<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- --------------
Commission file number 0-4554
---------------------------------------------
Bank South Corporation
- ---------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1048216
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
55 Marietta Street, Atlanta, Georgia 30303
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(404) 529-4111
- ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- ------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report. )
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 XX No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Common Stock, Shares Outstanding at March 31, 1995 :
- ----- -------------------------------------
$5 par value 58,564,175 shares (no shares held as treasury shares)
Exhibit Index located on page 14.
<PAGE> 2
BANK SOUTH CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
at March 31, 1995 and December 31, 1994 1
Consolidated Statements of Income
for the Three Months Ended March 31, 1995 and 1994 2
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 5
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE> 3
BANK SOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------------ -------------------
ASSETS (Thousands of dollars, except share data)
<S> <C> <C> <C> <C>
Cash and due from banks:
Interest-bearing deposits $ 26,363 $ 64,048
Non-interest bearing deposits and cash 411,730 360,472
------------------ -------------------
Total cash and due from banks 438,093 424,520
Federal funds sold and securities purchased
under agreements to resell 10,735 50,649
Trading account securities 51,497 75,431
Investment securities available for sale 852,840 472,061
Investment securities held to maturity (fair value $1,878,678
at March 31, 1995 and $1,875,006 at December 31, 1994) 1,905,418 1,968,970
Loans 4,086,902 3,954,491
Less: Unearned income 18,086 18,979
Allowance for loan losses 82,284 82,936
------------------ -------------------
Net loans 3,986,532 3,852,576
------------------ -------------------
Premises and equipment, net 113,909 113,557
Customers' acceptance liability 712 770
Other real estate owned, net 3,309 3,753
Other assets 302,684 286,950
------------------ -------------------
TOTAL ASSETS $ 7,665,729 $ 7,249,237
================== ===================
LIABILITIES
Non-interest bearing demand deposits $ 1,125,110 $ 1,250,710
Interest-bearing deposits:
NOW accounts 772,076 752,684
Money market accounts 565,214 572,681
Savings accounts 459,673 443,550
Certificates of deposit $100,000 or more 407,872 364,584
Other time deposits 1,697,591 1,649,550
------------------ -------------------
Total interest-bearing deposits 3,902,426 3,783,049
------------------ -------------------
Total deposits 5,027,536 5,033,759
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 1,016,354 944,153
Commercial paper 32,903 49,773
Other short-term borrowings 715,000 375,998
------------------ -------------------
Total short-term borrowings 1,764,257 1,369,924
Bank acceptances outstanding 712 770
Long-term debt 89,367 89,413
Other liabilities 133,204 121,139
------------------ -------------------
TOTAL LIABILITIES 7,015,076 6,615,005
------------------ -------------------
SHAREHOLDERS' EQUITY 1995 1994
--------------------------------
Preferred stock:
Par value $ 25 $ 25
Shares authorized 5,000,000 5,000,000
Shares issued and outstanding - -
Common stock:
Par value $5 $5
Shares authorized 100,000,000 100,000,000
Shares issued and outstanding 58,564,175 58,326,282 292,821 291,631
Capital surplus 186,109 183,544
Retained earnings 174,829 167,582
Unrealized loss on investment securities
available for sale, net of tax (3,106) (8,525)
------------------ -------------------
TOTAL SHAREHOLDERS' EQUITY 650,653 634,232
------------------ -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,665,729 $ 7,249,237
================== ===================
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
BANK SOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
--------------- -----------
INTEREST INCOME (In thousands, except per share data)
<S> <C> <C>
Interest and fees on loans:
Taxable $ 85,045 $ 73,465
Tax-exempt 1,137 764
--------------- -----------
Total interest and fees on loans 86,182 74,229
Interest and dividends on investment securities held to maturity
Taxable 20,127 8,127
Tax-exempt 7,113 4,054
--------------- -----------
Total interest and dividends on investment securities held to maturity 27,240 12,181
Interest and dividends on investment securities
available for sale (taxable) 10,653 13,309
Trading account securities 652 850
Federal funds sold and securities purchased
under agreements to resell 653 317
Interest-bearing deposits 511 277
Other short-term investments 957 76
--------------- -----------
Total interest income 126,848 101,239
--------------- -----------
INTEREST EXPENSE
Interest on deposits:
NOW accounts 5,334 5,215
Money market accounts 4,877 3,503
Savings accounts 2,947 5,109
Certificates of deposit $100,000 or more 5,499 2,257
Other time deposits 21,557 13,787
--------------- -----------
Total interest on deposits 40,214 29,871
Interest on short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 13,866 4,576
Other short-term borrowings 9,890 1,391
--------------- -----------
Total interest on short-term borrowings 23,756 5,967
Interest on long-term debt 1,155 1,622
--------------- -----------
Total interest expense 65,125 37,460
--------------- -----------
NET INTEREST INCOME 61,723 63,779
Less: Provision for loan losses - 4,697
--------------- -----------
Net interest income after provision for loan losses 61,723 59,082
--------------- -----------
NON-INTEREST INCOME
Trust income 2,516 2,575
Service charges and fees on deposit accounts 16,699 14,619
Electronic banking 4,758 3,707
Mortgage banking activities 1,013 1,036
Other service charges and fees 3,409 2,999
Institutional investment activities 1,441 1,723
Retail investment activities 453 465
Securities gains (losses) 1,161 (329)
Other income 739 1,188
--------------- -----------
Total non-interest income 32,189 27,983
--------------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 34,976 30,696
Occupancy 4,804 5,005
Equipment 4,171 3,787
Other expense 29,700 23,455
--------------- -----------
Total non-interest expense 73,651 62,943
--------------- -----------
Income before income taxes 20,261 24,122
Income tax expense 4,820 4,813
--------------- -----------
NET INCOME $ 15,441 $ 19,309
=============== ===========
Earnings per common share $ 0.26 $ 0.35
Cash dividends declared per share 0.14 0.11
Weighted average common shares and common
share equivalents outstanding 59,159 55,828
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
BANK SOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
----------------- -----------------
(Thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 15,441 $ 19,309
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for loan losses - 4,697
Provision for losses on other real estate owned 279 65
Depreciation and amortization expense - premises and equipment 3,043 2,609
Amortization expense - intangible and other assets 2,926 2,584
Deferred income tax benefit (799) (589)
Net amortization (accretion) of investment securities premiums and discounts 853 (326)
Securities (gains) losses (1,161) 329
Net unrealized valuation losses (gains) on trading account securities 411 (527)
Net realized loss (gain) on sales of other assets 543 (208)
Net decrease (increase) in trading account securities 23,523 (309,049)
Net decrease in mortgage loans held for resale 2,109 10,661
Net increase in interest receivable (1,196) (2,956)
Net increase in other assets (17,399) (10,518)
Net increase (decrease) in interest payable 8,932 (3,299)
Net increase (decrease) in other liabilities 3,754 (8,845)
----------------- -----------------
Total adjustments 25,818 (315,372)
----------------- -----------------
Net cash provided by (used in) operating activities 41,259 (296,063)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in federal funds sold and securities purchased
under agreements to resell 39,914 (277,072)
Purchases of investment securities held to maturity (16,629) (111,801)
Purchases of investment securities available for sale (2,074,330) (268,500)
Proceeds from sales of investment securities available for sale 1,638,827 719,568
Proceeds from calls, maturities and redemptions of investment securities held
to maturity 79,505 47,291
Proceeds from calls, maturities and redemptions of investment securities
available for sale 61,120 62,885
Net (increase) decrease in loans (142,638) 18,922
Purchases of premises and equipment (4,472) (1,245)
Proceeds from sales of premises and equipment 1,060 2,025
Proceeds from sales of other real estate owned 902 3,000
Proceeds from recoveries on loans previously charged off 5,430 5,518
Business combinations, net of cash acquired - 7,883
----------------- -----------------
Net cash (used in) provided by investing activities (411,311) 208,474
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (6,223) 53,980
Net increase in short-term borrowings 394,333 30,351
Repayments of long-term debt (46) (519)
Proceeds from employee and director stock purchases 3,276 3,581
Cash dividends paid (8,194) (6,224)
Proceeds from dividend reinvestment plan 479 256
----------------- -----------------
Net cash provided by financing activities 383,625 81,425
----------------- -----------------
Net increase (decrease) in cash and due from banks 13,573 (6,164)
Cash and due from banks at beginning of period 424,520 395,378
----------------- -----------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 438,093 $ 389,214
================= =================
SUPPLEMENTARY INFORMATION:
Income taxes paid $ 3 $ 10,598
Income tax refunds received 6,169 974
Interest paid 56,193 40,131
Non-cash transactions:
Loans transferred to other real estate owned 1,143 1,405
Loans to facilitate the sale of other real estate owned - 205
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
BANK SOUTH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
The financial statements in this report have not been audited. In the opinion
of management, all adjustments necessary for a fair presentation of the
financial position and results of operations for the interim periods have been
made. All such adjustments are of a normal recurring nature. These statements
should be read in conjunction with the 1994 Annual Report on Form 10-K for Bank
South Corporation (the "Registrant" or "Company"). Results of operations for
the three months ended March 31, 1995 are not necessarily indicative of the
results of operations for the year ending December 31, 1995 or any interim
periods. Certain previously reported amounts have been reclassified to conform
to the current presentation.
