 in premises and equipment in 1996 and
1995, respectively. Cash provided by financing activities was $29,146,202 and
$46,295,915 in 1996 and 1995, respectively. Financing activities consist
primarily of accepting deposits from customers, the payment of dividends to
shareholders, and occasional strategic borrowing from the Federal Home Loan
Bank. Dividend payments were $1,699,119 in 1996 and $1,274,321 in 1995.
Effective May 15, 1995, the Company declared an eight-for-five split of its
common stock effected in the form of a 60% stock dividend. All references to
share and per share amounts have been retroactively adjusted to reflect the
split.
FINANCIAL CONDITION
Total assets increased $33,669,945 (9.6%) at December 31, 1996 from
December 31, 1995 and increased $53,855,495 (18.2%) at December 31, 1995 from
December 31, 1994. The 1996 growth was primarily in investment securities and
loans and was funded by an increase in total deposits of $25,164,629, other
borrowings of $5,683,504, and by operations of $5,368,714. The 1995 increase was
primarily in investment securities and loans and was funded by an increase in
total deposits of $15,089,967 and other borrowings of $2,604,571 and by
operations of $5,932,613. A detailed discussion of the major components of the
changes follows.
INVESTMENT SECURITIES. The Company has classified its investment securities
as either available for sale or held to maturity depending upon whether the
Company has the intent and ability to hold investment securities to maturity. At
December 31, 1996 and 1995, $85,865,947 and $54,015,190, respectively, of
investment securities were classified as available for sale. A net unrealized
loss of $22,824 at December 31, 1996 and a net unrealized gain of $256,447 at
December 31, 1995 were included in shareholders' equity related to available for
sale securities. There were no realized losses from the sale or call of
investment securities in 1996 and 1995. Gross unrealized losses for all
investment securities at December 31, 1996 were $296,387. Such losses are not
expected to have any adverse impact on future operations of the Company.
The following table sets forth the carrying amounts of investment
securities available for sale at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
U.S. Treasury Securities................................ $22,156,402 $22,594,548 $31,031,134
U.S. Government Agencies................................ 55,678,161 24,923,867 13,087,232
States and Political Subdivisions....................... 5,421,832 4,899,323 3,447,085
Other................................................... 2,609,552 1,597,452 1,219,552
---------- ---------- ----------
$85,865,947 $54,015,190 $48,785,003
========== ========== ==========
</TABLE>
The following table sets forth the maturities of investment securities
available for sale at December 31, 1996, and the weighted average yields of such
securities (calculated on the basis of the cost and effective yields weighted
for the scheduled maturity of each security):
26
<PAGE> 27
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------
WITH IN AFTER ONE BUT
ONE YEAR WITHIN FIVE YEARS
------------------------ -------------------------
AMOUNT YIELD AMOUNT YIELD
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
U.S. Treasury Securities............... $11,875,163 5.82% $10,281,239 5.47%
U.S. Government Agencies................ 22,739,938 5.82 30,324,453 5.40
States and Political Subdivisions(1).... 848,445 6.68
Other...................................
---------- ---- ---------- ----
$34,615,101 5.82% $41,454,137 5.44%
========== ==== ========== ====
<CAPTION>
MATURING
--------------------------------------------------------
AFTER FIVE BUT AFTER
WITHIN TEN YEARS TEN YEARS
------------------------- ------------------------
AMOUNT YIELD AMOUNT YIELD
----------- -------- -------------- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities...........
U.S. Government Agencies........... $2,399,613 5.80% $ 214,157 8.02%
States and Political Subdivisions.. 2,050,312 6.95 2,523,075 7.21
Other.............................. 2,609,552
--------- ---- --------- ----
$4,449,925 6.33% $5,346,784 7.27%
========= ==== ========= ====
</TABLE>
The following table sets forth the carrying amounts of investment
securities held to maturity at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
U.S. Treasury Securities................................ $ 1,999,082 $ 6,985,104 $ 3,969,386
U.S. Government Agencies................................ 2,377,268 17,221,506 3,163,026
States and Political Subdivisions....................... 13,781,394 11,571,495 10,152,297
---------- ---------- ----------
$18,157,744 $35,778,105 $17,284,709
========== ========== ==========
</TABLE>
The following table sets forth the maturities of investment securities held
to maturity at December 31, 1996, and the weighted average yields of such
securities (calculated on the basis of the cost and effective yields weighted
for the scheduled maturity of each security):
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------
WITHIN AFTER ONE BUT
ONE YEAR WITHIN FIVE YEARS
------------------------- --------------------------
AMOUNT YIELD AMOUNT YIELD
----------- ----- ------------ ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities.......... $ 1,999,082 6.83%
U.S. Government Agencies.......... 1,016,864 5.99 $ 1,195,587 8.32%
States and Political
Subdivisions.................... (1) 1,487,796 9.65 5,265,309 8.54
---------- ---- ---------- ----
$ 4,503,742 7.57% $ 6,460,896 8.50%
========== ==== ========== ====
<CAPTION>
MATURING
----------------------------------------------------------
AFTER FIVE BUT AFTER
WITHIN TEN YEARS TEN YEARS
------------------------ -------------------------
AMOUNT YIELD AMOUNT YIELD
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
U.S. Treasury Securities..........
U.S. Government Agencies.......... $ 117,923 9.12% $ 46,894 10.37%
States and Political
Subdivisions.................... 3,645,077 7.30 3,383,212 7.91
--------- ---- --------- -----
$3,763,000 7.36% $3,430,106 7.94%
========= ==== ========= =====
</TABLE>
(1) Weighted average yields on tax exempt obligations have been computed on
a fully tax-equivalent basis assuming a tax rate of 34 percent. The tax
equivalent rate has been reduced by 0.35% to allow for estimated disallowance of
interest expense.
No securities of a single issuer held by the Company, excluding U. S.
Treasury and U. S. Government Agencies, exceeded 10% of total stockholders'
equity in 1996, 1995, and 1994.
LOANS. Loans net of unearned interest increased $15,934,923 or 7.4% in 1996
as compared to 1995 and increased $27,060,604 or 14.3% in 1995 as compared to
1994. These increases were the result of continued strong economic activity,
both consumer and commercial, in the Company's market.
The Company's loan portfolio consists of the following categories of loans:
Commercial, Financial and Agricultural. Commercial, Financial and
Agricultural loans consist of all business and agricultural loans not secured by
real estate. The borrowers in this category are generally small to medium sized
businesses located in the market area of the Company. Most loans in this
category are collateralized. Types of collateral include accounts receivable,
inventory, equipment, furniture and fixtures, and certificates of deposit. Risks
associated with these types of loans include bankruptcy, economic downturn,
deteriorating collateral, crop failure as a result of extreme or poor weather,
and changes in market prices for underlying crops in the case of agricultural
loans.
Real Estate -- Construction. Loans classified as construction loans are
typically made short-term to finance the construction of residential (1-4
family) dwellings, have permanent take-out mortgages approved and will be
fully repaid upon completion of construction. Builder financing is generally
discouraged. Such loans require site inspections and evaluations prior to the
payment of any draws. Risks associated with such loans include cost overruns and
interest rate movements.
27
<PAGE> 28
Real Estate -- Mortgage. Loans classified as mortgage real estate include
all loans secured by real estate which were made for commercial, financial or
agricultural purposes and which are not construction loans. The primary
collateral on such loans is first lien mortgages, but also includes
second-mortgage positions. Risks associated with this type loan are typically
the same as those classified "Commercial, Financial, and Agricultural".
Installment Loans to Individuals. Installment loans to individuals consist
of consumer loans made for personal, household and family purposes, such as home
improvement and automobile purchases. Types of collateral include automobiles,
mobile homes, savings accounts, and stock. Risks associated with such loans
include deteriorating collateral, general economic downturn, and bankruptcy.
Agriculturally-related loans. Agriculturally related loans comprise
approximately 8.6% of the total loan portfolio at December 31, 1996.
Agriculturally related loans are defined as those loans secured by farmland as
well as those originated to finance agricultural production, which includes
irrigated and non-irrigated row crops, food and feed grain, livestock and other
enterprises, such as timber and pecans. The Company limits such loans to
operators who exhibit strong financial ability and proven performance and can
offer the collateral deemed necessary for their individual lines of credit.
