<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 21, 1998
(June 19, 1998)
PAB Bankshares, Inc.
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
Georgia 0-25422 58-1473302
- -------------------------------------------------------------------------------
(State or other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
3102 North Oak Street Extension, Valdosta, Georgia 31602
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
912/241-2775
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The financial statements of Investors Financial Corporation commence on
page F-2 hereof.
(B) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma combined condensed financial statements for
PAB Bankshares, Inc. and its subsidiaries commence on page F-33 hereof.
(C) EXHIBITS
23.1 Consent of Mauldin & Jenkins, LLC
2
<PAGE>
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 hereunto duly authorized.
PAB BANKSHARES, INC.
August 21, 1998 /s/ C. Larry Wilkerson
----------------------
C. Larry Wilkerson
Executive Vice President
3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTORS FINANCIAL CORPORATION AND SUBSIDIARY
Independent Auditors' Report F-2
Consolidated Balance Sheets - December 31, 1997 and 1996 F-3
Consolidated Statements of Income - Years ended December 31, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity - Years ended December 31, 1997 and 1996 F-5
Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996 F-6
Notes to Consolidated Financial Statements - December 31, 1997 and 1996 F-8
INVESTORS FINANCIAL CORPORATION AND SUBSIDIARY (Interim Financial Statements)
Unaudited Consolidated Balance Sheet - March 31, 1998 F-33
Unaudited Consolidated Statements of Income - Three Months ended March 31,
1998 and 1997 F-34
Unaudited Consolidated Statements of Stockholders' Equity - Three Months
ended March 31, 1998 and 1997 F-35
Unaudited Consolidated Statements of Cash Flows - Three Months ended March 31,
1998 and 1997 F-36
PAB BANKSHARES, INC. AND SUBSIDIARIES
Unaudited Pro Forma Financial Information F-37
Unaudited Pro Forma Combined Condensed Balance Sheet - March 31, 1998 F-38
Notes to Unaudited Pro Forma Combined Condensed Balance Sheet F-39
Unaudited Pro Forma Combined Condensed Statements of Income - Three Months ended March 31, 1998,
Years ended December 31, 1997 and 1996 F-40
Notes to Unaudited Pro Forma Combined Condensed Statements of Income F-44
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Investors Financial Corporation and Subsidiary
Bainbridge, Georgia
We have audited the accompanying consolidated balance sheets of Investors
Financial Corporation and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. 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 aspects, the financial position of Investors
Financial Corporation and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
MAULDIN & JENKINS, LLC
Albany, Georgia
January 9, 1998
F-2
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Assets 1997 1996
------ ----------- -----------
<S> <C> <C>
Cash and due from banks $ 4,005,299 $ 3,708,799
Interest-bearing deposits in banks 200,000 100,000
Federal funds sold 2,848,129 970,000
Securities available for sale, at fair value 18,859,450 21,208,807
Loans 47,180,301 45,244,349
Less allowance for loan losses 671,328 613,864
----------- -----------
Loans, net 46,508,973 44,630,485
----------- -----------
Premises and equipment, net 1,719,863 1,879,405
Intangible assets 912,160 1,160,920
Other assets 1,766,262 1,810,503
----------- -----------
$76,820,136 $75,468,919
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $11,723,504 $11,314,854
Interest-bearing demand 16,079,815 15,388,791
Savings 5,453,469 5,546,022
Time, $100,000 and over 8,153,182 9,175,056
Other time 23,315,922 23,965,404
----------- -----------
Total deposits 64,725,892 65,390,127
Long-term debt 2,184,000 2,184,000
Federal Home Loan Bank advances 1,000,000 -
Other liabilities 328,110 344,244
----------- -----------
Total liabilities 68,238,002 67,918,371
----------- -----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $.10; 10,000,000 shares
authorized 470,000 issued and outstanding 47,000 47,000
Capital surplus 4,562,976 4,562,976
Retained earnings 3,981,476 3,041,056
Unrealized losses on securities available for sale, net of tax (9,318) (100,484)
----------- -----------
Total stockholders' equity 8,582,134 7,550,548
----------- -----------
$76,820,136 $75,468,919
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Income
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------------------------------
<S> <C> <C>
Interest Income
Interest and fees on loans $4,692,870 $4,370,916
Interest on taxable securities 1,176,138 1,321,694
Interest on nontaxable securities 6,932 6,920
Interest on deposits in other banks 8,565 6,223
Interest on Federal funds sold 85,453 61,881
---------- ----------
5,969,958 5,767,634
---------- ----------
Interest expense 2,438,805 2,497,399
Interest on deposits 202,683 185,320
---------- ----------
Interest on other borrowings 2,641,488 2,682,719
---------- ----------
Net interest income 3,328,470 3,084,915
Provision for loan losses 144,000 120,000
---------- ----------
Net interest income after provision for loan losses 3,184,470 2,964,915
---------- ----------
Other income
Service charges on deposit accounts 536,331 454,876
Other service charges, commissions and fees 23,238 28,452
Net realized gains (losses) on securities available for sale (1,854) 3,673
Other 147,506 114,719
---------- ----------
705,221 601,720
---------- ----------
Other expenses
Salaries and employee benefits 959,966 971,200
Equipment expenses 197,161 196,988
Occupancy expense 176,909 172,524
Amortization of intangible assets 248,760 268,009
Other operating expenses 489,536 441,224
---------- ----------
2,072,332 2,049,945
---------- ----------
Income before income taxes 1,817,359 1,516,690
Applicable income taxes 632,539 548,497
---------- ----------
Net income $1,184,820 $ 968,193
========== ==========
Basic earnings per share $ 2.52 $ 2.06
========== ==========
Diluted earnings per share $ 2.28 $ 1.87
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Unrealized
Gains
(Losses) on
Securities
Common Stock Available Total
------------------ Capital Retained for Sale, Stockholders'
Shares Par Value Surplus Surplus Net of Tax Equity
------- --------- ---------- ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 470,000 $47,000 $4,562,976 $2,279,663 $ 16,638 $6,906,277
Net income - - - 968,193 - 968,193
Cash dividends declared,
$.44 per share - - - (206,800) - (206,800)
Net change in unrealized losses
on securities available for sale,
net of tax - - - - (117,122) (117,122)
------- ------- ---------- ---------- --------- ----------
Balance, December 31, 1996 470,000 47,000 4,562,976 3,041,056 (100,484) 7,550,548
Net income - - - 1,184,820 - 1,184,820
Cash dividends declared,
$.52 per share - - - (244,400) - (244,400)
Net change in unrealized gains on
securities available for sale,
net of tax - - - - 91,166 91,166
------- ------- ---------- ---------- --------- ----------
Balance, December 31, 1997 470,000 $47,000 $4,562,976 $3,981,476 $ (9,318) $8,582,134
======= ======= ========== ========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES $ 1,184,820 $ 968,193
----------- -----------
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation 184,573 191,684
Amortization of intangible assets 248,760 268,009