Note 2 - Business Combinations
On February 17, 1995, the Registrant acquired Gwinnett Bancshares, Inc.
("Gwinnett"), parent company of Gwinnett Federal Bank, FSB. As a result of the
Gwinnett merger, each share of Gwinnett common stock issued and outstanding
immediately prior to the effective time of the Gwinnett merger was converted
into the right to receive 1.75 shares of the common stock of the Registrant.
The Registrant issued an aggregate 3,681,402 shares of the Registrant's common
stock to holders of Gwinnett common stock. As of December 31, 1994, Gwinnett
had total assets of approximately $319.1 million and total shareholders' equity
of approximately $33.2 million. For the year ended December 31, 1994, Gwinnett
reported a net loss of approximately $1.4 million. The acquisition was
accounted for using the pooling-of-interests accounting method.
Note 3 - Adoption of New Accounting Standards
Beginning January 1, 1995, the Company adopted Financial Accounting Standards
Board Statement No. 114 ("FAS 114"), "Accounting by Creditors for Impairment of
a Loan" which was issued in May 1993 and amended in October 1994 by Statement
of Financial Accounting Standards Number 118 , "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." Under the new
standard, the 1995 allowance for credit losses related to loans that are
identified for evaluation in accordance with FAS 114 is based on discounted
cash flows using the loan's initial effective interest rate or the fair value
of the collateral for certain collateral-dependent loans. Prior to 1995, the
allowance for credit losses related to these loans was based on undiscounted
cash flows or the fair value of the collateral for collateral-dependent loans.
This evaluation is inherently subjective as it requires material estimates
including the amounts and timing of future cash flows expected to be received
on impaired loans that may be susceptible to significant change.
In accordance with FAS 114, a loan is classified as in-substance foreclosure
when the Company has taken possession of the collateral regardless of whether
formal foreclosure proceedings take place. Loans previously classified as
in-substance foreclosure but for which the Company had not taken possession of
the collateral have been reclassified to loans. This reclassification did not
impact the Company's financial condition or results of operations.
Loans are generally classified as non-accrual when they are past due in
principal or interest payments for more than 90 days or it is otherwise not
reasonable to expect collection of principal and interest under the original
terms. Exceptions are allowed when loans are well-secured and in process of
collection. Generally, payments received on non-accrual loans are applied
directly against principal.
At March 31, 1995, the recorded investment in loans that are considered to be
impaired under FAS 114 was $20.0 million. The related allowance for credit
losses for this $20.0 million in loans was $2.6 million. The average recorded
investment in impaired loans during the three months ended March 31, 1995 was
approximately $21.1 million. For the three months ended March 31, 1995, the
Company did not recognize any interest income on those impaired loans or any
interest income using the cash basis method of income recognition.
4
<PAGE> 7
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company reported net income of $15.4 million, or $0.26 per share, for the
first three months of 1995 compared to $19.3 million, or $0.35 per share, for
the same period in 1994. Contributing to the decrease in earnings in 1995 over
1994, among other factors, was an increase in other operating expenses related
to an insurance premium tax, acquisition expenses, severance payments and the
decrease in tax benefit. This was offset by a decrease in the provision for
loan losses in the first three months of 1995 compared to the same period of
1994.
The Company completed the first phase of its internal business process
reengineering effort, which identified 16 specific processes to be
reengineered. Once completed this effort is intended to reduce costs, increase
revenue, allow better customer service, increase sales and enhance shareholder
value. The Company expects a net enhancement in 1996 pre-tax earnings of $17
million as a result of the New Ideas program.
During the first quarter of 1995, the Company continued to enhance its retail
banking franchise and its market position in metropolitan Atlanta through
acquisition activity and aggressive marketing efforts. The Company acquired
Gwinnett in the first quarter of 1995. This transaction was accounted for as
pooling-of-interests, and accordingly, the prior period financial statements
have been restated to reflect this transaction. See Note 2 to the consolidated
financial statements for further discussion of this acquisition.
Net Interest Income
Net interest income, on a taxable equivalent basis (t.e.), was $67.4 million
for the three months ended March 31, 1995, 1.49 percent higher than the $66.4
million for the same period in 1994. The increase in net interest income
resulted primarily from increased volumes of loans and investments which offset
a decrease in the net interest margin due to narrower spreads. The net
interest margin, t.e., was 4.04 percent in the first quarter of 1995 compared
to 4.92 percent in the first quarter of 1994. The decline in the margin is
primarily attributable to the addition of investments at relatively narrow
spreads and a higher cost of funds reflecting the Company's strategy of
lengthening deposit maturities in anticipation of rising interest rates.
Total average earning assets were $6.8 billion during the first three months of
1995, an increase of $1.3 billion, or 23.64 percent, over the same period in
1994. Total average loans were $4.0 billion for the first three months of
1995, an increase of 15.3 percent over the $3.5 billion of average loans for
the first three months of 1994. Comprising approximately 52 percent of the loan
increase, mortgage and installment loans increased $275.1 million, or 14.5
percent, over 1994. The remaining increase in average loans was due to
commercial loans, increased of $257.5 million, or 16.6 percent, over 1994. The
increase in installment, mortgage and commercial loans reflects the Company's
rapidly expanding dealer finance niche and the rapidly growing Atlanta economy.
Investment securities held to maturity and investment securities available for
sale averaged $2.6 billion in the first three months of 1995, an increase of
$735.3 million, or 40.0 percent, over the same period of 1994. Average total
investments as a percentage of earning assets increased to 40.9 percent in the
first three months of 1995, compared to 36.7 for the same period in 1994.
These additional investment securities were added to better utilize capital.
Average transaction account deposit balances, including demand, savings and NOW
accounts, remained stable in the first three months of 1995 over the same
period in 1994. Consumer and other time deposits averaged $1.4 billion in the
first three months of 1995, an increase of $206.8 million, or 17.72 percent,
over the same period in 1994. Total average deposits increased 9.55 percent to
$5.02 billion for first quarter of 1995 from $4.59 billion for the same period
in 1994 and average short-term borrowings increased $819.6 million in the first
three months of 1995 over 1994 to fund the addition of investment securities.
5
<PAGE> 8
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Provision for Loan Losses
Due to the continued improvement in asset quality, lower than expected losses,
and a higher level of recoveries, no provision was recognized for the first
quarter of 1995. In the first quarter of 1994, the provision for loan losses
recognized was $4.7 million. See "Asset Quality" for further discussion of the
Allowance for Loan Losses.
Non-Interest Income
Non-interest income of $32.2 million in the first quarter of 1995 was $4.2
million, or 15.03 percent, higher than in the first quarter of 1994. Included
in non-interest income were gains on the sale of investment securities
available for sale of $1.2 million in the first three months of 1995, and
losses of $329,000 for the first three months of 1994. Excluding these
securities gains and losses, non-interest income increased $2.7 million, or
9.59 percent, in the first three months of 1995 over 1994.
In the first three months of 1995, deposit service charges, the largest
component of non-interest income, totaled $25.9 million, an increase of $3.5
million, or 15.73 percent, from the first three months of 1994. The increase in
service charge income was largely due to strong growth in consumer accounts and
the successful debit card promotion.
Non-Interest Expense
Non-interest expense totaled $73.7 million for the three months ended March 31,
1995, an increase of $10.7 million, or 17.01 percent, from the same period of
1994. The primary driver of the increase was the higher level of retail
activities including expanded hours in the branches, additional branches,
consulting services, deposit insurance premiums, amortization of intangibles
and acquisition related expenses.