Agriculturally related loans made for real estate or for equipment follow the
general guidelines discussed below in "Credit Underwriting and Monitoring." Crop
production and livestock operation loans typically require liens on the
livestock or the current year crop production. Farm visits and inspections are
performed periodically to assess the collateral and the overall soundness of the
operation. A customized repayment plan is developed for each operator based upon
his projected cash flow from crop production or livestock sales. Risks
associated with such loans are typically those identified above in "Commercial,
Financial and Agricultural," but also include poor production associated with
unfavorable weather conditions as well as an unfavorable farm- to-market
economic relationship.
Credit Underwriting and Monitoring. It is the practice of the Company to
meet the credit needs of qualified borrowers within its market area at a
reasonable price. The extent and amount of collateral required is based on
factors such as the character of the borrower, his financial condition, his
ability to service the debt according to a predetermined repayment plan, his
credit history, and the loan purpose. Because each loan is evaluated on its own
merit, there are no predetermined or minimal loan-to-value ratios or lien
positions, except as provided by bank regulators in the case of real estate
loans. State banking regulations require that, in the absence of other
acceptable collateral, a real estate loan be less than or equal to 90% and 75%
of the appraised value of the real estate taken as security in the case of an
amortizing loan and of a nonamortizing loan, respectively.
The Company operates under a comprehensive loan policy which
individually addresses the various types and purposes of loans the Banks can
make and defines acceptable collateral. The lending policy emphasizes the
financial strength and cash flow position of the borrower and considers
collateral as the last resort source of repayment. The Company has also
established a formal loan classification and grading system, performed as a
separate and independent function within the Company. All loans are assigned a
grade and are subject to review based on the perceived risk of loss to the
Company. Such review includes verification of all necessary documentation as
well as financial statement analysis and compliance with regulations and bank
policy.
Economy of the Market Area. The Company's primary market area is comprised
of Bulloch, Candler, Effingham, and contiguous counties of southeast Georgia.
The local economy is a diversified mix of retail and service, manufacturing and
agriculture. Statesboro-Bulloch County is a retail hub which draws from an eight
county area and is also the home of Georgia Southern University, enrolling
14,000 students and employing 2,000 faculty and staff. Ogeechee Technical
Institute is a drawing card for industries looking to locate in southeast
Georgia. Metter-Candler County has also experienced commercial development in
terms of motels, restaurants, and gas stations around the Interstate 16
interchange which cater to travelers. Ceran Language Institute, a language
school headquartered in Belgium, recently established its first U. S. facility
in Metter-Candler County and is designed to provide intense instruction in the
English language to foreign executives. Springfield-Rincon-Effingham County is
included as part of the Savannah-Chatham County, Georgia Metropolitan
Statistical Area. This area has experienced tremendous growth in recent years
as a result of population movement from Savannah-Chatham County, and the
correlating growth in retail and service businesses from the increased
population, and of the establishment of a large paper mill in the county.
In the manufacturing sector the Company's market area is home to seventy
manufacturers, ranging from meat packing, lumber mills, a paper mill, grey-iron
foundry, meter and valve production, and garment manufacturing to computer form
production, steel recycling, and lawn mower engines.
28
<PAGE> 29
Agriculture and agribusiness accounts for approximately one-third of the
local economy in terms of economic impact. Major cash producers include Vidalia
onions, peanuts, cotton, forestry, tobacco, corn, poultry, beef and swine. The
resurgence of cotton has led to the construction of three cotton gins in the
area and the major upgrading of an existing one. A technological advance in
controlled atmospheric storage enables Vidalia onion growers to store their crop
and ship year-round all across the nation.
The following tables present the composition of the Company's loan
portfolio at December 31 for the past five years as well as the maturities and
sensitivities of loans to changes in interest rates.
<TABLE>
<CAPTION>
LOAN PORTFOLIO
DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Commercial, Financial and Agricultural............. $ 49,837,280 $ 54,600,117 $ 64,999,750
Real Estate -- Constructio.......................... 17,366,129 12,505,746 7,534,115
Real Estate -- Mortgage............................. 141,015,449 127,203,963 93,688,443
Installment Loans to Individuals................... 22,838,620 21,686,523 22,945,822
------------ ------------ ------------
Total.......................................... $231,057,478 $215,996,349 $189,168,130
============ ============ ============
<CAPTION>
LOAN PORTFOLIO
December 31,
----------------------------------------
1993 1992
<S> <C> <C>
Commercial, Financial and Agricultural............. $ 63,548,257 $ 60,868,686
Real Estate -- Constructio.......................... 7,272,112 2,503,516
Real Estate -- Mortgage............................. 77,795,102 79,013,657
Installment Loans to Individuals................... 23,307,496 21,683,790
------------ ------------
Total.......................................... $171,922,967 $164,069,649
============ ============
</TABLE>
The maturities of the indicated loans at December 31, 1996 are
as follows:
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------------------------------
AFTER ONE
WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Commercial, Financial and
Agricultural.................... $ 29,677,943 $16,237,226 $ 3,922,111 $ 49,837,280
Real Estate- Construction......... 14,092,597 2,220,697 1,052,835 17,366,129
Real Estate- Mortgage............. 51,877,927 66,551,513 22,586,009 141,015,449
Installment Loans to Individuals.. 8,408,638 14,037,383 392,599 22,838,620
----------- ---------- ---------- -----------
Total........................... $104,057,105 $99,046,819 $27,953,554 $231,057,478
=========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITY
DECEMBER 31, 1996
------------------------------------------------------------
FIXED VARIABLE
RATE RATE TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Due Within One Year................................... $ 64,004,871 $40,052,234 $104,057,105
Due After One But Within Five Years................... 62,104,678 36,942,141 99,046,819
Due After Five Years.................................. 12,520,465 15,433,089 27,953,554
----------- ---------- -----------
Total............................................... $138,630,014 $92,427,464 $231,057,478
=========== ========== ===========
</TABLE>
The risks associated with granting loans at fixed rates is that the
deposits funding such loans may reprice at higher rates prior to the loan's
maturity. The Company mitigates such risk by managing the maturity match of
interest bearing assets and liabilities. See "Interest Rate Sensitivity."
The Banks have no foreign loans or significant potential problem loans that
are not already disclosed herein nor any other significant interest bearing
assets required to be disclosed.
NONPERFORMING ASSETS. The following table presents a history of the
Company's nonperforming assets at year-end for the past five years.
29
<PAGE> 30
<TABLE>
<CAPTION>
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
DECEMBER 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans................... $ 353,389 $ 549,297 $ 474,045 $ 562,123 $ 292,345
Accruing Loans Past Due at least 90
days............................. 207,420 367,663 419,115 241,560 503,127
Restructured Loans................. 855,515 750,550 1,039,729 413,897
---------- ---------- ------------- ----------- ----------
Total Nonperforming Loans.......... 1,416,324 1,667,510 1,932,889 1,217,580 795,472
Other Real Estate.................. 446,500 306,500 492,692 504,000 379,000
---------- ---------- ------------- ----------- ----------
Total Nonperforming Assets....... $1,862,824 $1,974,010 $ 2,425,581 $ 1,721,580 $1,174,472
========== ========== ============= =========== ==========
</TABLE>
Interest income that would have been recorded on these nonperforming
loans in accordance with their original terms amounted to $171,952, $110,345,
$115,293, $94,358 and $18,496 in 1996, 1995, 1994, 1993 and 1992, respectively,
compared with amounts received of $52,193, $53,462, $53,961, $23,553 and $1,438
for such years, respectively. Restructured loans are performing in accordance
with their restructured terms.
Nonaccrual loans by loan category in 1996 included $27,000 in real
estate-construction, $254,000 in real estate-mortgage, $59,000 in installment
loans to individuals, and $13,000 in commercial loans.
Loans are placed on non-accrual status when management does not consider
the collection of interest to be reasonably assured. It is the Company's policy
to allow any loan past due greater than 90 days to remain on an accrual basis if
it is well collateralized and in process of collection. All loans 120 days past
due, however, are charged-off.