Provision for loan losses 144,000 120,000
Provision for deferred income taxes (54,548) (50,396)
Net realized (gains) losses on securities available for sale 1,854 (3,673)
(Increase) decrease in interest receivable 56,956 (114,338)
Increase (decrease) in interest payable (20,269) 21,613
Increase (decrease) in taxes payable 11,986 (119,099)
Other prepaids, deferrals and accruals, net (12,982) (49,950)
----------- -----------
Total adjustments 560,330 263,850
----------- -----------
Net cash provided by operating activities 1,745,150 1,232,043
----------- -----------
INVESTING ACTIVITIES
Increase in interest bearing-deposits in banks (100,000) -
Proceeds from sales of securities available for sale 792,368 1,974,624
Purchase of securities available for sale (2,000,060) (7,625,053)
Proceeds from maturities of securities available for sale 3,693,325 6,544,808
(Increase) decrease in Federal funds sold (1,878,129) 576,579
Increase in loans, net (2,022,488) (4,062,271)
Purchase of premises and equipment (25,031) (217,680)
----------- -----------
Net cash used in investing activities (1,540,015) (2,808,993)
----------- -----------
FINANCING ACTIVITIES
Increase (decrease) in deposits (664,235) 2,574,197
Increase (decrease) in other borrowings 1,000,000 (1,000,000)
Principal payments on note payable - (273,000)
Dividends paid (244,400) (206,800)
----------- -----------
Net cash provided by financing activities 91,365 1,094,397
----------- -----------
</TABLE>
F-6
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
Net increase (decrease) in cash and due from banks $ 296,500 $ (482,553)
Cash and due from banks at beginning of year 3,708,799 4,191,352
---------- ----------
Cash and due from banks at end of year $4,005,299 $3,708,799
========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for: $2,661,757 $2,661,106
Interest
$ 675,101 $ 717,992
Income taxes
NONCASH TRANSACTION
Net unrealized gains (losses) on securities available for sale $ 138,130 $ (177,457)
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Investors Financial Corporation (the Company) is a bank holding
company whose business is conducted by its wholly-owned subsidiary,
Bainbridge National Bank, (the Bank). The Bank is a commercial bank
located in Bainbridge, Decatur County, Georgia. The Bank provides a
full range of banking services in its primary market area of Decatur
County and the surrounding counties.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions
and accounts are eliminated in consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash on hand, cash items in process of collection, and amounts due
from banks are included in cash and cash equivalents.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent to hold for
an indefinite period of time, but not necessarily to maturity are
classified as available for sale and are recorded at fair value with
net unrealized gains and losses included in stockholders' equity net
of tax.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
LOANS
Loans are carried at their principal amounts outstanding less the
allowance for loan losses. Interest income on loans is credited to
income based on the principal amount outstanding.
Loan origination fees and certain direct loan costs are recognized at
the time the loan is recorded. Because net origination loan fees and
costs are not material, the results of operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses in the
loan portfolio. Management's determination of the adequacy of the
allowance is based on an evaluation of the portfolio, past loan loss
experience, current economic conditions, volume, growth, composition
of the loan portfolio, and other risks inherent in the portfolio. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for
loan losses, and may require the Company to record additions to the
allowance based on their judgment about information available to them
at the time of their examinations.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When accrual of interest is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with
the terms of the loan agreement. Individually identified impaired
loans are measured based on the present value of payments expected to
be received, using the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices
or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds
the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Changes to the valuation
allowance are recorded as a component of the provision for loan
losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the straight-
line method over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Intangible assets represent the excess of costs over net tangible
assets acquired by the Bank, less accumulated amortization of
$2,062,746 and $1,813,986 at December 31, 1997 and 1996,
respectively. Core deposit intangibles are being amortized over a
period of ten years. Goodwill is being amortized over a period of
fifteen years. Covenants not to compete and organization costs were
being amortized over a period of five years.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried
at the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair
value at the time of transfer to other real estate owned is charged
to the allowance for loan losses. Subsequent gains or losses on sale
and any subsequent adjustment to the value are recorded as other
expenses.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for
the applicable year. Deferred tax assets and liabilities are
recognized on the temporary differences between the bases of assets
and liabilities as measured by tax laws and their bases as reported
in the financial statements. Deferred tax expense or benefit is then
recognized for the change in deferred tax assets or liabilities
between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards, and tax credits will be realized. A valuation
allowance is recorded for those deferred tax items for which it is
more likely than not that realization will not occur.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes (benefits) of the consolidated group.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding.
Diluted earnings per share are computed by dividing net income by the
sum of the weighted average number of shares of common stock
outstanding and potential common shares. Potential common shares
consist of warrants and stock options. Earnings per share for the
year ended December 31, 1996 has been restated to reflect the
adoption of Statement of Financial Accounting Standards No. 128,
"Earnings per Share".
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CURRENT ACCOUNTING DEVELOPMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". ("SFAS No. 125"). This statement
provides standards for distinguishing transfers of financial assets
that are sales from those that are secured borrowings, and provides
guidance on the recognition and measurement of asset servicing
contracts and on debt extinguishments. As issued, SFAS No. 125 is
effective for transactions occurring after December 31, 1996.
However, as a result of an amendment to SFAS No. 125 by the FASB in
December 1996, certain provision of SFAS No. 125 are deferred for an
additional year. Adoption of the new accounting standard is not
expected to have a material impact on the Company's financial
statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share."