In the first three months of 1995, personnel costs increased $4.3 million or
13.9 percent over the same period in 1994 due to additional locations and
expanded banking hours. Data processing expenses increased $406,000 or 39.1
percent, general and administrative expenses increased $3.0 million or 591.4
percent and acquisition expenses increased $1.4 million for the first three
months of 1995 compared to the same period in 1994, each related to increased
transaction volumes, and on-going costs associated with expansion into mutual
funds and teleservices, and acquisitions.
Income Taxes
Income tax expense was $4.8 million for the three months ended March 31, 1995,
or 23.79 percent of pre-tax income, compared to $4.8 million, or 19.95 percent
of pre-tax income, for the same period in 1994. The 1994 rate was positively
affected by the utilization of the remaining Federal deferred tax valuation
allowance established at the beginning of 1993. In addition, the Company
reduced the state deferred tax valuation allowance by approximately $1.8
million, of which approximately $435,000 reduced goodwill, leaving an allowance
of $9.3 million at March 31, 1995. Management evaluates the need for the
valuation allowances on a quarterly basis.
Asset Quality
Non-performing assets were $23.4 million at March 31, 1995, $25.9 million at
December 31, 1994 and $38.1 million at March 31, 1994. Non-performing assets
as a percent of total loans and other real estate owned was 0.58 percent, 0.66
percent and 1.05 percent at March 31, 1995, December 31, 1994 and March 31,
1994, respectively.
6
<PAGE> 9
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
COMPOSITION OF LOAN PORTFOLIO
TABLE 1
<TABLE>
<CAPTION> December 31,
March 31, ----------------------------------------------------
1995 1994 1993
----------------------- ----------------------- -----------------------
Amount Percent Amount Percent Amount Percent
----------------------- ----------------------- -----------------------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 1,041,712 25 % $ 1,048,187 27 % $ 894,774 25 %
Real estate construction 227,815 6 218,985 6 137,741 4
Commercial mortgage 613,250 15 598,376 15 579,652 17
1-4 Family residential mortgage 752,079 18 672,515 17 574,548 16
Consumer 1,418,645 35 1,384,573 34 1,306,783 37
Lease financing 33,401 1 31,855 1 15,517 1
----------------------- ----------------------- -----------------------
Total loans $ 4,086,902 100 % $ 3,954,491 100 % $ 3,509,015 100 %
======================= ======================= =======================
<CAPTION>
December 31,
---------------------------------------------------------------
1992 1991
------------------------- -------------------------
Amount Percent Amount Percent
------------------------- -------------------------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 902,228 31 % $ 1,032,436 34 %
Real estate construction 86,709 3 % 314,016 10
Commercial mortgage 665,126 23 % 513,807 17
1-4 Family residential mortgage 521,489 18 % 546,153 18
Consumer 755,184 25 % 643,186 20
Lease financing 13,956 - % 21,721 1
------------------------ -------------------------
Total loans $ 2,944,692 100 % $ 3,071,319 100 %
======================== =========================
</TABLE>
Note: During 1992 loans were reclassified between real estate construction and
commercial mortgages.
ALLOWANCE FOR LOAN LOSS ALLOCATION
TABLE 2
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Amount Percent Amount Percent
-----------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C> <C>
Allowance for loan loss balance applicable to:
Commercial, financial and
agricultural $ 8,743 11 % $ 9,057 11 %
Real estate construction 1,693 2 1,608 2
Commercial mortgage 7,016 9 6,470 8
1-4 Family residential mortgage 4,801 6 4,047 5
Consumer 11,182 13 12,112 14
Lease financing 126 - 111 -
Unallocated 48,723 59 49,531 60
-------------------- --------------------------
Total $ 82,284 100 % $ 82,936 100 %
==================== ==========================
</TABLE>
7
<PAGE> 10
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
ALLOWANCE FOR LOAN LOSSES
TABLE 3
<TABLE>
<CAPTION>
Three
Months Ended Year Ended December 31,
March 31, -----------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 82,936 $ 88,482 $ 78,713 $ 86,909 $ 93,267
Loans charged-off:
Commercial, financial and agricultural (809) (9,280) (5,498) (21,331) (57,278)
Real estate construction 0 (369) (453) (5,520) (6,126)
Commercial mortgage (658) (3,152) (6,609) (10,887) (11,096)
1-4 Family residential mortgage (1,100) (5,445) (6,849) (5,276) (7,057)
Consumer (3,507) (18,212) (6,425) (7,900) (8,903)
Lease financing (8) (54) (656) (511) (422)
Other - - - (267) -
---------------------------------------------------------------------------
Total loans charged-off (6,082) (36,512) (26,490) (51,692) (90,882)
---------------------------------------------------------------------------
Recoveries on loans previously charged-off:
Commercial, financial and agricultural 964 5,178 2,732 4,500 1,398
Real estate construction 24 2,215 135 134 397
Commercial mortgage 1,158 1,967 1,237 519 507
1-4 Family residential mortgage 559 3,210 1,900 1,043 566
Consumer 2,686 8,034 3,993 4,283 3,858
Lease financing 39 269 438 504 47
---------------------------------------------------------------------------
Total loan recoveries 5,430 20,873 10,435 10,983 6,773
---------------------------------------------------------------------------
Net loans charged-off (652) (15,639) (16,055) (40,709) (84,109)
Net increase as a result of business combinations - 2,496 5,431 - -
Provision for loan losses charged to expense - 7,597 20,393 32,513 77,751
---------------------------------------------------------------------------
Balance at end of period $ 82,284 $ 82,936 $88,482 $78,713 $ 86,909
===========================================================================
Total net loans at end of period $4,068,816 $3,935,512 $3,473,523 $2,939,574 $3,062,813
Average loans outstanding during the period 3,997,154 3,655,982 3,013,021 3,004,525 3,335,177
Allowance for loan losses to loans
outstanding at end of period 2.02 % 2.11 % 2.55 % 2.68 % 2.84 %
Net loan charge-offs to average loans
outstanding during the period (annualized) 0.07 0.43 0.53 1.35 2.52
</TABLE>
8
<PAGE> 11
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE
TABLE 4
<TABLE>
<CAPTION> December 31,
March 31, ------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 20,118 $ 22,266 $ 36,880 $ 78,343 $160,271
Renegotiated or restructured loans - - 1,235 8,979 7,721
Other real estate owned 3,309 3,678 4,985 22,988 50,027
Other non-performing assets - - 2,417 2,646 3,646
-------- -------- -------- -------- --------
Total non-performing assets $ 23,427 $ 25,944 $ 45,517 $112,956 $221,665
======== ======== ======== ======== ========
Loans 90 days or more past due
on accrual status $ 741 $ 1,428 $ 1,846 $ 5,420 $13,159
Potential problem loans 112,039 124,656 141,230 241,505 430,239
Non-performing assets to total
loans, other real estate owned
and other non-performing assets 0.58 % 0.66 % 1.31 % 3.81 % 7.11 %
Non performing assets and loans 90 days or more
past due on accrual status to total loans,
other real estate owned, and other non-performing
assets 0.59 0.69 1.36 4.00 7.54
Loans 90 days or more past due
on accrual status to total loans and
real estate acquired by foreclosure 0.02 0.04 0.05 0.18 0.42
</TABLE>
9
<PAGE> 12
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Non-performing assets at March 31, 1995 included $20.1 million of non-accrual
and renegotiated loans, of which $14.6 million, or 72.4 percent, were current
as to both principal and interest. Non-accrual and renegotiated loans were
$22.2 million at December 31, 1994 and $34.7 million at March 31, 1994. Also
included in non-performing assets was other real estate owned, totaling $3.3
million at March 31, 1995, $3.8 million at December 31, 1994 and $3.4 million
at March 31, 1994.
Effective January 1, 1995, the Company adopted Financial Accounting Standards
Board Statement No. 114 ("FAS 114"), "Accounting by Creditors for Impairment of
a Loan" which was issued in May 1993 and amended in October 1994 by Statement
of Financial Accounting Standards Number 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." The impact of the
adoption of FAS 114 had no material effect on the Company's results of
operations and financial position.
Loans identified by management as potential problem assets (classified and
criticized loans) declined from 3.2 percent of total loans at December 31, 1994
to 2.8 percent of total loans at March 31, 1995.
Net loans charged off during the first quarter of 1995 were $652,000 compared
to $1.8 million during the same period of 1994. Further detail of loan
charge-offs and recoveries is presented in Table 3, "Allowance for Loan
Losses."