DEPOSITS. Average deposits increased $38,891,138 in 1996 and $36,885,879 in
1995. The 1996 increase is primarily the result of an increase of $15,716,684 in
NOW accounts and of $18,339,260 in time deposits. The overall cost of funds did
not vary from 1995 to 1996. The increase in NOW accounts is primarily
attributable to one new public fund account obtained through competitive bid and
opened on January 2, 1996. This account maintained an average balance of
approximately $10,700,000 during 1996. The 1995 increase is attributable solely
to an increase in rates paid on deposits. At December 31, 1996 and 1995, time
deposits $100,000 and above comprised 24.9% of total deposits and 21.4% and
21.6%, respectively, of total assets. Peer average of time deposits $100,000 and
above to total assets was 8.7% at December 31, 1995. At December 31, 1996 and
1995, 33.8% and 37.5%, respectively, of total time deposits over $100,000 were
deposits of state and local governmental entities. Such deposits are acquired
from, and rates paid are based on, competitive bids with other local commercial
banks in the market area. State banking regulations require such deposits in
excess of the FDIC coverage of $100,000 be collateralized by pledging securities
in the investment portfolio. Because of the volatility of such deposits,
securities are generally purchased to match maturities of the corresponding time
deposit.
The following table presents the average amount outstanding and the average
rate paid on deposits by the Company for the years 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994
---------------------- -------------------- ------------------
Average Average Average
Amount Rate Amount Rate Amount Rate
------------ ---- ------------ ---- ------------ ----
<S> <C> <C> <C> <C> <C> <C>
Deposits:
Demand................................. $ 35,775,861 0.00% $ 32,728,690 0.00% $ 29,535,652 0.00%
NOW.................................... 54,886,435 3.27 39,170,751 2.95 33,969,614 2.77
Money Market........................... 37,223,341 3.40 36,363,393 3.56 36,856,008 3.12
Savings................................ 13,110,326 3.20 12,181,251 3.17 11,538,719 2.88
Time ($100,000 and above).............. 74,498,750 6.08 66,101,805 6.05 49,147,129 4.67
Other Time............................. 98,616,158 5.87 88,673,843 5.85 77,286,732 4.37
----------- ---- ----------- ---- ----------- ----
Total................................ $314,110,871 4.39% $275,219,733 4.37% $238,333,854 3.40%
=========== ==== =========== ==== =========== ====
</TABLE>
30
<PAGE> 31
As of December 31, 1996, time deposits of $100,000 or more totaled
$82,203,709. The maturities of all time deposits over $100,000 are as follows:
<TABLE>
<S> <C>
Three months or less........................................ $28,259,360
Over three months through six months........................ 17,705,499
Over six months through twelve months....................... 21,506,798
Over twelve months.......................................... 14,732,052
-----------
Total..................................................... $82,203,709
===========
</TABLE>
OTHER BORROWED MONEY. Other borrowed money increased $3,683,504 from
December 31, 1995 to December 31, 1996 and increased $2,604,571 from December
31, 1994 to December 31, 1995. Funds are strategically borrowed from the Federal
Home Loan Bank of Atlanta as a means of providing funding for long-term credit
products to the Company's loan customers. Maturities and principal repayments of
other borrowed money are structured to generally match those of the loans funded
by these borrowings. At December 31, 1996, the Company also had short-term
borrowings outstanding of $800,000 in fed funds purchased and $1,200,000 in
repurchase agreements.
There were no short-term borrowings for which the average balance
outstanding during the period was more than 30% of shareholders' equity for each
of the years ended December 31, 1996, 1995 and 1994.
INTEREST RATE SENSITIVITY
The objective of interest rate sensitivity management is to minimize the
effect of interest rate changes on net interest margin. Maintaining a balanced
interest rate sensitivity position by adjusting the asset and liability mix so
that generally equal volumes of assets and liabilities reprice each period is
one way of achieving this objective. Profits, however, are not always maximized
by this balance and the Company selectively mismatches asset and liability
repricing to take advantage of short-term interest rate movements. The Banks'
historical performance in various economic climates assists management in making
long-term asset/liability decisions for the Banks.
The table below depicts the Company's interest risk at December 31, 1996.
The time period indicated in the table represents the shorter of the time
remaining before the asset or liability either matures or is subject to
repricing. NOW, money market, and savings accounts have been included in "less
than three months." The analysis results in a negative one year gap of
$44,710,000 (excess of interest bearing liabilities over interest earning assets
repricing within one year). However, the Banks' experience has indicated that
NOW, money market, and savings deposits of $102,783,000 are not interest rate
sensitive.
31
<PAGE> 32
INTEREST RATE SENSITIVITY ANALYSIS
December 31, 1996 (Dollars in thousands)
<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
------------ -------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing Deposits
in Other Banks $ 9,905 $ 9,905
Investment Securities 13,348 $ 26,612 $ 47,072 $ 16,992 104,024
Federal Funds Sold 6,220 6,220
Loans 108,828 47,806 56,977 17,431 231,042
------- -------- -------- ------- -------
Total Interest
Earning Assets 138,301 74,418 104,049 34,423 351,191
Non-interest Earning
Assets 32,845 32,845
------- -------- -------- ------- -------
Total Assets $138,301 $ 74,418 $ 104,049 $ 67,268 $384,036
======= ======== ======== ======= =======
Interest Bearing Liabilities:
Interest Bearing Deposits $160,347 $ 92,811 $ 33,121 $286,279
Short-term Borrowings 2,000 2,000
Other Borrowed Money 1,529 742 4,227 $ 4,420 10,918
------- -------- -------- ------- -------
Total Interest Bearing
Liabilities 163,876 93,553 37,348 4,420 299,197
======= ======== ======== ======= =======
Interest Free Deposits 43,368 43,368
Other Interest Free
Liabilities and Equity 41,471 41,471
------- -------- -------- ------- -------
Total Liabilities & Equity $163,876 $ 93,553 $ 37,348 $ 89,259 $384,036
======= ======== ======== ======= =======
Net Interest Rate
Sensitivity Gap $(25,575) $ (19,135) $ 66,701 $(21,991)
Cumulative Gap $(25,575) $ (44,710) $ 21,991
Net Interest Rate
Sensitivity Gap as a
Percent of Interest
Earning Assets (18.49) (25.71) 64.11 (63.88)
Cumulative Gap as a Percent
of Cumulative Interest
Earning Assets (18.49) (21.02) 6.94
</TABLE>
32
<PAGE> 33
The following table sets forth the consolidated average balance sheets for
the Company as of December 31, 1996, 1995 and 1994.