This statement simplifies the standards for computing earnings per
share previously set forth in APB Opinion No. 15, "Earnings per
Share," and makes them comparable to international Earnings per Share
("EPS") standards. It replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This
statement is effective for financial statements issued for periods
ending after December 15, 1997. The adoption of this statement did
not have a material impact on the Company's financial statements.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CURRENT ACCOUNTING DEVELOPMENTS (CONTINUED)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and
display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose
financial statements. This statement requires that all items that
are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. This statement does not require a specific
format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the
period in that financial statement. This statement requires that an
enterprise classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance
or other comprehensive income by their nature in a financial
statement and display the accumulated balance or other comprehensive
income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
This statement is effective for fiscal years beginning after December
15, 1997. The adoption of this statement is not expected to have a
material impact on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement
requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it
is used internally for evaluating segment performance and deciding
how to allocate resources to segments. The statement requires that
a business enterprise report a measure of segment profit or loss,
certain specific revenue and expense items and segment assets. It
requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets and other amounts disclosed for
segments to corresponding amounts in the enterprise's general-purpose
financial statements. It requires that the enterprise report
information about the revenues derived from the enterprise's products
or services, about the countries in which the enterprise earns
revenues and hold assets and about major customers. This statement
is effective for financial statements for periods beginning after
December 15, 1997. The adoption of this statement is not expected to
have a material impact on the Company's financial statements.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1997:
U. S. GOVERNMENT AND AGENCY
SECURITIES $ 9,100,272 $21,304 $ (20,248) $ 9,101,328
STATE AND MUNICIPAL
SECURITIES 169,777 78 (44) 169,811
MORTGAGE-BACKED SECURITIES 9,603,520 41,777 (56,986) 9,588,311
----------- ------- --------- -----------
$18,873,569 $63,159 $ (77,278) $18,859,450
=========== ======= ========= ===========
December 31, 1996:
U. S. Government and agency
securities $ 9,290,920 $13,112 $ (78,552) $ 9,225,480
State and municipal
securities 169,470 313 (13) 169,770
Mortgage-backed securities 11,900,665 38,519 (125,627) 11,813,557
----------- ------- --------- -----------
$21,361,055 $51,944 $(204,192) $21,208,807
=========== ======= ========= ===========
</TABLE>
The amortized cost and fair value of securities as of December 31,
1997 by contractual maturity are shown below. Maturities may differ
from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid with or
without penalty. Therefore, these securities are not included in the
maturity categories in the following maturity summary.
SECURITIES AVAILABLE FOR SALE
-----------------------------
AMORTIZED FAIR
COST VALUE
----------- -----------
Due in one year or less $ 3,869,192 $ 3,871,920
Due from one year to five years 5,400,857 5,399,219
Mortgage-backed securities 9,603,520 9,588,311
----------- -----------
$18,873,569 $18,859,450
=========== ===========
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES (CONTINUED)
Securities with a carrying value of $7,481,279 and $8,636,481 at
December 31, 1997 and 1996, respectively, were pledged to secure
public deposits and for other purposes.
Gains and losses on sales of securities available for sale consist of
the following:
DECEMBER 31,
--------------------
1997 1996
------- --------
Gross gains on sales of securities $ 934 $11,094
Gross losses on sales of securities (2,788) (7,421)
------- -------
Net realized gains (losses) on sales of
securities available for sale $(1,854) $ 3,673
======= =======
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
Commercial and financial $ 5,486,663 $ 4,489,035
Agricultural 1,889,573 1,216,009
Real estate - construction 509,154 847,007
Real estate - mortgage, farmland 2,518,763 2,739,021
Real estate - mortgage, other 25,605,761 24,197,187
Consumer installment 11,157,382 11,731,090
Other 13,005 25,000
----------- -----------
47,180,301 45,244,349
Allowance for loan losses (671,328) (613,864)
----------- -----------
Loans, net $46,508,973 $44,630,485
=========== ===========
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Changes in the allowance for loan losses are as follows:
DECEMBER 31,
---------------------
1997 1996
-------- --------
BALANCE, BEGINNING OF YEAR $613,864 $563,710
Provision charged to operations 144,000 120,000
Loans charged off (95,692) (80,833)
Recoveries 9,156 10,987
-------- --------
BALANCE, END OF YEAR $671,328 $613,864
======== ========
The total recorded investment in impaired loans was $103,848 and
$112,960 at December 31, 1997 and 1996, respectively. Included in
these loans were $49,000 that had related allowances for loan losses
of $3,100 in 1997. There were no impaired loans that had related
allowances in 1996. The average recorded investment in impaired loans
for 1997 and 1996 was $80,750 and $78,000, respectively. Interest
income on impaired loans of $2,326 and $2,116 was recognized for cash
payments received for the year ended December 31, 1997, and 1996,
respectively.
The Company has granted loans to certain directors, executive
officers, and related entities of the Company and the Bank. The
interest rates on these loans were substantially the same as rates
prevailing at the time of the transaction and repayment terms are
customary for the type of loan involved. Following is a summary of
transactions:
DECEMBER 31,
--------------------------
1997 1996
---------- -----------
BALANCE, BEGINNING OF YEAR $ 2,347,044 $ 2,534,953
Advances 4,261,077 5,344,997
Repayments (3,408,181) (5,532,906)
----------- -----------
BALANCE, END OF YEAR $ 3,199,940 $ 2,347,044
=========== ===========
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PREMISES AND EQUIPMENT, NET
Premises and equipment are summarized as follows:
DECEMBER 31,
---------------------------
1997 1996
----------- -----------
Land $ 208,800 $ 208,800
Buildings and improvements 1,656,173 1,656,173
Equipment 1,114,251 1,089,220
----------- -----------
2,979,224 2,954,193
Accumulated depreciation (1,259,361) (1,074,788)
----------- -----------
$ 1,719,863 $ 1,879,405
=========== ===========
NOTE 5. OTHER BORROWINGS
As of December 31, 1997, pursuant to an agreement with Federal Home
Loan Bank of Atlanta, the Bank has received advances totaling
$1,000,000 bearing interest at a variable rate (5.63% at December 31,
1997). Under the terms of the agreement, interest is payable
quarterly and the advances are due on April 24, 2000. The Bank will
have to pay a penalty if they make a prepayment of principal before
the maturity date. The advances are secured by a blanket floating
lien of all the Bank's residential real estate loans.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT
Long-term debt represents a loan by the Company with a correspondent
bank. Under terms of the loan agreement, $2,730,000 was borrowed in
1995 and the proceeds were used to repay existing debt. Interest
accrues on the debt at a variable rate. The effective rate at
December 31, 1997 was 7.65%. Interest only is payable quarterly. The
loan is for a period of ten years with principal payable in equal
semiannual installments, each in the amount of $136,500. Following is
a schedule of principal payments for the next five years and
thereafter.