The allowance for loan losses was $82.3 million at March 31, 1995, compared to
$82.9 million at December 31, 1994 and $93.8 million at March 31, 1994. The
allowance for loan losses as a percent of total loans was 2.02 percent at March
31, 1995, 2.11 percent at December 31, 1994, and 2.60 percent at March 31,
1994. The allowance for loan losses as a percent of non-performing loans was
409.01 percent at March 31, 1995, 373.74 percent at December 31, 1994, and
270.62 percent at March 31, 1994. Table 2, "Allowance for Loan Loss
Allocation," presents specific reserves by loan type and the general portion of
the Company's total allowance for loan losses. In management's opinion, the
allowance for loan losses was adequate at March 31, 1995.
Shareholders' Equity and Dividends
At March 31, 1995, shareholders' equity was at the highest level in the
Company's history at $650.7 million or 8.49 percent of total assets. At March
31, 1995, the Company's Tier 1 capital ratio was 10.36 percent, the total
risk-based capital ratio was 12.02 percent and the leverage ratio was 7.42
percent. These ratios are in excess of regulatory requirements, as presented
in Table 5 - "Capital Adequacy." In addition, Bank South, N.A., the Company's
bank subsidiary, was considered "well capitalized" by banking regulators.
In the first quarter of 1995, the Company's Board of Directors declared a 14
cent per share quarterly dividend, which was paid on April 3, 1995, up 3 cents
per share from the first quarter of 1994 and 1 cent from the fourth quarter of
1994.
Liquidity
Liquidity represents the ability to provide funding for lending and investment
activities, as well as to cover deposit withdrawals and pay debt and operating
obligations. Maintaining an adequate level of liquidity is an important
component of the Company's balance sheet management objectives.
10
<PAGE> 13
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
CAPITAL ADEQUACY
TABLE 5
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Amount Percent Amount Percent
------------------------ ------------------------
(Thousands of dollars)
<S> <C> <C> <C> <C>
TIER 1 CAPITAL:
Actual $ 546,117 10.36 % $ 524,547 11.00 %
Minimum required 210,914 4.00 190,700 4.00
------------------------ ------------------------
Excess $ 335,203 6.36 % $ 333,847 7.00 %
======================= =======================
TOTAL RISK-BASED CAPITAL:
Actual $ 633,752 12.02 % $ 605,701 12.70 %
Minimum required 421,827 8.00 381,400 8.00
----------------------- -----------------------
Excess $ 211,925 4.02 % $ 224,301 4.70 %
======================= =======================
TIER 1 CAPITAL LEVERAGE RATIO:
Actual $ 546,117 7.42 % $ 524,547 8.10 %
Minimum required * 223,271 3.00 194,170 3.00
----------------------- -----------------------
Excess $ 322,846 4.42 % $ 330,377 5.10 %
======================= =======================
</TABLE>
* The regulatory requirement for leverage ratio is 3 percent to 5 percent.
This is determined by the Federal Reserve using various criteria. The
Federal Reserve has not given the Company a determination of the rate for
1995.
11
<PAGE> 14
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
At March 31, 1995, the Company's balance sheet continued to be liquid. The
Company's core deposits, which are typically the most stable funds, were 113
percent of loans at March 31, 1995 and short-term liquid assets as a percent
of volatile short-term liabilities were 337 percent at March 31, 1995. In
addition, the Company's access to debt markets improved during 1995 and 1994
due to upgrades in debt ratings, continued improvements in asset quality, an
increased level of capital, and increased profitability.
Interest Rate Sensitivity and Asset Liability Management
Interest rate sensitivity refers to the responsiveness of interest-earning
assets and interest-bearing liabilities to changes in market interest rates.
To lessen the impact of rate movements, the balance sheet is structured such
that differences in repricing opportunities between assets and liabilities are
minimized.
Interest rate risk management, an important component of the overall risk
management program of the Company, includes monitoring of the balance sheet
composition and its associated sensitivity to interest rate changes. Interest
rate sensitivity is monitored on a monthly basis by simulating net interest
income under varying interest rate scenarios. The simulation model utilizes
maturity and repricing data on loans, investments, derivative financial
instruments, deposits and other interest-bearing liabilities to predict future
levels of net interest income.
The model measures net interest income, t.e., at risk as the difference between
net interest income under rising and falling rate environments and net interest
income, t.e., in an unchanged rate environment. The Company's policy is to
actively manage the balance sheet so that net interest income simulated over a
12 month period under 100, 200 and 300 basis point changes in rates does not
vary adversely form net interest income produced in an unchanged rate
environment by more than 2 percent, 5 percent and 8 percent, respectively. At
March 31, 1995, the decrease in net interest income over 12 months from a 100,
200 and 300 basis point increase in interest rates would have been 1.9 percent,
4.1 percent and 6.9 percent, respectively. A measure of longer-term interest
rate risk is the market value of portfolio equity, which is the present value
of asset cash flows less the present value of liability cash flows, adjusted
for off-balance sheet activity. At March 31, 1995, the Company was liability
sensitive. The sensitivity of the market value of portfolio equity to changes
in interest rates is measured in comparison to established policy guidelines.
At March 31, 1995, the Company was in compliance with its market value of
portfolio equity policies.
It is the Company's policy to utilize derivative financial instruments,
primarily interest rate swap and interest rate cap agreements, to reduce its
exposure to interest rate fluctuations. Income streams from underlying assets
and liabilities are offset with income received or paid on interest rate swaps
and caps. Consequently, the overall impact of rate movements on net interest
income for the interest rate swap and cap portfolio must be evaluated in
conjunction with the impact of rate movements on the underlying assets which
the swaps are hedging.
Interest rate swap and cap agreements are used to modify the repricing
characteristics of interest-earning assets and interest-bearing liabilities.
These agreements generally involve the receipt of fixed-rate interest payments
in exchange for floating-rate interest payments over the life of the agreement
without an exchange of the underlying notional amount. The differential to be
paid or received is accrued as interest rates change and recognized as an
adjustment to interest expense or interest income related to the underlying
hedged item. The related amount payable to, or receivable from, counterparties
is included in other liabilities or assets. The fair value changes in the
interest rate swap and cap agreements are recognized in accordance with the
accounting for the underlying hedged item.
12
<PAGE> 15
BANK SOUTH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Interest rate swap agreements are stated in terms of a notional amount, which
represents a value used to compute the amount of interest to be received or
paid under the agreement. The Company's risk of loss relates to the ability of
the counterparties to make the interest payments required under the terms of
the agreements. Counterparties must meet rigorous credit standards and be
approved by the Company's Capital Markets Credit Committee before entering into
interest rate swap and cap agreements. Counterparties to the contract must
provide collateral sufficient to protect the other party from significant
exposure to loss. At March 31, 1995, the Company had sufficient collateral to
cover any loss exposure.
The notional balance for interest rate swaps and caps at March 31, 1995 was
$2.0 billion and $1.8 billion, respectively. At December 31, 1994, the Company
had $2.1 billion in interest rate swaps and $1.5 billion in interest rate caps.
The net unrealized market value loss on total off-balance sheet derivative
financial instruments at March 31, 1995 was approximately $56.8 million, or
1.34 percent of the total notional balance for total off-balance sheet
derivative financial instruments compared to a $90.4 million net unrealized
market value loss on total off-balance sheet derivative financial instruments
at December 31, 1994. The Company terminated $1.1 billion in interest rate
swaps during first quarter of 1995 resulting in a $708,000 gain. The
termination of $700 million in interest rate swaps was due to the sale or
maturity of the underlying assets in the course of the Company's asset and
liability management process. The Company has $1.9 billion of interest rate
swaps whose average lives extend when interest rates rise as a means of
constructing more effective hedges.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a. The exhibits filed as part of this Report are as follows:
Exhibit
Number Description
------ -----------
3(a) Amended and restated Articles of
Incorporation, (included as Exhibit 4(a) to
the Registrant's Form S-8 No. 33-57791,
previously filed with the Commission and
incorporated herein by reference).
3(b) Amended and restated By-laws, (included as
Exhibit 4(b) to the Registrant's Form S-8 No.
33-57791, previously filed with the
Commission and incorporated herein by
reference.)
13
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K (continued)
4 Bank South Corporation Rights Agreement
(included as Exhibit 1 to the Form 8
Amendment to the Form 8-A filed with the
Commission on April 8, 1988 (File No. 0-4554)
and incorporated herein by reference).