CONSOLIDATED AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks:
Interest Bearing Deposits.......................... $ 10,633,446 $ 12,556,038 $ 2,348,715
Non-Interest Bearing Deposits and Cash............. 12,690,146 10,391,126 9,208,057
----------- ----------- -----------
Total Cash and Due from Banks................... 23,323,592 22,947,164 11,556,772
----------- ----------- -----------
Investment Securities................................ 100,206,162 77,658,600 66,329,986
Federal Funds Sold................................... 8,263,873 4,909,650 7,424,568
Loans................................................ 221,740,000 202,322,084 180,241,579
Less: Unearned Interest............................ (17,632) (37,478) (50,315)
Allowance for Loan Losses....................... (4,075,648) (3,517,734) (3,160,464)
----------- ----------- -----------
Net Loans.......................................... 217,646,720 198,766,872 177,030,800
----------- ----------- -----------
Interest Receivable.................................. 4,652,260 4,026,487 3,112,927
Premises and Equipment, Net.......................... 6,389,377 5,251,465 4,028,272
Other Real Estate.................................... 369,197 450,852 556,803
Other Assets......................................... 2,314,288 2,406,137 2,421,838
----------- ----------- -----------
Total Assets.................................... $363,165,469 $316,417,227 $272,461,966
=========== =========== ===========
LIABILITIES
Deposits:
Demand............................................. $ 35,775,861 $ 32,728,690 $ 29,535,652
NOW Accounts....................................... 54,886,435 39,170,751 33,969,614
Money Market Deposit Accounts...................... 37,223,341 36,363,393 36,856,008
Savings............................................ 13,110,326 12,181,251 11,538,719
Time ($100,000 and above).......................... 74,498,750 66,101,805 49,147,129
Other Time......................................... 98,616,158 88,673,843 77,286,732
----------- ----------- -----------
Total Deposits................................. 314,110,871 275,219,733 238,333,854
Other Borrowed Money................................. 9,194,557 5,539,147 2,809,839
Interest Payable and Accrued Liabilities............. 4,232,296 3,714,329 2,715,172
----------- ----------- -----------
Total Liabilities.............................. 327,537,724 284,473,209 243,858,865
----------- ----------- -----------
Shareholders' Equity:
Common Stock......................................... 3,002,092 3,002,215 3,002,359
Additional Paid-in Capital........................... 8,024,608 8,026,506 8,028,454
Retained Earnings.................................... 24,737,028 21,288,649 17,940,599
Unrealized Loss on Investment Securities Available
for Sale........................................... (135,983) (373,352) (368,311)
----------- ----------- -----------
Shareholders' Equity............................ 35,627,745 31,944,018 28,603,101
----------- ----------- -----------
Total Liabilities and Shareholders' Equity...... $363,165,469 $316,417,227 $272,461,966
=========== =========== ===========
</TABLE>
33
<PAGE> 34
The following table sets forth the consolidated average balance sheets
for the Company, total interest earned on earning assets, total interest paid on
deposits, and average rates earned on earning assets and paid on interest
bearing liabilities. This information is presented for the years ended December
31, 1996, 1995 and 1994.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1996 1995
---------------------------------- --------------------------------------
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
BALANCE EARNED/PAID RATE BALANCE EARNED/PAID RATE
----------- ----------- ------- ------------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Interest Bearing Deposits:
Domestic....................... $10,633,446 $ 584,746 5.50% $ 12,556,038 $ 755,892 6.01%
Investment Securities:
Taxable........................ 83,224,586 5,111,510 6.14 63,315,691 3,815,850 6.03
Tax Exempt(1).................. 16,981,576 859,929 7.14 14,342,909 881,278 8.78
Federal Funds Sold............... 8,263,873 418,504 5.06 4,909,650 268,331 5.47
Loans (Less Unearned):
Taxable........................ 218,746,182 23,358,479 10.68 198,786,488 21,477,088 10.80
Tax Exempt(1).................. 2,976,186 234,809 11.42 3,498,118 249,364 10.27
----------- ---------- ----- ----------- ---------- -----
Interest Earning Assets(1)......... 340,825,849 30,567,977 9.10 297,408,894 27,447,803 9.39
Non-Interest Earning Assets:
Cash and Non-interest bearing
Deposits....................... 12,690,146 10,391,126
Premises and Equipment,
Net............................ 6,389,377 5,251,465
Other Real Estate................ 369,197 450,852
Other Assets..................... 6,966,548 6,432,624
Less: Allowance for
Loan Losses................ (4,075,648) (3,517,734)
----------- -----------
Total.......................... $363,165,469 $316,417,227
=========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Deposits:
NOW and Savings................ $67,996,761 $ 2,212,353 3.25% $ 51,352,002 $ 1,541,802 3.00%
Money Market Deposit
Accounts..................... 37,223,341 1,265,473 3.40 36,363,393 1,292,854 3.56
Time:
Certificates of Deposits
over $100,000................ 74,498,750 4,528,026 6.08 66,101,805 3,998,332 6.05
Other Time..................... 98,616,158 5,783,882 5.87 88,673,843 5,184,666 5.85
Other Borrowed Money............... 9,194,557 617,601 6.72 5,539,147 400,390 7.23
----------- ---------- ---- ----------- ---------- ----
Total Interest Bearing
Liabilities...................... 287,529,567 14,407,335 5.01 248,030,190 12,418,044 5.01
---------- -----------
Non-Interest Bearing
Liabilities:
Demand Deposits................ 35,775,861 32,728,690
Other.......................... 4,232,296 3,714,329
Shareholders' Equity............... 35,627,745 31,944,018
----------- -----------
Total.......................... $363,165,469 $ 316,417,227
=========== ===========
Net Interest Earnings.............. $ 16,160,642 $ 15,029,759
=========== ===========
Net Yield on Interest Earning
Assets (1)....................... 4.88% 5.22%
==== ====
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994
--------------------------------------------------
AVERAGE INTEREST YIELD/
BALANCE EARNED/PAID RATE
------------ ----------- -----
<S> <C> <C>
Assets
Interest Earning Assets:
Interest Bearing Deposits:
Domestic................... $ 2,348,715 $ 138,028 5.88%
Investment Securities:
Taxable.................... 54,101,850 2,988,170 5.52
Tax Exempt(1).............. 12,228,136 747,987 8.74
Federal Funds Sold........... 7,424,568 276,119 3.72
Loans (Less Unearned):
Taxable.................... 176,186,962 16,953,041 9.62
Tax Exempt(1).............. 4,004,302 216,501 7.67
----------- ---------- ----
Interest Earning Assets(1)..... 256,294,533 21,319,846 8.48
Non-Interest Earning Assets:
Cash and Non-interest bearing
Deposits................... 9,208,057
Premises and Equipment, Net.. 4,028,272
Other Real Estate............ 556,803
Other Assets................. 5,534,765
Less: Allowance for
Loan Losses............ (3,160,464)
-----------
Total...................... $272,461,966
===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest Bearing Liabilities:
Deposits:
NOW and Savings............ $ 45,508,333 $ 1,274,689 2.80%
Money Market Deposit
Accounts................. 36,856,008 1,150,027 3.12
Time:
Certificates of Deposits
over $100,000............ 49,147,129 2,295,819 4.67
Other Time................. 77,286,732 3,380,577 4.37
Other Borrowed Money........... 2,809,839 170,252 6.06
----------- --------- ----
Total Interest Bearing
Liabilities.................. 211,608,041 8,271,364 3.91
Non-Interest Bearing ---------
Liabilities:
Demand Deposits............ 29,535,652
Other...................... 2,715,172
Shareholders' Equity........... 28,603,101
-----------
Total...................... $272,461,966
===========
Net Interest Earnings.......... $13,048,482
Net Yield on Interest Earning ==========
Assets (1)................... 5.25%
====
</TABLE>
1. Yields have been calculated on a tax equivalent basis assuming a tax rate of
34 percent. The tax equivalent rate has been reduced by 0.35 percent to
allow for estimated disallowance of interest expense.
2. Loan fees included in total interest income are as follows:
1996 -- $789,618 1995 -- $721,902 1994 -- $638,691
3. No separate treatment has been made for non-accrual loans.
34
<PAGE> 35
The following table sets forth a summary of the changes in interest income
and interest expense resulting from changes in volume and rate for the periods
indicated. There were no out-of-period items and adjustments required to be
excluded from the table.
<TABLE>
<CAPTION>
1996 COMPARED TO 1995
INCREASE (DECREASE) DUE TO
--------------------------------------------------------------
VOLUME(1) RATE(1) NET
------------------ -------------------- ------------------
<S> <C> <C> <C>
Interest Income:
Interest Bearing Deposits............... $ (110,119) $ (61,027) $ (171,146)
Loans:
Taxable............................... 2,115,491 (234,100) 1,881,391
Tax-Exempt............................ (58,336) 43,781 (14,555)
Investments:
Taxable............................... 1,223,860 64,440 1,288,300
Tax-Exempt............................ 14,085 (12,476) 1,609
Federal Funds Sold...................... 168,680 (18,506) 150,174
--------- ---------- ---------
Total Interest Income..................... 3,353,661 (217,888) 3,135,773
--------- ---------- ---------
Interest Expense:
NOW and Savings......................... 533,412 137,139 670,551
Money Market Deposit Accounts........... 30,407 (57,788) (27,381)
Certificate of Deposits Over $100,000... 509,794 19,900 529,694
Other Time.............................. 581,485 17,730 599,215
Other Borrowed Money.................... 243,208 (25,996) 217,212
--------- ---------- ---------
Total Interest Expense.................... 1,898,306 90,985 1,989,291
--------- ---------- ---------
Net Interest Earnings..................... $1,455,355 $ (308,873) $1,146,482
========= ========== =========
<CAPTION>
1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO
-----------------------------------------------------------------
VOLUME(1) RATE(1) NET
--------------------- -------------------- -------------------
<S> <C> <C> <C>
Interest Income:
Interest Bearing Deposits............... $ 614,498 $ 3,367 $ 617,865
Loans:
Taxable............................... 2,302,169 2,221,878 4,524,047
Tax-Exempt............................ (19,383) 52,246 32,863
Investments:
Taxable............................... 539,392 305,407 844,799
Tax-Exempt............................ 127,158 (16,825) 110,333
Federal Funds Sold...................... (456,938) 449,148 (7,790)
--------- --------- ---------
Total Interest Income..................... 3,106,896 3,015,221 6,122,117
--------- --------- ---------
Interest Expense:
NOW and Savings......................... 165,781 101,333 267,114
Money Market Deposit Accounts........... (15,067) 157,894 142,827
916,760
Certificate of Deposits Over $100,000... 572,348 785,752 1,702,512
Other Time.............................. 184,611 1,231,741 1,804,089
Other Borrowed Money.................... --------- 45,527 230,138
1,824,433 --------- ---------
Total Interest Expense.................... --------- 2,322,247 4,146,680
--------- ---------
Net Interest Earnings..................... $ 1,282,463 $ 692,974 $1,975,437
========= ========= =========
</TABLE>
(1) The change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the absolute
dollar amount of the change of each.