1998 $ 273,000
1999 273,000
2000 273,000
2001 273,000
2002 273,000
Later years 819,000
----------
$2,184,000
==========
The loan has no penalty for prepayment and is secured by all of the
issued and outstanding stock of the Bank.
The loan agreement contains restrictive provisions that limit or
prevent creating liens on or disposing of the stock of the
subsidiary. There are also other restrictions on mergers,
acquisitions, consolidations, certain leases, sales or transfers of
assets, capital expenditures, stockholders' equity and payment of
dividends in event of default. As of December 31, 1997, the Company
was in compliance with all covenants and provisions of the loan
agreement except those pertaining to the possible merger with PAB
Bancshares, Inc. explained in Note 15. However, the Company has
received a waiver from the Correspondent Bank for these covenant
violations.
NOTE 7. EMPLOYEE BENEFIT PLAN
The Bank has a 401(k) salary deferral plan which allows employees to
defer up to 16% of their salary with partially matching Bank
contributions. Bank contributions to this plan charged to expense
amounted to $13,006 and $12,018 in 1997 and 1996, respectively.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES
The provision for income taxes consists of the following:
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
-------- --------
Current $687,087 $598,893
Deferred (54,548) (50,396)
-------- --------
$632,539 $548,497
======== ========
The Company's provision for income taxes differs from the amounts
computed by applying the Federal income tax statutory rates to income
before income taxes. A reconciliation of the differences is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996
------------------- ---------------------
AMOUNT PERCENT Amount Percent
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Tax provision at statutory rate $617,902 34% $515,675 34%
Increase (decrease) resulting from:
Tax-exempt interest (18,474) (1) (3,757) -
State income tax 42,250 3 39,445 3
Amortization of goodwill 7,058 - 7,058 -
Other items, net (16,197) (1) (9,924) (1)
-------- ---- -------- ---
Provision for income taxes $632,539 35% $548,497 36%
======== ==== ======== ===
</TABLE>
The components of deferred income taxes are as follows:
DECEMBER 31,
--------------------
1997 1996
-------- --------
Deferred tax assets:
Loan loss reserves $218,260 $192,866
Unrealized loss on securities
available for sale 4,801 51,764
-------- --------
223,061 244,630
Deferred tax liabilities:
Amortization of core deposits 94,748 123,902
-------- --------
Net deferred tax assets $128,313 $120,728
======== ========
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK WARRANTS AND STOCK OPTION PLAN
STOCK WARRANTS
The organizers of the Company and the Bank purchased 231,760 shares
of the common stock at a price of $10 per share, the same price at
which shares were offered to others. In recognition of the financial
risks undertaken by the organizers, the Company granted each
organizer an opportunity to purchase, for a nominal price, warrants
to purchase one additional share for every two shares he or she
purchased in the offering.
The warrants became exercisable on the date the Bank opened for
business and are exercisable in whole or in part at any time during
the ten year period following that date, at an exercise price equal
to $10 per share. The warrants are nontransferable, other than by
will or the laws of descent and distribution, but shares issued
pursuant to the exercise of warrants will be transferable, subject to
compliance with applicable securities laws. The warrant exercise
price is subject to upward adjustment, and the warrants are subject
to defeasance if not exercised, in the event that the OCC issues a
capital directive or other order requiring the Bank to obtain
additional capital. The maximum number of shares that can be
purchased pursuant to the Warrants Agreement amounts to 115,428
shares.
STOCK OPTION PLAN
The Company has adopted a Key Employee Incentive Option Plan covering
50,000 shares of the common stock, which is intended to qualify for
favorable tax treatment under Section 422 of the Internal Revenue
Code. The Stock Option Plan will be administered by the Board of
Directors of the Company and will provide for the granting of options
to purchase shares of the common stock to officers and other key
employees of the Company and its subsidiary. The purchase price
under all such options intended to qualify as incentive options will
not be less than the fair market value of the shares of common stock
on the date of grant. Options will be exercisable upon such terms as
may be determined by the body administering the Stock Option Plan,
but in any event, all options, whether intended to qualify as
incentive options or not, will be exercisable no later than ten years
after the date of grant.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK WARRANTS AND STOCK OPTION PLAN (CONTINUED)
Other pertinent information related to the plan is as follows:
DECEMBER 31,
----------------------
1997 1996
------ -------
NUMBER OF SHARES
----------------------
Under option, beginning of year 2,850 2,850
Granted - -
Expired - -
------- -------
Under option, end of year 2,850 2,850
======= =======
Options exercisable, end of year 2,850 2,850
======= =======
Available to grant, end of year 46,350 46,350
======= =======
AVERAGE PRICES
----------------------
Under option, end of year $ 10 $ 10
If options granted under the Stock Option Plan qualify as incentive
options under Section 422, no taxable income will be recognized by
the recipient of the options as a result of the grant or exercise of
the options. If options do not qualify as incentive options, income
will be recognized by the recipient upon exercise of the option to
the extent of the difference in the option exercise price and the
fair market value of the common stock, and a corresponding deduction
to taxable income will be created for the Company.
SPECIAL STOCK
The Company is authorized to issue up to 5,000,000 shares of a
special class of stock, $1 par value per share. Liquidation
preferences and other such items are subject to establishment by the
Board of Directors. No special stock has been issued.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-
balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Company's
commitments is as follows:
DECEMBER 31,
-------------------------
1997 1996
---------- ----------
Commitments to extend credit $9,320,000 $6,686,000
Standby letters of credit 555,400 315,000
---------- ----------
$9,875,400 $7,001,000
========== ==========
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in
extending loans to customers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the customer.
Collateral held varies but may include real estate and improvements,
crops, marketable securities, accounts receivable, inventory,
equipment, and personal property.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above
and is required in instances which the Company deems necessary.
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
NOTE 11. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and
consumer loans to customers in the Decatur County and surrounding
counties. The ability of the majority of the Company's customers to
honor their contractual loan obligations is dependent on the economy
in Bainbridge, Georgia and surrounding areas.