10(a) Supplemental Executive Retirement Agreement
for Ralph E. Hutchins, Jr., and Supplemental
Executive Retirement Agreements for Patrick
L. Flinn, John E. McKinley, Lee M. Sessions,
Jr. and James A. Dewberry (included as
Exhibit 10(a) to the Registrant's Form 10-K
for the fiscal year ended December 31, 1991,
previously filed with the Commission and
incorporated herein by reference).
10(b) Employment Agreements with Patrick L. Flinn,
John E. McKinley and Lee M. Sessions, Jr.
(included as Exhibit 10(b) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1991, previously filed
with the Commission and incorporated herein
by reference).
10(c) Employment Agreement with Ralph E. Hutchins,
Sr. (included as Exhibit 10(c) to the
Registrant's Form 10-k for the fiscal year
ended December 31, 1994, previously filed
with the Commission and incorporated herein
by reference)
10(d) Directors' Deferred Compensation Plan
(included as Exhibit 10(c) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1988, previously filed
with the Commission and incorporated herein
by reference).
10(e) Key Employee Stock Option Plan, as amended
(included as Exhibit 10(d) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1991, previously filed
with the Commission and incorporated herein
by reference).
10(f) 1993 Equity Incentive Plan as amended April
20, 1995.
10(g) 1994 Stock Option Plan for Outside Directors
(included as Exhibit 10(g) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1994, previously filed
with the Commission and incorporated herein
by reference).
10(h) Change in Control Agreements with Patrick L.
Flinn, John E. McKinley, Lee M. Sessions,
Jr. and James A. Dewberry (included as
Exhibit 10(f) to the Registrant's Form 10-K
for the fiscal year ended December 31, 1991,
previously filed with the Commission and
incorporated herein by reference). Form of
Change in Control Agreements with Barry
Anderson, Bernard Baum, George M. Boltwood,
J. Brent Lee, John E. Thacker, Ray K.
Williams and J. Blake Young Jr. Change in
Control Agreement with Ralph E. Hutchins, Jr.
(included as Exhibit 10(h) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1994, previously filed
with the Commission and incorporated herein
by reference).
14
<PAGE> 17
Item 6. Exhibits and Reports on Form 8-K (continued)
10(i) Agreement between the Registrant and the
Federal Reserve Bank of Atlanta, dated April
3, 1992 (included as Exhibit 28 to the
Registrant's Form 10-Q for the quarter ended
March 31, 1992, previously filed with the
Commission and incorporated herein by
reference).
10(j) Management Employees Salary Deferral Plan
(included as Exhibit 10(h) to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1991, previously filed
with the Commission and incorporated herein
by reference).
11 Statement Re Computation of Per Share
Earnings.
27 Financial Data Schedules (for SEC use only)
b. Reports on Form 8-K - None
15
<PAGE> 18
BANK SOUTH CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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.
Date: May 12, 1995
-------------------------
BANK SOUTH CORPORATION
-------------------------
Registrant
By: /s/ Ralph E. Hutchins, Jr
-------------------------
Ralph E. Hutchins, Jr.
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 19
BANK SOUTH CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------ -----------------------------------------------------------------------------------------
<S> <C> <C>
10(f) 1993 Equity Incentive Plan as amended April 20, 1995 17
11 Statement Re Computation of Per Share Earnings 32
27 Financial Data Schedules (for SEC use only) 33
</TABLE>
16
<PAGE> 1
Exhibit 10(f)
BANK SOUTH CORPORATION
1993 EQUITY INCENTIVE PLAN
(Effective January 1, 1993, as amended April 20, 1995)
17
<PAGE> 2
BANK SOUTH CORPORATION
1993 EQUITY INCENTIVE PLAN
(Effective January 1, 1993, as amended April 20, 1995)
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN
Bank South Corporation, a Georgia corporation (hereinafter referred to as the
"Company"), hereby establishes an incentive compensation plan to be known as
the "Bank South Corporation 1993 Equity Incentive Plan" (hereinafter referred
to as the "Plan"), as set forth in this document. The Plan permits the grant
of Nonqualified Stock Options, Incentive Stock Options, and Performance Units.
Upon approval by the Board of Directors of the Company, subject to
ratification by an affirmative vote of a majority of Shares at the Company's
April 15, 1993 annual shareholders' meeting, the Plan shall become effective
as of January 1, 1993 (the "Effective Date"), and shall remain in effect as
provided in Section 1.3 herein. Awards may be granted prior to shareholder
ratification of the Plan; provided, however, that in the event shareholder
approval of the Plan is not obtained, all outstanding Awards shall become null
and void.
1.2 PURPOSE OF THE PLAN
The purpose of the Plan is to promote the success, and enhance the value, of
the Company by linking the personal interests of Participants to those of
Company shareholders, and by providing Participants with an incentive for
outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon
whose judgment, interest, and special effort the successful conduct of its
operation largely is dependent.
1.3 DURATION OF THE PLAN
Subject to approval by the Board of Directors of the Company and ratification
by the shareholders of the Company, the Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject
to the right of the Board of Directors to terminate the Plan at any time
pursuant to Article 11 herein, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no
event may an Award be granted under the Plan on or after January 1, 2003.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
(a) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options or
Performance Units.
(b) "Award Agreement" means an agreement entered into by each Participant
and the Company, setting forth the terms and provisions applicable to
Awards granted to Participants under this Plan.
(c) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(d) "Cause" means: (i) willful or gross misconduct on the part of a
Participant that is materially and demonstrably detrimental to the
Company; or (ii) the commission by a Participant of one or more acts
which constitute an indictable crime under United States Federal, state,
or local law. "Cause" under either (i) or (ii) shall be determined
in good faith by the Committee.
18
<PAGE> 3
(e) "Change in Control" will be deemed to have occurred as of the first day
that any one or more of the following conditions has been satisfied:
(i) the acquisition, directly or indirectly, by any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) within
any twelve (12) month period of securities of the Company
representing an aggregate of twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, cease for any
reason to constitute at least a majority thereof, unless the
election of each new director was approved in advance by a vote of
at least a majority of the directors then still in office who were
directors at the beginning of the period; or
(iii) consummation of (a) a merger, consolidation or other business
combination of the Company with any other "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) or
affiliate thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock
of the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into common
stock of the surviving entity or a parent or affiliate thereof) at
least sixty percent (60%) of the outstanding common stock of the
Company or such surviving entity or parent or affiliate thereof
outstanding immediately after such merger, consolidation or
business combination, or (b) a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets; or
19
<PAGE> 4
(iv) the occurrence of any other event or circumstance which is not
covered by (i) through (iii) above which the Board determines
affects control of the Company and adopts a resolution that such
event or circumstance constitutes a Change in Control.
After the earlier of (i) a Change in Control, (ii) the public
announcement of a transaction that, if consummated, would constitute a
Change in Control, or (iii) the Board of Directors learning of a
proposal for a transaction that, if consummated, would constitute a
Change in Control, the Plan may not be amended to restrict the events
which constitute a Change in Control for purposes of this Plan.
However, if the transaction that would have constituted a Change in
Control is subsequently withdrawn or abandoned, the definition may then
be amended.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(g) "Committee" means the committee, as specified in Article 3, appointed
by the Board to administer the Plan with respect to grants of Awards.
(h) "Company" means Bank South Corporation, a Georgia corporation, or any
successor thereto as provided in Article 14 herein.
(i) "Director" means any individual who is a member of the Board of
Directors of the Company.
(j) "Disability" means a permanent and total disability within the meaning
of Code Section 22(e)(3), as determined by the Committee in good faith,
upon receipt of sufficient competent medical advice from one or more
individuals, selected by the Committee, who are qualified to give
professional medical advice.
(k) "Employee" means any full-time employee of the Company or of the
Company's Subsidiaries. Directors who are not otherwise employed by the
Company shall not be considered Employees under this Plan.
(l) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor act thereto.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
(n) "Fair Market Value" means the average of the highest and lowest quoted
selling prices for Shares on the relevant date, or (if there were no
sales on such date) the weighted average of the means between the
highest and lowest quoted selling prices on the nearest day before and
the nearest day after the relevant date, as determined by the Committee.
(o) "Incentive Stock Option" or "ISO" means an option to purchase Shares,
granted under Article 6 herein, which is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of
the Code.
(p) "Insider" shall mean an Employee who is, on the relevant date, an
officer or Director of the Company, as defined under Rule 16(a) of the
Exchange Act.
(q) "Noninsider" means an Employee who is not, on the relevant date, an
Insider.