RESULTS OF OPERATIONS
INTEREST INCOME
Total interest income increased $3,120,174 (11.4%) in 1996 from 1995 and
increased $6,127,957 (28.7%) in 1995 from 1994. Interest on loans increased
$1,866,836 in 1996 from 1995 and increased $4,556,910 in 1995 from 1994. The
increase in 1996 is primarily the result of an increase in average loans
outstanding of $19,437,762. The increase in 1995 is the result of an increase in
average yield on loans from 9.6% in 1994 to 10.7% in 1995 as well as an increase
in average loans outstanding of $22,093,402. The loan growth in 1996 and 1995 is
reflected primarily in Real Estate-Mortgage loans, which are made for
commercial, financial or agricultural purposes.
Interest on investments increased $1,274,311 (27.1%) in 1996 from 1995 and
increased $960,971 (25.7%) in 1995 from 1994. The increase in 1996 is the result
of an increase in the average investment portfolio of $22,547,562 offset by
lower average yields in the portfolio from 6.5% in 1995 to 6.3% in 1996. The
increase in 1995 is the result of an increase in the average investment
portfolio of $11,328,614 as well as higher average yields within the portfolio
from 6.1% in 1994 to 6.5% in 1995.
During 1996, interest on federal funds sold increased $150,173 (56.0%) from
1995 and decreased $7,788 (2.8%) in 1995 from 1994, while interest on interest
bearing deposits decreased $171,146 (22.6%) in 1996 from 1995 and increased
$617,864 (447.6%) in 1995 from 1994. The net decrease of $20,972 in total
interest on interest bearing deposits and federal funds sold in 1996 is the
result of a decrease in the yield on such investments from 5.86% in 1995 to
5.31% in 1996 offset by an increase in the average balance of $1,431,631. The
decrease in income from federal funds sold and the increase in income from
interest bearing deposits in other banks during 1995 is primarily the result of
a shift in short-term investments from federal funds sold to interest bearing
deposit accounts as well as an overall increase in total funds available for
short-term investment and higher rates paid on short-term investments.
INTEREST EXPENSE
During 1996 interest paid on deposits increased $1,772,080 (14.7%) from
1995 and increased $3,916,542 (48.3%) in 1995 from 1994. The 1996 increase is
soley the result of an increase of $35,843,967 in average interest bearing
deposits. The 1995 increase is the result of an increase in average interest
bearing deposits of $33,692,841 as well as an increase in the average rate paid
on deposits from 3.9% in 1994 to 5.0% in 1995.
35
<PAGE> 36
NET INTEREST MARGIN
The interest margin of the Company, the spread between interest income and
interest expense, was 4.9% in 1996, 5.2% in 1995, and 5.3% in 1994. The decrease
each year is the result of careful management of both the growth and the pricing
of loans and deposits in a competitive interest rate environment.
PROVISION FOR LOAN LOSSES
Provision for loan losses decreased $164,389 in 1996 from 1995 and
increased $227,227 in 1995 from 1994. Changes in the amount of the provision for
loan losses are the result of judgments made by management of the Banks after
considering the credit worthiness and growth of the loan portfolios. At December
31, 1996 and 1995, the allowance for loan losses was 1.8% and 1.7%,
respectively, of outstanding loans less unearned interest. Total nonperforming
loans were $1,123,555 at December 31, 1996 and $1,667,510 at December 31, 1995.
The allowance for loan losses was 3.58 and 2.31 times total nonperforming loans
at December 31, 1996 and 1995, respectively. Net charge-offs amounted to
$526,693 in 1996 as compared to $277,566 in 1995. The amount of the allowance
for loan losses is determined by management after considering, among other
things, factors such as classified and past due loans as well as portfolio
growth and diversification. Management believes such allowance is adequate to
absorb future losses on loans outstanding at December 31, 1996.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances; changes in the
allowance for possible loan losses arising from loans charged off and recoveries
on loans previously charged off, by loan category; and additions to the
allowance which have been charged to expense:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Average Amount of Loans....................... $221,722,368 $202,284,606 $180,191,264
============ ============ ============
Analysis of the Allowance for Loan Losses:
Balance at Beginning of Period................ $ 3,856,321 $ 3,274,587 $ 2,852,712
------------ ------------ ------------
Loans Charged off:
Commercial, Financial and Agricultural..... 254,876 88,777 70,117
Real Estate -- Mortgage..................... 336 2,514
Installment Loans to Individuals............ 403,947 253,294 254,231
------------ ------------ ------------
Total Loans Charged off.................. 659,159 342,071 326,862
------------ ------------ ------------
Recoveries on Loans Previously Charged off:
Commercial, Financial and Agriculture....... 55,393 12,907 33,123
Installment Loans to Individuals............ 77,073 51,598 83,541
------------ ------------ ------------
Total Recoveries......................... 132,466 64,505 116,664
------------ ------------ ------------
Net Loans Charged off......................... 526,693 277,566 210,198
Additions to Allowance Charged to Expense..... 694,911 859,300 632,073
------------ ------------ ------------
Balance at End of Period...................... $ 4,024,539 $ 3,856,321 $ 3,274,587
============ ============ ============
Ratio of Net Charge-offs during the period
to Average Loans Outstanding................ 0.24% 0.14% 0.12%
============ ============ ============
Provision for Loan Losses shown on the
Selected Financial Data..................... $ 694,911 $ 859,300 $ 632,073
============ ============ ============
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992
------------ ------------
<S> <C> <C>
Average Amount of Loans....................... $171,448,186 $162,482,695
============ ============
Analysis of the Allowance for Loan Losses:
Balance at Beginning of Period................ $ 2,783,559 $ 2,461,288
------------ ------------
Loans Charged off:
Commercial, Financial and Agricultural..... 312,463 408,257
Real Estate -- Mortgage..................... 34,738 29,797
Installment Loans to Individuals............ 406,597 219,179
------------ ------------
Total Loans Charged off.................. 753,798 657,233
------------ ------------
Recoveries on Loans Previously Charged off:
Commercial, Financial and Agriculture....... 35,904 32,778
Installment Loans to Individuals............ 60,279 44,196
------------ ------------
Total Recoveries......................... 96,183 76,974
------------ ------------
Net Loans Charged off......................... 657,615 580,259
Additions to Allowance Charged to Expense..... 726,768 902,530
------------ ------------
Balance at End of Period...................... $ 2,852,712 $ 2,783,559
============ ============
Ratio of Net Charge-offs during the period
to Average Loans Outstanding................ 0.38% 0.36%
============ ============
Provision for Loan Losses shown on the
Selected Financial Data..................... $ 726,768 $ 902,530
============ ============
</TABLE>
The Company's provision for loan losses is based upon management's
continuing review and evaluation of the portfolio and is intended to create an
allowance adequate to absorb losses on loans outstanding as of the end of each
reporting period. For individually significant amounts, management's review
consists of evaluations of the financial strength of the borrowers and the
related collateral. Such evaluation is made by classifying loans based on values
for financial strength. These classifications are assigned by responsible loan
officers and reviewed by the Loan Review Officer. The totals by loan
classification, along with related historical loss ratios, are used to determine
the allowance required to provide for potential losses. The review of groups of
loans which are individually insignificant is based upon delinquency status of
the group, lending policies and previous collection experience by each category.