Although the Bank's loan portfolio is diversified, there is a
relationship in this region between the agricultural economy and the
economic performance of loans made to nonagricultural customers. The
Bank's lending policies for agricultural and nonagricultural
customers require loans to be well-collateralized and supported by
cash flows. Collateral for agricultural loans include equipment,
crops, livestock and land. Credit losses from loans related to the
agricultural economy is taken into considerations by management in
determining the allowance for loan losses.
A substantial portion of these loans are secured by real estate in
the Company's primary market area. In addition, a substantial portion
of the other real estate owned is located in those same markets.
Accordingly, the ultimate collectibility of the loan portfolio and
the recovery of the carrying amount of other real estate owned are
susceptible to changes in market conditions in the Company's primary
market area. The other significant concentrations of credit by type
of loan are set forth in Note 3.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 1997, approximately $2,065,095 of retained earnings were
available for dividend declaration without regulatory approval.
The Company and the Bank 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 financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must
meet specific capital guidelines that involve quantitative measures
of the assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company and
Bank capital amounts and classification 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 Bank to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1997, the Company and the Bank meet all capital adequacy
requirements to which it is subject.
As of December 31, 1997, the most recent notification from the OCC
categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following
table. There are no conditions or events since that notification that
management believes have changed the Bank's category.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. REGULATORY MATTERS (CONTINUED)
The Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------------------- --------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ------ ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
TOTAL CAPITAL
(TO RISK WEIGHTED ASSETS):
BAINBRIDGE NATIONAL BANK $10,366,316 21.37% $3,881,225 8% $4,851,531 10%
TIER I CAPITAL
(TO RISK WEIGHTED ASSETS):
BAINBRIDGE NATIONAL BANK $ 9,759,074 20.12% $1,940,612 4% $2,910,919 6%
TIER I CAPITAL
(TO AVERAGE ASSETS):
BAINBRIDGE NATIONAL BANK $ 9,759,074 12.98% $3,007,470 4% $3,759,337 5%
As of December 31, 1996
Total Capital
(to Risk Weighted Assets):
Bainbridge National Bank $ 9,104,850 19.16% $3,801,608 8% $4,752,009 10%
Tier I Capital
(to Risk Weighted Assets):
Bainbridge National Bank $ 8,510,649 17.91% $1,900,759 4% $2,851,139 6%
Tier I Capital
(to Average Assets):
Bainbridge National Bank $ 8,510,649 11.49% $2,962,802 4% $3,703,503 5%
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator) and
the weighted average shares outstanding (the denominator) used in
determining basic and diluted earnings per share.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
NET INCOME $1,184,820 470,000 $2.52
=====
EFFECT OF DILUTIVE SECURITIES
WARRANTS - 47,529
STOCK OPTIONS - 1,174
---------- -------
DILUTIVE EARNINGS PER SHARE
NET INCOME $1,184,820 518,703 $2.28
========== ======= =====
YEAR ENDED DECEMBER 31, 1996
------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ---------
BASIC EARNINGS PER SHARE
Net income $ 968,193 470,000 $2.06
=====
EFFECT OF DILUTIVE SECURITIES
Warrants - 47,529
Stock options - 1,174
---------- -------
DILUTIVE EARNINGS PER SHARE
Net income $ 968,193 518,703 $1.87
========== ======= =====
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets of
Investors Financial Corporation and statements of income and cash
flows as of and for the years ended December 31, 1997 and 1996.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Cash $ 136,324 $ 123,994
Investment in subsidiary 10,661,917 9,571,085
Due from subsidiary 6,718 66,713
----------- ----------
Total assets $10,804,959 $9,761,792
=========== ==========
LIABILITIES:
Long-term debt $ 2,184,000 $2,184,000
Other liabilities 38,825 27,244
----------- ----------
Total liabilities 2,222,825 2,211,244
----------- ----------
STOCKHOLDERS' EQUITY 8,582,134 7,550,548
----------- ----------
Total liabilities and stockholders' equity $10,804,959 $9,761,792
=========== ==========
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
INCOME, dividends from subsidiary $ 300,000 $700,000
---------- --------
EXPENSE
Interest 163,091 175,736
Other expense 39,700 9,250
---------- --------
202,791 184,986
---------- --------
Income before income tax benefits and
equity in undistributed earnings of
subsidiary 97,209 515,014
INCOME TAX BENEFITS 87,945 62,895
---------- --------
Income before equity in undistributed
earnings of subsidiary 185,154 577,909
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 999,666 390,284
---------- --------
Net income $1,184,820 $968,193
========== ========
</TABLE>
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,184,820 $ 968,193
---------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiary (999,666) (390,284)
Increase in taxes payable 59,994 25,281
Decrease in interest payable (405) (50,804)
Other assets and liabilities, net 11,987 (50,563)
---------- ---------
Total adjustments (928,090) (466,370)
---------- ---------
Net cash provided by operating activities 256,730 501,823
---------- ---------
FINANCING ACTIVITIES
Repayment of debt - (273,000)
Dividends paid (244,400) (206,800)
---------- ---------
Net cash used in financing activities (244,400) (479,800)
---------- ---------
Net increase in cash 12,330 22,023
Cash at beginning of year 123,994 101,971
---------- ---------
Cash at end of year $ 136,324 $ 123,994
========== =========
SUPPLEMENTAL DISCLOSURE
Cash paid during the year for interest $ 163,496 $ 226,540
</TABLE>
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimates using discounted cash flow methods. Those methods are
significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. The use of
different methodologies may have a material effect on the estimated
fair value amounts. Also, the fair value estimates presented herein
are based on pertinent information available to management as of
December 31, 1997 and 1996. Such amounts have not been revalued for
purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, INTEREST-BEARING DEPOSITS AND FEDERAL FUNDS
SOLD:
The carrying amounts of cash, due from banks, interest-bearing
deposits and Federal funds sold approximate their fair value.
AVAILABLE FOR SALE SECURITIES:
Fair values for securities are based on quoted market prices.
LOANS:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated
using discounted cash flow methods, using interest rates currently
being offered on certificates.
LONG-TERM DEBT & FEDERAL HOME LOAN BANK BORROWINGS:
The carrying amounts of the Company's Long-term debt and Federal Home
Loan Bank borrowings approximate their fair value.
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been
assigned.