(r) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 6 herein, which is not intended to be an
Incentive Stock Option.
(s) "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
20
<PAGE> 5
(t) "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee.
(u) "Participant" means an Employee of the Company who has outstanding an
Award granted under the Plan.
(v) "Performance Unit" means an Award granted to a Participant pursuant to
Article 7 herein.
(w) "Retirement" shall mean early or normal retirement under the Bank South
Corporation Employees' Retirement Plan and Trust (or its successor
retirement plan).
(x) "Shares" means the shares of common stock of the Company.
(y) "Subsidiary" means any corporation in which the Company owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the
total combined voting power of all classes of stock, or any other
entity (including but not limited to, partnerships and joint ventures)
in which the Company owns at least fifty percent (50%) of the combined
equity thereof.
(z) "Window Period" means the period beginning on the third business day
following the date of public release of the Company's quarterly
financial information and ending on the twelfth business day following
such date.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE
The Plan shall be administered by the Compensation Committee of the Board, or
by any other Committee appointed by the Board consisting of not less than two
(2) Directors who are not Employees. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the
Board of Directors.
The Committee shall be comprised solely of Directors who are eligible to
administer the Plan pursuant to Rule 16b-3 under the Exchange Act and
Section 162(m) of the Code, and the rules and regulations thereunder. However,
if for any reason the Committee does not qualify to administer the Plan, as
contemplated by Rule 16b-3 of the Exchange Act or Section 162(m) of the Code
and the rules and regulations thereunder, the Board of Directors may appoint a
new Committee so as to comply with Rule 16b-3 and Section 162(m) of the Code,
and the rules and regulations thereunder.
3.2 AUTHORITY OF THE COMMITTEE
The Committee shall have full power except as limited by law or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, to determine the size and types of Awards; to determine the
terms and conditions of such Awards in a manner consistent with the Plan; to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 11 herein) to
amend the terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. Further, the Committee shall make all other determinations which
may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authorities as identified
hereunder.
3.3 DECISIONS BINDING
All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders or resolutions of the Board of
Directors shall be final, conclusive, and binding on all persons, including
the Company, its stockholders, Employees, Participants, and their estates and
beneficiaries.
21
<PAGE> 6
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES
Subject to adjustment as provided in Section 4.3 herein, the total number of
Shares available for grant under the Plan may not exceed two million
(2,000,000), and the maximum number of Shares that may be the subject of
Options granted to any one individual in any consecutive three-year period is
one hundred fifty thousand (150,000) Shares. These two million Shares may
be either authorized but unissued or reacquired Shares.
The following rules will apply for purposes of the determination of the number
of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option shall reduce the Shares available for grant
under the Plan by the number of Shares subject to such Award.
(c) The payment of a Performance Unit in the form of a Share or Shares
shall reduce the Shares available for grant under the Plan at the time of
payment.
(d) To the extent that an Award is settled in cash rather than in Shares,
the authorized Share pool shall be credited with the appropriate number
of Shares represented by the cash settlement of the Award, as
determined at the sole discretion of the Committee (subject to the
limitation set forth in Section 4.2 herein).
4.2 LAPSED AWARDS
If any Award granted under this Plan is canceled, terminates, expires, or
lapses for any reason, any Shares subject to such Award again shall be
available for the grant of an Award under the Plan. However, in the event
that prior to the Award's cancellation, termination, expiration, or lapse, the
holder of the Award at any time received one or more "benefits of ownership"
pursuant to such Award (as defined by the Securities and Exchange Commission,
pursuant to any rule or interpretation promulgated under Section 16 of the
Exchange Act), the Shares subject to such Award shall not be made available
for regrant under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES
In the event of any merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, split-up, Share combination, or other
change in the corporate structure of the Company affecting the Shares, such
adjustment shall be made in the number and class of Shares which may be
delivered under the Plan, and in the number and class of and/or price of
Shares subject to outstanding Options granted, and Performance Units paid in
Shares, under the Plan, as may be determined to be appropriate and equitable
by the Committee, in its sole discretion, to prevent dilution or enlargement
of rights; and provided that the number of Shares subject to any Award shall
always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY
Persons eligible to participate in this Plan include all full-time, active
Employees of the Company and its Subsidiaries, as determined by the Committee,
including Employees who are members of the Board, but excluding Directors who
are not Employees.
22
<PAGE> 7
5.2 ACTUAL PARTICIPATION
Subject to the provisions of the Plan, the Committee may, from time to time,
select from all eligible Employees those to whom Awards shall be granted and
shall determine the nature and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS
Subject to the terms and provisions of the Plan, Options may be granted to
Employees at any time and from time to time as shall be determined by the
Committee. The Committee shall have discretion in determining the number of
Shares subject to Options granted to each Participant. The Committee may
grant ISOs, NQSOs, or a combination thereof. The Committee may delegate its
duties to the Chief Executive Officer as regards Noninsiders.
6.2 AWARD AGREEMENT
Each Option grant shall be evidenced by an Award Agreement that shall specify
the Option Price, the duration of the Option, the number of Shares to which
the Option pertains, and such other provisions as the Committee shall
determine. The Option Agreement also shall specify whether the Option is
intended to be an ISO within the meaning of Section 422 of the Code, or a
NQSO whose grant is intended not to fall under the Code provisions of Section
422.
6.3 OPTION PRICE
The Option Price for each grant of an Option shall be determined by the
Committee; provided that the Option Price shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date the Option is
granted.
6.4 DURATION OF OPTIONS
Each Option shall expire at such time as the Committee shall determine at the
time of grant; provided, however, that no Option shall be exercisable later
than the tenth (10th) anniversary date of its grant.
6.5 EXERCISE OF OPTIONS
Options granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or for each
Participant.
6.6 Payment
Options shall be exercised by the delivery of a written notice of exercise to
the Secretary of the Company, setting forth the number of Shares with respect
to which the Option is to be exercised, accompanied by full payment for the
Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares that are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), (c) through foregone income based
on an arrangement with the Company, or (d) by a combination of (a),(b) and/or
(c).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
23
<PAGE> 8
As soon as practicable after receipt of a written notification of exercise and
full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon
the number of Shares purchased under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY
The Committee may impose such restrictions on any Shares acquired pursuant to
the exercise of an Option under the Plan, as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities laws,
under the requirements of any stock exchange or market upon which such Shares
are then listed and/or traded, and under any blue sky or state securities
laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT
(a) Termination by Death. In the event the employment of a Participant is
terminated by reason of death, all outstanding Options granted to that
Participant shall immediately vest one hundred percent (100%), and shall
remain exercisable at any time prior to their expiration date, or for one (1)
year after the date of death, whichever period is shorter, by such person or
persons as shall have been named as the Participant's beneficiary under Article
8.
(b) Termination by Disability. In the event the employment of a
Participant is terminated by reason of Disability, all outstanding Options
granted to that Participant shall immediately vest one hundred percent (100%)
as of the date the Committee determines the definition of Disability to have
been satisfied, and shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date that the Committee
determines the definition of Disability to have been satisfied, whichever
period is shorter.
(c) Termination by Retirement. In the event the employment of a
Participant is terminated by reason of Retirement, all outstanding Options
granted to that Participant shall immediately vest one hundred percent (100%),
and shall remain exercisable at any time prior to their expiration date.
(d) Employment Termination Followed by Death. In the event that a
Participant's employment terminates by reason of Disability or Retirement,
and within the exercise period following such termination the Participant dies,
then the remaining exercise period under outstanding Options shall equal the
shorter of: (i) one (1) year following death; or (ii) the remaining portion of
the exercise period. Such Options shall be exercisable by such person or
persons who shall have been named as the Participant's beneficiary under
Article 8.
(e) Exercise Limitations on ISOs. In the case of ISOs, the tax treatment
prescribed under Section 422 of the Code may not be available if the Options
are not exercised within the Section 422 prescribed time periods after each of
the various types of employment termination.
6.9 TERMINATION OF EMPLOYMENT FOR OTHER REASONS
If the employment of a Participant shall terminate for any reason other
than the reasons set forth in Section 6.8 (and other than for Cause), all
Options held by the Participant which are not vested as of the effective date
of employment termination immediately shall be forfeited to the Company (and,
subject to Section 4.2, shall once again become available for grant under the
Plan). Options that are vested as of the effective date of employment
termination may be exercised by the Participant within the period beginning
on the effective date of employment termination, and ending 30 days after such
date.