Also, the effects of current economic conditions on specific industries or
classes of borrowers are considered in determining allowance for loan loss
requirements.
The approximate anticipated amount of charge-offs by category during 1997
is as follows:
<TABLE>
<S> <C>
Commercial, Financial and Agricultural...................... $100,000
Real Estate -- Mortgage
Installment Loans to Individuals............................ 250,000
Total..................................................... $350,000
--------
</TABLE>
36
<PAGE> 37
NON-INTEREST INCOME AND EXPENSE
Non-interest income increased $209,498 in 1996 from 1995 and decreased
$1,043 in 1995 from 1994. Non-interest expense increased $588,959 in 1996 from
1995 and $585,380 in 1995 from 1994. The increase in non-interest income in 1996
is primarily the result of an increase of $166,617 in service charges on deposit
accounts, of $15,710 in trust income, and of $26,188 in income from long-term
mortgage loans originated for other banks. The decrease in 1995 non-interest
income is the result of increases in service charges on deposit accounts and in
trust income offset primarily by a decrease in income from a lesser number of
long-term mortgage loans originated for other banks. The increases in
non-interest expense resulted from an increase in total salary and personnel
expense of $134,204 in 1996 and $412,441 in 1995, an increase in total occupancy
and equipment expense of $208,865 in 1996 and $183,703 in 1995, and an increase
in Other Expense of $245,890 in 1996 and a decrease in such expense of $10,764
in 1995. The increase in other expense in 1996 and 1995 included approximately
$374,000 and $64,000, respectively, in non-recurring merger expenses related to
the Effingham Bank transaction.
INCOME TAXES
The increase in the provision for income taxes of $447,817 in 1996 and the
increase of $293,782 in 1995 resulted from increases in taxable income. The
effective tax rate for 1996, 1995 and 1994 was 32%, 29%, and 30%, respectively.
The effective tax rate is lower than the statutory rate of 34% because of the
Banks' investments in tax-exempt securities and loans. New Accounting Standard
NEW ACCOUNTING STANDARD
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities".
SFAS 125 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishment of liabilities. The Company plans to
adopt SFAS 125 effective January 1, 1997. The Company has not completed the
process of evaluating the impact that will result from adopting SFAS 125 and is
therefore unable to disclose the impact that such adoption will have on its
financial position or results of operations.
In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective
Date of Certain Provisions of SFAS No. 125." SFAS No. 127 defers the effective
date of certain provisions of SFAS 125 until December 31, 1997.
37
<PAGE> 38
HISTORY AND BUSINESS
First Banking Company of Southeast Georgia (referred to as the "Registrant"
or "Company") is a bank holding company which was organized on October 27, 1981.
All of the Company's business is presently conducted by its whollyowned
subsidiaries, First Bulloch Bank & Trust Company ("Bulloch Bank"), Metter
Banking Company ("Metter Bank"), and First National Bank of Effingham
("Effingham Bank"), (collectively, the "Banks"), which are engaged in bank and
bankrelated activities. The Company does not engage in any non-bank activities.
Bulloch Bank was organized under the laws of the State of Georgia in 1934 as a
state banking corporation. On December 31, 1985, Metter Financial Services, Inc.
("Metter Financial") combined with the Company and Metter Financial's
subsidiary, Metter Bank, became a wholly-owned subsidiary of the Company. On
August 27, 1996, FNB Bancshares, Inc. ("FNB") combined with the Company, and
FNB's subsidiary, Effingham Bank, became a wholly-owned subsidiary of the
Company.
As of December 31, 1996, the Company had consolidated assets of
approximately $384 million, consolidated deposits of approximately $330 million
and consolidated shareholders' equity of approximately $37 million.
The Banks accept customary types of demand and time deposits, make
installment and commercial loans and offer safe deposit services and individual
retirement accounts to their customers. Bulloch Bank also performs corporate,
pension and personal trust services as well as other financial services for its
customers and for those of Metter Bank and Effingham Bank.
As of December 31, 1996, Bulloch Bank had a headquarters building, four
branch offices and six ATM installations, and Metter Bank had a headquarters
building, a drive-in facility, two ATM installations and a supermarket branch
office. The Effingham Bank had a headquarters building, two branch offices and
three ATM installations.
Information concerning the Company's loan portfolio and the economy of the
market area is set forth under the heading "Mangement's Discussion and Analysis
of Financial Condition and Results of Operations--Financial Condition--Loans."
COMPETITION
The banking business is highly competitive. The Banks emphasize the quality
of services they provide. The prices of the Banks' financial products relative
to those of other financial institutions is another important variable
influencing customer choice. Bulloch Bank's primary market area consists of
Bulloch County, Georgia, which has a population of approximately 50,400. Bulloch
Bank competes for all types of loans, deposits, and other financial services
with four other commercial banks in Bulloch County. As of December 31, 1996,
Bulloch Bank was the largest of the five commercial banks located in Bulloch
County, based upon total deposits and total assets.
Metter Bank's primary market area consists of Candler County, Georgia,
which is adjacent to Bulloch County. Candler County has a population of
approximately 8,200. Metter Bank competes for all types of loans, deposits and
other financial services with one other commercial bank and a local thrift in
the county, as well as other providers of financial services in adjacent
counties. Metter Bank is the largest of the two commercial banks and a local
thrift in its primary service area, based upon total deposits and total assets.
Effingham Bank's primary market area consists of Effingham County, Georgia,
which is included in the SavannahChatham County Metropolitan Statistical Area.
The county has been recognized as one of the "bedroom" communities of Savannah
and had an estimated population of 32,000 at December 31, 1996. The Bank
competes for all types of loans, deposits and other financial services with one
community bank and two branches of a regional bank. As of December 31, 1996 the
Bank was the largest of the two community banks in its market area, based upon
total deposits and total assets.
The Company also competes with other financial institutions that are
located in Bulloch, Candler and Effingham counties as well as with commercial
banks, savings and loan associations, other financial institutions and brokerage
houses located in Chatham, Evans, Bryan, Screven, Tattnall and Jenkins Counties.
To a lesser extent, the Company competes for loans with insurance companies,
regulated small loan companies, credit unions and certain governmental agencies.
Recent legislation, together with other regulatory changes by the primary
regulators of the various financial institutions and competition from
unregulated entities, has resulted in the elimination of many traditional
distinctions between commercial banks, thrift institutions and other providers
of financial services. Consequently, competition among financial institutions of
all types is virtually unlimited with respect to legal ability and authority to
provide most financial services.
38
<PAGE> 39
EMPLOYEES
Except for the six officers of the Company, who are also officers of the
Banks, the Company does not have any employees. As of December 31, 1996, Bulloch
Bank had eighty-eight (88) full-time employees and ten (10) part-time employees;
Metter Bank had thirty-six (36) full-time employees and four (4) part-time
employees; and Effingham Bank had twenty-eight (28) full-time employees and four
(4) part-time employees. Management considers employee relations to be generally
good. Neither the Company nor the Banks have collective bargaining agreements
with any employees.
SUPERVISION AND REGULATION
The following discussion sets forth the material elements of the regulatory
framework applicable to banks and bank holding companies and provides certain
specific information related to the Company.
GENERAL
The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). As such, the Company is
subject to the supervision, examination, and reporting requirements of the BHC
Act and the regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (a) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (b) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (c) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks by
bank holding companies, such that the Company, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in"
39
<PAGE> 40
and accelerate the date after which interstate branching is permissible or "opt
out" and prohibit interstate branching altogether.
In February 1996, the Georgia Legislature adopted the "Georgia Interstate
Branching Act" effective June 1, 1997. The Georgia Interstate Banking Act will
permit Georgia-based banks and bank holding companies owning or acquiring banks
outside of Georgia and all non-Georgia banks and bank holding companies owning
or acquiring banks in Georgia to merge any lawfully acquired bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branches on a limited basis beginning July 1, 1996.
Beginning July 1, 1998, the number of de novo branches which may be established
will no longer be limited.
The BHC Act generally prohibits the Company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices. For example, factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services, acting as
agent or broker in selling credit life insurance and certain other types of
insurance in connection with credit transactions, and performing certain
insurance underwriting activities all have been determined by the Federal
Reserve to be permissible activities of bank holding companies. The BHC Act does
not place territorial limitations on permissible non-banking activities of bank
holding companies. Despite prior approval, the Federal Reserve has the power to
order a holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.