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The carrying value and estimated fair value of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 7,053,428 $ 7,053,428 $ 4,778,799 $ 4,778,799
Investments in securities $18,859,450 $18,859,450 $21,208,807 $21,208,807
=========== =========== =========== ===========
Loans $47,180,301 $46,908,664 $45,244,349 $45,016,310
Allowance for loan losses (671,328) - (613,864) -
----------- ----------- ----------- -----------
Loans net $46,508,973 $46,908,664 $44,30,485 $45,016,310
=========== =========== =========== ===========
Financial liabilities:
Noninterest bearing demand $11,723,504 $11,723,504 $11,314,854 $11,314,854
Interest-bearing demand 15,388,791 15,388,791 16,079,815 16,079,815
Savings 5,453,469 5,453,469 5,546,022 5,546,022
Time deposits 31,469,104 31,740,006 33,14,460 33,458,041
----------- ----------- ----------- -----------
Total Deposits $64,725,892 $64,996,794 $65,390,127 $65,707,708
=========== =========== =========== ===========
Long-term Debt $ 2,184,000 $ 2,184,000 $ 2,184,000 $ 2,184,000
=========== =========== =========== ===========
Federal Home Loan
Bank advances $ 1,000,000 $ 1,000,000 $ - $ -
=========== =========== =========== ===========
</TABLE>
F-31
<PAGE>
NOTE 16. PENDING MERGER
The directors of the Company have entered into a definitive agreement
with PAB Bancshares, Inc., a multi-bank holding company with
headquarters in Valdosta, Georgia, whereby, PAB Bancshares, Inc.
would acquire all of the outstanding common stock of the Company in
exchange for common stock of PAB Bancshares, Inc. The merger is
subject to approval by the Company's shareholders and certain
regulatory authorities. Upon completion of the merger, the Bank will
be merged with and into First Community Bank of Southwest Georgia (a
wholly-owned subsidiary of PAB Bancshares, Inc.)
F-32
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and due from banks $ 3,397,575
Federal funds sold and securities purchased
under agreements to resell 8,553,355
-----------
Total Cash and Cash Equivalents 11,950,930
Time deposits 299,000
Investment securities 16,996,703
Loans, net of unearned interest 47,803,969
Allowance for loan losses (711,981)
Bank premises and equipment 1,686,117
Other real estate 19,607
Accrued interest receivable 719,767
Goodwill and other intangible assets 849,970
Other assets 213,382
-----------
Total Assets $79,827,464
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Non-interest bearing deposits $10,129,241
Interest-bearing deposits 57,333,130
Notes payable 2,047,500
Advances from Federal Home Loan Bank 1,000,000
Other liabilities 497,246
-----------
Total Liabilities 71,007,117
-----------
Stockholders' Equity:
Common stock, $.10 par value, 10,000,000
shares authorized, 470,000 shares issued
and outstanding 47,000
Additional paid in capital 4,562,976
Retained earnings 4,194,720
Accumulated other comprehensive income 15,651
-----------
8,820,347
-----------
Total Liabilities and Stockholders' Equity $79,827,464
===========
</TABLE>
F-33
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 1,144,220 1,091,794
Interest on Investment Securities:
Taxable 293,415 336,775
Tax exempt 1,506 1,735
Interest on federal funds sold 54,906 12,977
Interest on deposits in banks 3,584 1,513
----------- ---------
Total 1,497,631 1,444,794
----------- ---------
Interest Expense:
Interest on deposits 611,917 603,512
Interest on federal funds purchased -0- 383
Interest on notes and mortgages 40,764 39,577
Interest on advances from Federal Home Loan Bank 14,141 -0-
----------- ---------
Total 666,822 643,472
----------- ---------
Net interest income 830,809 801,322
Provisions for loan losses 36,000 36,000
----------- ---------
Net interest income after provision for loan losses 794,809 765,322
----------- ---------
Other Income:
Service charges on deposit accounts 117,986 117,383
Insurance commissions 4,020 5,754
Fees on loans originated for sale -0- 480
Other income 47,012 43,652
----------- ---------
Total 169,018 167,269
----------- ---------
Other Expenses:
Compensation 212,618 219,880
Other personnel expenses 35,908 36,016
Occupancy expense of bank premises 45,108 43,880
Furniture and equipment expense 40,222 60,427
Postage and courier services 17,257 12,949
Supplies 14,992 15,096
Amortization 62,190 62,190
Other operating expenses 99,854 53,377
----------- ---------
Total 528,149 503,815
----------- ---------
Income Before Income Taxes 435,678 428,776
Income Taxes 156,635 152,247
----------- ---------
Net Income $ 279,043 276,529
=========== =========
Earnings Per Share:
Basic $ .59 .59
=========== =========
Diluted $ .54 .53
=========== =========
Weighted Average Shares:
Basic 470,000 470,000
=========== =========
Diluted 518,703 518,703
=========== =========
</TABLE>
F-34
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
---------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID IN RETAINED INCOME
STOCK CAPITAL EARNINGS (LOSS) TOTAL
------- ---------- --------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 $47,000 4,562,976 3,041,056 (100,484) 7,550,548
Net income -0- -0- 276,529 -0- 276,529
Other comprehensive income (loss) -0- -0- -0- (79,136) (79,136)
Dividends -0- -0- (56,400) -0- (56,400)
------- --------- --------- -------- ----------
Balance, March 31, 1997 (Unaudited) $47,000 4,562,976 3,261,185 (179,620) 7,691,541
======= ========= ========= ======== ==========
Balance December 31, 1997 $47,000 4,562,976 3,981,476 (9,318) 8,582,134
Net income -0- -0- 279,043 -0- 279,043
Other comprehensive income (loss) -0- -0- -0- 24,969 24,969
Dividends -0- -0- (65,799) -0- (65,799)
------- --------- --------- -------- ----------
Balance, March 31, 1998 (Unaudited) $47,000 4,562,976 4,194,720 15,651 8,820,347
======= ========= ========= ======== ==========
</TABLE>
F-35
<PAGE>
INVESTORS FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 279,043 276,529
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 33,747 51,877
Provision for loan losses 36,000 36,000
Amortization of goodwill and other
intangible assets 62,190 62,190
Amortization (accretion) of securities (9,575) (11,373)
Change in assets and liabilities:
(Increase) decrease in accrued interest
receivable 34,855 41,470
Increase (decrease) in accrued interest
payable 1,910 (28,991)
(Increase) decrease in other assets (45,337) (37,504)
Increase (decrease) in income taxes payable 133,156 129,545