If the employment of a Participant is terminated by the Company for Cause, all
outstanding Options held by the Participant immediately shall be forfeited to
the Company and no additional exercise period shall be allowed, regardless of
the vested status of the Options.
6.10 ACCELERATED VESTING AND EXTENDED EXERCISABILITY FOLLOWING TERMINATION
Regardless of the provisions regarding the exercisability of Options
that are not vested as of the date of employment termination, and the
provisions regarding the length of the exercise period following employment
termination, as specified in Sections 6.8 and 6.9 above, the Committee (or, in
the case of
24
<PAGE> 9
Options held by Noninsiders, the Committee or the CEO), may in its or his sole
discretion, subject to the limitation of Section 11.2 below, provide for
accelerated Option vesting and/or for an extended period of exercisability
following termination, upon such terms and provisions as it or he deems
appropriate; provided, however, that the period of exercisability shall not
extend beyond the period specified in Section 6.4 herein.
6.11 NONTRANSFERABILITY OF OPTIONS
No Option granted under the Plan may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order
as defined in the Code or ERISA. Further, all Options granted to a
Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant.
ARTICLE 7. PERFORMANCE UNITS
7.1 GRANT OF PERFORMANCE UNITS
Subject to the terms and provisions of the Plan, the Committee, at any time
and from time to time, may grant Performance Units to eligible Employees in
such amounts as the Committee shall determine. Each Performance Unit shall
represent a dollar amount to be specified by the Committee. The
determination of the value of a Performance Unit will be made by the
Committee.
7.2 NUMBER OF PERFORMANCE UNITS EARNED
The Committee shall set performance goals in its discretion which, depending
on the extent to which they are met, will determine the ultimate number of the
Performance Units earned by the Participant. The time period during which the
performance goals must be met shall be called a "Performance Period," and also
is to be determined by the Committee.
7.3 PAYMENT OF PERFORMANCE UNITS
After a Performance Period has ended, the holder of a Performance Unit shall
be entitled to receive the value thereof as determined by the original
designation of the value of a Performance Unit, and the extent to which
performance goals established by the Committee have been met.
7.4 FORM AND TIMING OF PAYMENT
Payment under Section 7.3 above shall be made in cash, stock, or a combination
thereof as determined by the Committee. Payment may be made in a lump sum or
installments as prescribed by the Committee. If any payment is to be made on
a deferred basis, the Committee may provide for the payment of dividend
equivalents or interest during the deferral period.
7.5 VOTING RIGHTS AND DIVIDENDS
Participants are not entitled to vote Performance Units that represent Shares,
or to receive dividends thereon, until actual receipt of Shares earned by the
Participant (if any) after the applicable Performance Period established by
the Committee has been completed, or upon earlier satisfaction of any other
conditions as specified by the Committee.
7.6 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT
In the case of Disability or Retirement, the holder of a Performance Unit
shall receive prorata payment based on the number of months' service during
the Performance Period, but based on the achievement of performance goals
during the entire Performance Period. Payment shall be made at the time
payments are made to participants who did not terminate service during the
Performance Period.
In the case of death, this provision will also apply, except that payment for
all performance units held by the Participant for all open Performance Periods
shall be based on the performance goals achieved as of the end of the first
Performance Period to expire following the Participant's death.
25
<PAGE> 10
7.7 TERMINATION OF EMPLOYMENT FOR OTHER REASONS
In the event that a Participant terminates employment with the Company for any
reason other than death, Disability, or Retirement, all Performance Units for
Performance Periods that have not yet ended shall be forfeited. In the case
of a Performance Period that ended prior to termination but for which payout
has not yet been made, the Participant will receive the payout as though
termination had not yet occurred.
7.8 NONTRANSFERABILITY
Except as provided in this Article 7, the Performance Units granted herein may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until actual receipt of cash or Shares earned by the Participant
after the applicable Performance Period established by the Committee has been
completed, or upon earlier satisfaction of any other conditions, as specified
by the Committee in its sole discretion. However, in no event may any
Performance Unit granted under the Plan be paid out in Shares prior to six (6)
months following the date of its grant.
At time of grant, the Committee may provide that payment amounts will carry
additional performance requirements or requirements for continued employment.
All rights with respect to Performance Units granted to a Participant under
the Plan shall be available during his or her lifetime only to such Participant.
7.9 PERFORMANCE UNITS QUALIFYING AS "PERFORMANCE-BASED COMPENSATION" UNDER
SECTION 162(M) OF THE CODE.
The Committee may, but shall not be required to, conform Performance Units to
the parameters set forth in this Section 7.9. To the extent not
inconsistent with this Section 7.9, the other provisions of Article 7 and
the Plan shall apply to Performance Units granted hereunder.
The parameters set forth below have been approved by the shareholders of the
Company to qualify as "performance-based" compensation under Section 162(m)
of the Code. As used herein the term "Covered Employee" shall have the
meaning given such term in Section 162(m) of the Code and the rules and
regulations thereunder.
The Committee shall within 90 days of the beginning of the applicable
Performance Period, or any earlier or later date to the extent required or
permitted by Code Section 162(m) without causing the award to fail to qualify
as performance-based compensation, select the Participants to receive
Performance Units for the Performance Period in question and adopt in writing
each of the following: (i) a Target Award for each Participant expressed in
terms of a number of units, each worth $1, to be earned at target performance,
(ii) a performance measure based on the Company's compound annual total
shareholder return (stock price increase plus dividends) over the Performance
Period, (iii) a performance measure based on the percentile ranking of the
Company's compound annual total shareholder return as compared to a peer group
of similar institutions selected by the Committee for such period, and (iv)
a mathematical matrix combining the two performance measures as a method of
determining the percent of the Target Award to be earned by the Participant
with respect to the applicable Performance Period, including, in each case, a
threshold performance level below which no award will be earned and a maximum
award level. No Performance Unit award shall be paid to a Participant unless
the relevant performance criteria for the Performance Period are met or
exceeded.
In no event shall the value of Performance Units paid to a Covered Employee
under this Section 7.9 with respect to any one Performance Period exceed
$2,000,000. Except as may be permitted under Section 162(m) of the Code or the
rules and regulations thereunder, once established, neither the Target Award
nor the performance criteria for Performance Units applicable to a Covered
Employee pursuant to Section 7.9 of Plan may be amended.
26
<PAGE> 11
ARTICLE 8. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Company, and will be effective only when filed by the Participant in
writing with the Secretary of the Company or his designee during the
Participant's lifetime. In the absence of any such designation, or in the
event the designated beneficiary does not survive the Participant, the
Participant's beneficiary under this Plan shall be the Participant's
beneficiary under the Company's group life insurance program.
ARTICLE 9. RIGHTS OF EMPLOYEES
9.1 EMPLOYMENT
Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant's employment at any time, nor confer upon
any Participant any right to continue in the employ of the Company
For purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Subsidiaries (or between Subsidiaries) shall not be
deemed a termination of employment.
9.2 PARTICIPATION
No Employee shall have the right to be selected to receive an Award under
this Plan, or, having been so selected, to be selected to receive a future
Award.
ARTICLE 10. CHANGE IN CONTROL
Upon the occurrence of a Change In Control, unless otherwise specifically
prohibited by the terms of Section 11 herein:
(a) Any and all Options granted hereunder shall become immediately
exercisable;
(b) All open Performance Periods for Performance Units shall end, and
within 120 days after the occurrence of a Change in Control, the value of
Performance Units granted for those Performance Periods (calculated as
set forth in the following sentence) will be paid in cash to the
Participant. The amount to be paid to the Participant in the event of
a Change in Control shall be calculated by measuring total shareholder
return over the Performance Period in question, using as the ending
measure (both as to the Company and the comparison peer group) the
average performance results over the 20 trading days prior to the
earlier of (i) the announcement of the Change in Control or (ii) the
announcement of an agreement in principle, or the signing of a
definitive agreement, to enter into a transaction that would, if
consummated, constitute a Change in Control (the "Announcement Date"),
and including all dividends paid through the Announcement Date. In
addition, any restrictions on sale of shares received in connection with
prior Performance Periods will lapse.