Each of the bank subsidiaries of the Company is a member of the Federal
Deposit Insurance Corporation (the "FDIC"), and as such, its deposits are
insured by the FDIC to the maximum extent provided by law. Each such subsidiary
is also subject to numerous state and federal statutes and regulations that
affect its business, activities, and operations, and each is supervised and
examined by one or more state or federal bank regulatory agencies.
The regulatory agencies having supervisory jurisdiction over the bank
subsidiaries (the FDIC and the Georgia Department of Banking and Finance (the
"Georgia Department") for state-chartered banks and the Office of the
Comptroller of the Currency (the "OCC") for national banks) regularly examine
the operations of the subsidiary banks and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The regulatory agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
PAYMENT OF DIVIDENDS
The Company is a legal entity separate and distinct from its banking
subsidiaries. The principal sources of cash flow of the Company, including cash
flow to pay dividends to its shareholders, are dividends by its subsidiary
banks. There are statutory and regulatory limitations on the payment of
dividends by the subsidiary banks to the Company as well as by the Company to
its shareholders.
40
<PAGE> 41
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
At December 31, 1996, under dividend restrictions imposed under federal and
state laws, the subsidiary banks, without obtaining governmental approvals,
could declare aggregate dividends to the Company of approximately $2,824,000.
The payment of dividends by the Company and the subsidiary banks may also
be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
The Company and its subsidiary banks are required to comply with the
capital adequacy standards established by the Federal Reserve and the
appropriate federal banking regulator in the case of its banking subsidiaries.
There are two basic measures of capital adequacy for bank holding companies that
have been promulgated by the Federal Reserve: a risk-based measure and a
leverage measure. All applicable capital standards must be satisfied for a bank
holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least half
of Total Capital must comprise common stock, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves ("Tier 2 Capital"). At December 31, 1996, the Company's consolidated
Total Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e.,
the ratio of Tier 1 Capital to risk-weighted assets) were 17.0% and 15.8%,
respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3% for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies generally are required to maintain a Leverage Ratio
of at least 3%, plus an additional cushion of 100 to 200 basis points. The
Company's Leverage Ratio at December 31, 1996 was 9.8%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital
41
<PAGE> 42
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve has indicated
that it will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities.
The subsidiary banks are subject to risk-based and leverage capital
requirements adopted by the FDIC, which are substantially similar to those
adopted by the Federal Reserve for bank holding companies.
Each of the subsidiary banks was in compliance with applicable minimum
capital requirements as of December 31, 1996. The Company has not been advised
by any federal banking agency of any specific minimum capital ratio requirement
applicable to it or its subsidiary depository institutions.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements. See "-- Prompt
Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal regulatory agencies have, pursuant to
FDICIA, recently adopted final regulations, which will become mandatory on
January 1, 1998, requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. The bank regulatory agencies have
concurrently proposed a methodology for evaluating interest rate risk which
would require banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures. The market risk rules will
apply to any bank or bank holding company whose trading activity equals 10% or
more of its total assets, or whose trading activity equals $1 billion or more.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, the Company is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, the Company may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(a) the default of a commonly controlled FDIC-insured depository institution or
(b) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of the Company are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
42
<PAGE> 43
respect of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking affiliates, and a potential loss of the
Company's investment in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
The capital levels established for each of the categories are as follows:
<TABLE>
<CAPTION>
TOTAL
RISK-BASED TIER 1 RISK-
CAPITAL CATEGORY TIER 1 CAPITAL CAPITAL BASED CAPITAL OTHER
---------------- ---------------------------------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Well Capitalized 5% or more 10% or more 6% or more Not subject
to a capital
directive
Adequately 4% or more 8% or more 4% or more --
Capitalized
Undercapitalized less than 4% less than 8% less than 4% --
Significantly less than 3% less than 6% less than 3% --
Undercapitalized
Critically 2% or less -- -- --
Undercapitalized tangible equity
</TABLE>
For purposes of the regulation, the term "tangible equity" includes core
capital elements counted as Tier 1 Capital for purposes of the risk-based
capital standards, plus the amount of outstanding cumulative perpetual preferred
stock (including related surplus), minus all intangible assets with certain
exceptions. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan, subject to certain limitations.
The obligation of a controlling holding company under FDICIA to fund a capital
restoration plan is limited to the lesser of 5% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
43
<PAGE> 44
At December 31, 1996, two subsidiary banks had the requisite capital levels
to qualify as well capitalized, and one subsidiary bank had the requisite
capital level to qualify as adequately capitalized.
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, assigns an institution to one
of three capital categories: (a) well capitalized; (b) adequately capitalized;
and (c) undercapitalized. These three categories are substantially similar to
the prompt corrective action categories described above, with the
"undercapitalized" category including institutions that are undercapitalized,
significantly undercapitalized, and critically undercapitalized for prompt
corrective action purposes. An institution is also assigned by the FDIC to one
of three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which may
include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined based
on the capital category and supervisory category to which it is assigned. Under
the final risk-based assessment system, as well as the prior transitional
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates for members of both the Bank Insurance Fund
("BIF") and the Savings Association Insurance Fund ("SAIF") for the first half
of 1995, as they had during 1994, ranged from 23 basis points (0.23% of
deposits) for an institution in the highest category (i.e., "well capitalized"
and "healthy") to 31 basis points (0.31% of deposits) for an institution in the
lowest category (i.e., "undercapitalized" and "substantial supervisory
concern"). These rates were established for both funds to achieve a designated
ratio of reserves to insured deposits (i.e., 1.25%) within a specified period of
time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning 1996, the deposit insurance premiums for 92% of all BIF members in the
highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates had
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated elimination of the disparity
between the assessment rates on BIF and SAIF deposits following recapitalization
of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds Act of
1996 (the "Funds Act") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC implemented a special one-time assessment of approximately 65.7
basis points (0.657%) on a depository institution's SAIF-insured deposits held
as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions). Since the Company has no
SAIF-insured deposits, it did not incur any expense related to this one-time
assessment.
44
<PAGE> 45
In addition, the FDIC proposed a revision in the SAIF assessment rate
schedule that effected, as of October 1, 1996 (a) a widening in the assessment
rate spread among institutions in the different capital and risk assessment
categories, (b) an overall reduction of the assessment rate range assessable on
SAIF deposits of from 0 to 27 basis points, and (c) a special interim assessment
rate range for the last quarter of 1996 of from 18 to 27 basis points on
institutions subject to FICO assessments. Effective January 1, 1997, FICO
assessments will be imposed on both BIF- and SAIF-insured deposits in annual
amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF- insured institutions
will share the FICO interest costs at equal rates currently estimated 2.43 basis
points. The Funds Act further provides that BIF and SAIF are to be merged,
creating the "Deposit Insurance Fund," on January 1, 1999, provided that bank
and savings association charters are combined by that date.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed regulation or statute will be adopted or the
extent to which the business of the Company may be affected by such regulation
or statute.
PROPERTIES
The Company's and Bulloch Bank's main office is located at 40 North Main
Street, Statesboro, Georgia.
The first of Bulloch Bank's four branches was opened January 17, 1972, and
is located in Portal, Georgia, a farming community twelve miles north of
Statesboro, Georgia. A second branch is located at the Statesboro Mall, which is
approximately two miles east of the main office. Bulloch Bank's third branch
office is approximately one mile south of the main office and near Georgia
Southern University in the College Plaza Shopping Center. Bulloch Bank opened
its fourth branch office in October 1996 in the Wal-Mart Supercenter located
approximately two miles east of the main office on U. S. Highway 80 East.
Bulloch Bank maintains six automated teller machines located at the Mall Office,
the College Plaza Office, the Wal-Mart Office, near the junction of U.S.
Highways 301 and 80 (the "Northside ATM"), and two machines on the campus of
Georgia Southern University, one on Chandler Road and the other in the
University Union Building. The Northside ATM is equipped with a night
depository, a service not available at the other ATMs. These machines enable the
Bank to provide twenty-four hour banking services to its customers.