Increase (decrease) in other liabilities 26,008 27,160
----------- ----------
Net cash provided (used) by operating activities 551,997 546,903
----------- ----------
Cash Flows From Investing Activities:
Capital expenditures -0- (4,012)
Principal payments on mortgage-backed securities 709,169 598,115
Purchase of available-for-sale securities (1,100,915) -0-
Proceeds from maturities of available-for-sale
securities 1,070,000 250,114
Proceeds from sales of available-for-sale
securities 2,050,000 -0-
(Increase) decrease in interest-bearing deposits
in banks (99,000) -0-
(Increase) decrease in loans (617,929) (1,140,138)
----------- ----------
Net cash provided (used) by investing activities 2,011,325 (295,921)
----------- ----------
Cash Flows From Financing Activities:
Increase (decrease) in time deposits 1,916,233 (1,485,337)
Increase (decrease) in other deposits 820,246 1,561,564
Payments on long-term indebtedness (136,500) -0-
Dividends paid (65,799) (56,400)
----------- ----------
Net cash provided (used) by financing
activities 2,534,180 19,827
----------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents 5,097,502 270,809
Cash and Cash Equivalents at Beginning of
Period 6,853,428 4,678,799
----------- ----------
Cash and Cash Equivalents at End of Period $11,950,930 4,949,608
=========== ==========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During The Period For:
Interest $ 664,912 672,464
=========== ==========
Income taxes $ 23,479 22,702
=========== ==========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses
on securities available-for-sale $ (37,832) 119,903
=========== =========
</TABLE>
F-36
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
-----------------------------------------
The following unaudited pro forma combined condensed balance sheet as of March
31, 1998, gives effect to the merger of Investors Financial Corp. and its wholly
owned subsidiary, Bainbridge National Bank, with PAB Bankshares, Inc. assuming
such transaction is accounted for as a pooling of interest and as if such
transaction had been consummated on March 31, 1998.
The following unaudited pro forma combined condensed statements of income for
the three months ended March 31, 1998 and the three years ended December 31,
1997, give effect to the merger of Investors Financial Corp. and its wholly
owned subsidiary, Bainbridge National Bank, with PAB Bankshares, Inc. assuming
such transaction is accounted for as a pooling of interest and as if such
transaction had been consummated on January 1, 1995.
The transaction was consummated on June 19, 1998 by the issuance of 1,711,249
shares of PAB Bankshares, Inc. common stock in exchange for all of the
outstanding common stock and unexercised options of Investors Financial Corp.
The unaudited pro forma combined condensed financial statements are presented
for information purposes only and are not necessarily indicative of the combined
financial position or results of operations which would actually have occurred
if the transaction had been consummated at the date and for the periods
indicated or which may be obtained in the future.
F-37
<PAGE>
PAB BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
PAB INVESTORS ADJUSTMENTS
BANKSHARES, FINANCIAL INCREASE PRO FORMA
INC. CORP. (DECREASE) COMBINED
------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS
------
Cash and due from banks $ 13,264,814 3,397,575 -0- 16,662,389
Interest-bearing deposits
in other banks 548,524 -0- -0- 548,524
Federal funds sold and
securities purchased
under agreements to
resell 25,840,000 8,553,355 -0- 34,393,355
Time deposits 99,000 299,000 -0- 398,000
Investment securities 56,272,450 16,996,703 -0- 73,269,153
Investment in unconsolidated
subsidiary 128,454 -0- -0- 128,454
Loans, net of unearned interest 232,384,221 47,803,969 -0- 280,188,190
Allowance for loan losses (2,977,059) (711,981) -0- (3,689,040)
Bank premises and equipment 8,178,870 1,686,117 -0- 9,864,987
Other real estate 985,393 19,607 -0- 1,005,000
Accrued interest receivable 3,453,664 719,767 -0- 4,173,431
Cash value of life insurance 2,811,574 -0- -0- 2,811,574
Goodwill and other intangible
assets 2,131,290 849,970 -0- 2,981,260
Other assets 800,126 213,382 (8,062)(d) 1,005,446
------------ ---------- ---------- -----------
Total Assets $343,921,321 79,827,464 (8,062) 423,740,723
============ ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Non-interest bearing deposits $ 38,650,332 10,129,241 -0- 48,779,573
Interest-bearing deposits 229,071,634 57,333,130 -0- 286,404,764
Federal funds purchased and
securities sold under agreement
to repurchase 2,592,815 -0- -0- 2,592,815
Notes payable -0- 2,047,500 -0- 2,047,500
Advances from Federal Home
Loan Bank 37,776,916 1,000,000 -0- 38,776,916
Other borrowed funds 1,302,308 -0- -0- 1,302,308
Other liabilities 2,734,697 497,246 (6,627)(c)(d) 3,225,316
------------ ---------- ---------- -----------
Total Liabilities 312,128,702 71,007,117 (6,627) 383,129,192
------------ ---------- ---------- -----------
Stockholders' Equity:
Common stock 1,217,065 47,000 (47,000)(b) 1,217,065
Additional paid in capital 15,098,997 4,562,976 45,565 (b) 19,707,538
Retained earnings 15,392,593 4,194,720 -0- 19,587,313
Accumulated other
comprehensive income 83,964 15,651 -0- 99,615
------------ ---------- ---------- -----------
31,792,619 8,820,347 (1,435) 40,611,531
------------ ---------- ---------- -----------
Total Liabilities and
Stockholders' Equity $343,921,321 79,827,464 (8,062) 423,740,723
============ ========== ========== ===========
</TABLE>
See notes to unaudited pro forma combined condensed balance sheet.
F-38
<PAGE>
PAB BANKSHARES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
------------------------------------------------------------
(a) To reflect the issuance of 1,711,249 shares of PAB Bankshares, Inc. common
stock to effect the Investors Financial Corp. transaction. The transaction
will be accounted for as a pooling of interest, therefore the effect upon
stockholders' equity will be to increase PAB Bankshares, Inc. stockholders'
equity by the total equity of Investors Financial Corp. The unaudited pro
forma financial statements have been prepared based on PAB Bankshares, Inc.
issuance of 1,711,249 shares of PAB Bankshares, Inc. common stock in
exchange for all the outstanding common stock and unexercised options of
Investors Financial Corp.