27
<PAGE> 12
ARTICLE 11. AMENDMENT, MODIFICATION, AND TERMINATION
11.1 AMENDMENT, MODIFICATION, AND TERMINATION
With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend, or modify the Plan. However, without the
approval of the stockholders of the Company (as may be required by the Code,
by the insider trading rules of Section 16 of the Exchange Act, by any
national securities exchange or system on which the Shares are then listed
or reported, or by a regulatory body having jurisdiction with respect
hereto), no such termination, amendment, or modification may:
(a) Materially increase the total number of Shares which may be issued
under this Plan, except as provided in Section 4.3 herein; or
(b) Materially modify the eligibility requirements for participation in
this Plan; or
(c) Materially increase the benefits accruing to Insiders under the Plan.
In the event of a Change in Control, the public announcement of a transaction
that, if consummated, would constitute a Change in Control, or the Board of
Directors learning of a proposal for a transaction that, if consummated, would
constitute a Change in Control, termination, amendment or modification of
this Plan or an Award, either of which could adversely affect an Award in any
material way, shall require the consent of the Participant (or the
Participant's Beneficiary in the event of the Participant's death). Such
consent shall not be required if the transaction that would have constituted
a Change in Control is subsequently withdrawn or abandoned.
11.2 AWARDS PREVIOUSLY GRANTED
No termination, amendment, or modification of the Plan shall, without the
written consent ofthe affected Participant, adversely affect in any material
way (i) any Option previously granted under the Plan or (ii) any Performance
Unit for which the Performance Period applicable to such Performance Unit has
ended.
The Committee may, without the consent of the affected Participant, terminate,
amend or modify the Plan with respect to any Performance Unit prior to the
close of the Performance Period applicable to such Performance Unit. If the
Plan is terminated, however, the affected Participant shall receive a prorata
payment based on the number of months'service during the Performance Period,
but based on the achievement of performance goals as of the date of Plan's
termination. Payment shall be made as soon as administratively possible
following the Plan's termination. If the Plan is amended or modified with
respect to a Performance Unit, such amendment or modification may not, without
the consent of the affected Participant, reduce the potential payout under
such Performance Unit below that amount which the Participant would have
received assuming the Plan was terminated as of the date of the amendment or
modification.
In the event of the Participant's death, the Participant's consent, where
required, must be given by the Participant's Beneficiary.
ARTICLE 12. WITHHOLDING
12.1 TAX WITHHOLDING
The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any taxable event arising or as
a result of this Plan.
28
<PAGE> 13
12.2 SHARE WITHHOLDING
With respect to withholding required upon the exercise of Options, upon the
payout of Performance Units in the form of Shares, or upon any other taxable
event hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which could
be imposed on the transaction. All elections shall be irrevocable, made in
writing, signed by the Participant, and elections by Insiders shall
additionally comply with the applicable requirement set forth in (a) or (b)
of this Section 12.2.
29
<PAGE> 14
(a) Stock Options. The Participant must either:
(i) Deliver written notice of the stock withholding election to the
Committee at least six (6) months prior to the date specified by
the Participant on which the exercise of the Option is to occur;
or
(ii) Make the stock withholding election in connection with an
exercise of an Option that occurs during a Window Period.
(b) Performance Units. The Participant must either:
(i) Deliver written notice of the stock withholding election to the
Committee at least six (6) months prior to the date on which
the taxable event relating to the Award is scheduled to occur; or
(ii) Make the stock withholding election during a Window Period which
occurs prior to the scheduled taxable event relating to the
Performance Unit (for this purpose, an election may be made
prior to such a Window Period, provided that it becomes effective
during a Window Period occurring prior to the applicable taxable
event).
Article 13. INDEMNIFICATION
Each person who is or was a member of the Committee, or of the Board, shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him
or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan unless
arising out of such person's willful or gross misconduct. Such
indemnification shall include any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him or her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
ARTICLE 14. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
ARTICLE 15. LEGAL CONSTRUCTION
15.1 GENDER AND NUMBER
Except where otherwise indicated by the context, any masculine term used
herein also shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
15.2 SEVERABILITY
In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts
of the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
30
<PAGE> 15
15.3 REQUIREMENTS OF LAW
The granting of Awards and the issuance of Shares under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
Notwithstanding any other provision set forth in the Plan, if required
by the then-current Section 16 of the Exchange Act, any "derivative security"
or "equity security" granted pursuant to the Plan to an Insider may not be
sold or transferred for at least six (6) months after the date of grant of such
Award, and if an equity security is acquired by an Insider pursuant to the
exercise or conversion of a derivative security within six (6) months of the
grant of the derivative security hereunder, such equity security may not be
sold or transferred until the expiration of such six-month period. The terms
"equity security" and "derivative security" shall have the meanings ascribed
to them in the then-current Rule 16(a) under the Exchange Act.
15.4 SECURITIES LAW COMPLIANCE
With respect to Insiders, transactions under this Plan are intended to comply
with all applicable conditions or Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
15.5 FOREIGN EMPLOYEES
To the extent permissible under applicable law, the Company may make grants of
Awards to eligible Employees who are employed in locations outside of the
United States. The Committee shall have the authority to modify the terms of
Awards granted to such Employees in order to ensure compliance with applicable
local and national law.
15.6 GOVERNING LAW
To the extent not preempted by Federal law (or foreign law in the case of
grants to Employees who are not United States residents), the Plan, and
all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Georgia.
15.7 REGULATORY COMPLIANCE
It is the intention that any and all provisions of this Plan be
consistent and comply with applicable laws or regulations enacted or
promulgated before or after the execution or adoption of this Plan, and to the
extent that any such provision is inconsistent or in noncompliance with
applicable laws or regulations, the provision or portion thereof that is
inconsistent or in noncompliance will be deemed void.
IN WITNESS WHEREOF, Bank South Corporation has caused this document to
be executed as of the 20th day of April, 1995.
BANK SOUTH CORPORATION
By: /s/ Ralph E. Hutchins, Jr.
---------------------------
ATTEST:
By: /s/ Barry Anderson
------------------
31
<PAGE> 1
BANK SOUTH CORPORATION
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
Primary: 1995 1994
------- -------
<S> <C> <C>
Average Shares Outstanding 58,461 55,215
Dilutive Stock Options -
based on the treasury stock method using
the average market price for the period 698 613
------- -------
Total primary shares outstanding and
common share equivalents 59,159 55,828
======= =======
Net Income $15,441 $19,309
======= =======
Primary earnings per share $ 0.26 $ 0.35
======= =======
Fully diluted:
Average Shares Outstanding 58,461 55,215
Dilutive Stock Options -
based on the treasury stock method using
the period-end market price, if greater
than average market price for the period 743 718
------- -------
Total fully-dilutive shares outstanding 59,204 55,933
======= =======
Net Income $15,441 $19,309
======= =======
Fully diluted earnings per share * $ 0.26 $ 0.35
======= =======
</TABLE>
* Fully diluted earnings per share is less than 3% dilutive and, therefore,
was not disclosed on the Statements of Income in accordance with the
provisions of Accounting Principles Board Opinion Number 15.
32
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK SOUTH FOR THE PERIOD ENDED MARCH 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 411,730
<INT-BEARING-DEPOSITS> 26,363
<FED-FUNDS-SOLD> 10,735
<TRADING-ASSETS> 51,497
<INVESTMENTS-HELD-FOR-SALE> 852,840
<INVESTMENTS-CARRYING> 1,905,418
<INVESTMENTS-MARKET> 1,878,678
<LOANS> 4,068,816
<ALLOWANCE> 82,284
<TOTAL-ASSETS> 7,665,729
<DEPOSITS> 5,027,536
<SHORT-TERM> 1,764,257
<LIABILITIES-OTHER> 133,916
<LONG-TERM> 89,367
<COMMON> 292,821
0
0
<OTHER-SE> 357,832
<TOTAL-LIABILITIES-AND-EQUITY> 7,665,729
<INTEREST-LOAN> 85,045
<INTEREST-INVEST> 39,030
<INTEREST-OTHER> 2,773
<INTEREST-TOTAL> 126,848
<INTEREST-DEPOSIT> 40,214
<INTEREST-EXPENSE> 65,125
<INTEREST-INCOME-NET> 61,723
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,161
<EXPENSE-OTHER> 73,651
<INCOME-PRETAX> 20,261
<INCOME-PRE-EXTRAORDINARY> 20,261
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,441
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8
<LOANS-NON> 20,118
<LOANS-PAST> 741
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 112,039
<ALLOWANCE-OPEN> 82,936
<CHARGE-OFFS> 6,082
<RECOVERIES> 5,430
<ALLOWANCE-CLOSE> 82,284
<ALLOWANCE-DOMESTIC> 82,284
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 48,723
</TABLE>