Bulloch Bank owns all the properties except the Wal-Mart location and three
of the other ATM locations. The WalMart location is leased for a term of five
years until October 2001. The Northside ATM land is currently leased on a month
to month basis. The Chandler Road location is currently leased for a five year
term until December 2001, and the University Union location is leased on a month
to month basis.
Metter Bank's main office is located at 2 S.E. Broad Street, Metter,
Georgia. Metter Bank has one drive-in facility and an ATM located approximately
200 yards southeast of the main office and during 1990 opened a branch in a
supermarket which is approximately one-half mile from the main office. Metter
Bank maintains two ATM locations, one at the drive-in facility and one near the
Interstate 16 interchange. Metter Bank owns all the properties except the
supermarket branch
45
<PAGE> 46
facility, which is currently under a two year lease expiring in July 1997, and
the Interstate 16 ATM location, which is leased for a five year term until
February 2001.
Effingham Bank's main office is located at 501 South Laurel Street,
Springfield, Georgia. Effingham Bank opened its first branch office in Rincon in
1995, located approximately ten miles southeast of the main office, and opened a
branch in the Wal-Mart Supercenter in Rincon in July 1996. The Bank maintains
three ATM installations, one located at each branch. Effingham Bank owns all the
properties except the Wal-Mart branch location, which is leased for a five year
term until July 2001.
All properties of the Banks are in good condition and are adequate for the
current operations of the Banks.
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 the Banks,
nor to the knowledge of management are any such proceedings contemplated or
threatened against the Registrant or its subsidiaries.
46
<PAGE> 47
1996 FORM 10-K
Securities and Exchange Commission
Washington, D. C. 2059
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required, Effective October 7, 1996].
For the Fiscal Year Ended December 31, 1996
Commission File Number 0-10853
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
Incorporated in the State of Georgia
I. R. S. EMPLOYER IDENTIFICATION NUMBER 58-1458268
ADDRESS: 40 NORTH MAIN STREET
Statesboro, Georgia 30458
TELEPHONE: (912)764-6611
Securities Registered pursuant to Section 12(g)of the Exchange Act: Common
Stock -- $1.00 par value
First Banking Company of Southeast Georgia has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
twelve months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained herein, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
As of February 28, 1997, First Banking Company of Southeast Georgia had
3,002,020 shares of common stock outstanding. The aggregate market value of
First Banking Company of Southeast Georgia common stock held by nonaffiliates on
February 28, 1997 was $57,211,481.
DOCUMENTS INCORPORATED BY REFERENCE
Part III information is incorporated herein by reference from First Banking
Company of Southeast Georgia's Proxy Statement for its 1997 Annual Shareholders'
Meeting, which will be filed with the Commission by April 3, 1997. Certain Part
I and Part II information required by Form 10-K is incorporated by reference
from the 1996 First Banking Company of Southeast Georgia Annual Report to
Shareholders as indicated below. Except for those portions specifically
incorporated by reference, the 1996 Annual Report to Shareholders is not deemed
filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
ANNUAL
REPORT
PART I. PAGE
- ------ ------
<S> <C> <C>
Item 1 Business 38
Item 2 Properties 45
Item 3 Legal Proceedings 46
Item 4 Submission of Matters to a Vote
of Security Holders NA
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
ANNUAL REPORT
PART II. PAGE
- ------- ----
<S> <C> <C>
Item 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters 23
Item 6 Selected Financial Data 23
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 25
Item 8 Financial Statements and
Supplementary Data 5
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure NA
</TABLE>
<TABLE>
<CAPTION>
PROXY STATEMENT
PART III PAGE
<S> <C> <C>
Item 10 Directors and Executive Officers
of the Registrant 2-4, 6
Item 11 Executive Compensation 7-8, 11-13
Item 12 Security Ownership of Certain
Item 13 Beneficial Owners and Management 8-11
Certain Relationships and Related
Transactions 8
</TABLE>
Part IV.
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(A)(1). Financial Statements Filed. See Consolidated Financial
Statements on pages 5 through 22 of this Annual Report
and Form 10-K.
(2). Financial Statement Schedules. All financial statement
schedules are omitted because the data is either not
applicable or is discussed in the Management's Discussion
and Analysis of Financial Condition and Results of
Operations, the financial statements or related
footnotes.
(3). Exhibits. The Company's Articles of Incorporation, Bylaws
and certain other documents are filed as Exhibits to
this Report or incorporated by reference herein
pursuant to the Securities Exchange Act of 1934.
Shareholders may obtain the list of such Exhibits and
copies of such documents upon request to: Secretary,
First Banking Company of Southeast Georgia, P. O. Box
878, Statesboro, Georgia 30459. A copying fee will be
charged for the Exhibits.
(B) Reports on Form 8-K: None
48
<PAGE> 49
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 on March 28, 1997 by the undersigned, thereunto duly authorized.
FIRST BANKING COMPANY OF
SOUTHEAST GEORGIA
(REGISTRANT)
JAMES ELI HODGES, PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James Eli Hodges and Dwayne E. Rocker, and each
of them, for him in his name, place and stead, in any and all capacities, to
sign any amendments to this Report on Form 10-K, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and hereby ratifies and confirms all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 28, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
JAMES ELI HODGES
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
JULIAN C. LANE, JR.
VICE PRESIDENT
JOHN M. WILSON, JR.
VICE PRESIDENT
DWAYNE E. ROCKER
SECRETARY & TREASURER
(PRINCIPAL FINANCIAL &
ACCOUNTING OFFICER)
DIRECTORS: E. RAYBON ANDERSON
A. M. BRASWELL, JR.
W. A. CRIDER, JR.
JAMES ELI HODGES
C. ARTHUR HOWARD
LANIER A. HUNNICUTT
JOE P. JOHNSTON
JULIAN C. LANE, JR.
HARRY S. MATHEWS
DAN J. PARRISH, JR.
CHARLES M. ROBBINS, JR.
LARRY D. WEDDLE
ALVIN WILLIAMS
JOHN M. WILSON, JR.
49
<PAGE> 1
EXHIBIT 21
The Company's subsidiaries are:
First Bulloch Bank & Trust Company, Statesboro, Georgia, incorporated
under the laws of Georgia
Metter Banking Company, Metter, Georgia, incorporated under the laws of
Georgia
First National Bank of Effingham, Springfield, Georgia, incorporated under
laws of the United States
50
<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 YEAR
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,611
<INT-BEARING-DEPOSITS> 9,905
<FED-FUNDS-SOLD> 6,220
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 85,866
<INVESTMENTS-CARRYING> 18,158
<INVESTMENTS-MARKET> 18,738
<LOANS> 231,042
<ALLOWANCE> 4,024
<TOTAL-ASSETS> 384,036
<DEPOSITS> 329,647
<SHORT-TERM> 3,250
<LIABILITIES-OTHER> 4,150
<LONG-TERM> 9,668
0
0
<COMMON> 3,002
<OTHER-SE> 34,319
<TOTAL-LIABILITIES-AND-EQUITY> 384,036
<INTEREST-LOAN> 23,593
<INTEREST-INVEST> 5,972
<INTEREST-OTHER> 1,003
<INTEREST-TOTAL> 30,568
<INTEREST-DEPOSIT> 13,790
<INTEREST-EXPENSE> 14,407
<INTEREST-INCOME-NET> 16,161
<LOAN-LOSSES> 695
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 10,431
<INCOME-PRETAX> 7,574
<INCOME-PRE-EXTRAORDINARY> 7,574
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,174
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
<YIELD-ACTUAL> 4.88
<LOANS-NON> 353
<LOANS-PAST> 207
<LOANS-TROUBLED> 856
<LOANS-PROBLEM> 1,416
<ALLOWANCE-OPEN> 3,856
<CHARGE-OFFS> 659
<RECOVERIES> 132
<ALLOWANCE-CLOSE> 4,024
<ALLOWANCE-DOMESTIC> 4,024
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[LETTERHEAD OF McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP]
FEBRUARY 2, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
FNB Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of FNB BANCSHARES,
INC. AND SUBSIDIARY as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of FNB
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1995 and 1994, and the
consolidated results of income and cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Notes 2 and 7 to the consolidated financial statements, FNB
BANCSHARES, INC. AND SUBSIDIARY changed its method of accounting for investment
securities in 1994 and income taxes in 1993.
/s/ McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
---------------------------------------------
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