(b) A reclassification from common stock to additional paid in capital reflects
the fact that issuance of the common stock of PAB Bankshares, Inc. is no par
value and the Company has elected to freeze the common stock account at
$1,217,065.
(c) To reflect the payment for fractional shares which would otherwise have been
issued to stockholders of Investors Financial Corp. in the amount of $1,435.
(d) To reflect the reclassification of a deferred income tax liability of
Investors Financial Corp. in the amount of $8,062 and reflect as a reduction
of deferred tax assets of PAB Bankshares, Inc.
F-39
<PAGE>
PAB BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
PAB INVESTORS ADJUSTMENTS
BANKSHARES, FINANCIAL INCREASE PRO FORMA
INC. CORP. (DECREASE) COMBINED
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income $ 6,769,464 1,497,631 -0- 8,267,095
Interest expense (3,249,985) (666,822) -0- (3,916,807)
----------- --------- --- ----------
Net interest income 3,519,479 830,809 -0- 4,350,288
Provision for loan losses (241,433) (36,000) -0- (277,433)
Non-interest income 1,060,695 169,018 -0- 1,229,713
Non-interest expense (2,384,027) (528,149) -0- (2,912,176)
----------- --------- --- ----------
Income before income taxes 1,954,714 435,678 -0- 2,390,392
Income taxes (624,309) (156,635) -0- (780,944)
----------- --------- --- ----------
Net Income $ 1,330,405 279,043 -0- 1,609,448
=========== ========= === ==========
Earnings Per Share(a):
Basic $ .24 .22
=========== ==========
Diluted $ .23 .21
=========== ==========
Weighted Average Shares:
Basic 5,657,884 7,369,133
=========== ==========
Diluted 5,784,985 7,496,234
=========== ==========
</TABLE>
See notes to unaudited pro forma combined condensed statements of income.
F-40
<PAGE>
PAB BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
PAB INVESTORS ADJUSTMENTS
BANKSHARES, FINANCIAL INCREASE PRO FORMA
INC. CORP. (DECREASE) COMBINED
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income $ 24,880,250 5,969,958 -0- 30,850,208
Interest expense (11,796,983) (2,641,488) -0- (14,438,471)
------------ ---------- --- -----------
Net interest income 13,083,267 3,328,470 -0- 16,411,737
Provision for loan losses (532,900) (144,000) -0- (676,900)
Non-interest income 2,839,954 705,221 -0- 3,545,175
Non-interest expense (9,023,701) (2,072,332) -0- (11,096,033)
------------ ---------- --- -----------
Income before income taxes 6,366,620 1,817,359 -0- 8,183,979
Income taxes (2,222,487) (632,539) -0- (2,855,026)
------------ ---------- --- -----------
Net Income $ 4,144,133 1,184,820 -0- 5,328,953
============ ========== === ===========
Earnings Per Share(a):
Basic $ .73 .72
============ ===========
Diluted $ .73 .72
============ ===========
Weighted Average Shares:
Basic 5,645,634 7,356,883
============ ===========
Diluted 5,711,020 7,422,269
============ ===========
</TABLE>
See notes to unaudited pro forma combined condensed statements of income.
F-41
<PAGE>
PAB BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
PAB INVESTORS ADJUSTMENTS
BANKSHARES, FINANCIAL INCREASE PRO FORMA
INC. CORP. (DECREASE) COMBINED
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income $ 22,209,612 5,767,634 -0- 27,977,246
Interest expense (11,061,569) (2,682,719) -0- (13,744,288)
------------ ---------- --- -----------
Net interest income 11,148,043 3,084,915 -0- 14,232,958
Provision for loan losses (405,000) (120,000) -0- (525,000)
Non-interest income 2,566,756 601,720 -0- 3,168,476
Non-interest expense (8,309,243) (2,049,945) -0- (10,359,188)
------------ ---------- --- -----------
Income before income taxes 5,000,556 1,516,690 -0- 6,517,246
Income taxes (1,652,002) (548,497) -0- (2,200,499)
------------ ---------- --- -----------
Net Income $ 3,348,554 968,193 -0- 4,316,747
============ ========== === ===========
Earnings Per Share(a):
Basic $ .61 .60
============ ===========
Diluted $ .60 .59
============ ===========
Weighted Average Shares:
Basic 5,523,742 7,234,991
============ ===========
Diluted 5,557,760 7,269,009
============ ===========
</TABLE>
See notes to unaudited pro forma combined condensed statements of income.
F-42
<PAGE>
PAB BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
PAB INVESTORS ADJUSTMENTS
BANKSHARES, FINANCIAL INCREASE PRO FORMA
INC. CORP. (DECREASE) COMBINED
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income $19,910,674 5,483,744 -0- 25,394,418
Interest expense (9,619,582) (2,598,409) -0- (12,217,991)
----------- ---------- --- -----------
Net interest income 10,291,092 2,885,335 -0- 13,176,427
Provision for loan losses (385,500) (132,000) -0- (517,500)
Non-interest income 2,120,871 567,735 -0- 2,688,606
Non-interest expense (7,580,686) (2,088,266) -0- (9,668,952)
----------- ---------- --- -----------
Income before income taxes 4,445,777 1,232,804 -0- 5,678,581
Income taxes (1,465,709) (406,953) -0- (1,872,662)
----------- ---------- --- -----------
Net Income $ 2,980,068 825,851 -0- 3,805,919
=========== ========== === ===========
Earnings Per Share(a):
Basic $ .54 .52
=========== ===========
Diluted $ .54 .52
=========== ===========
Weighted Average Shares:
Basic 5,561,600 7,272,849
=========== ===========
Diluted 5,561,600 7,272,849
=========== ===========
</TABLE>
See notes to unaudited pro forma combined condensed statements of income.
F-43
<PAGE>
PAB BANKSHARES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
--------------------------------------------------------------------
(a) Pro forma earnings per share are based on the weighted average number of
shares outstanding for the period adjusted for the shares issued in the
transaction of 1,711,249 shares.
F-44
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated August 18th, 1998 relating to
the consolidated financial statements of Investors Financial Corporation
included in the Current Report on Form 8-K/A.
/s/ MAULDIN & JENKINS, LLC
MAULDIN & JENKINS, LLC
Albany, Georgia
August 18, 1998
