<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1995
REGISTRATION NO. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NATIONSBANK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6711 56-0906609
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Code Number) Identification No.)
</TABLE>
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
(704) 386-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PAUL J. POLKING
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
NATIONSBANK CORPORATION
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
(704) 386-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
BOYD C. CAMPBELL, JR.
SMITH HELMS MULLISS & MOORE, L.L.P.
227 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202
(704) 343-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: []
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE
<S> <C> <C> <C>
Common Stock.................. 4,500,000 shares (1) $28.875 (2)
<CAPTION>
AMOUNT OF
REGISTRATION FEE
<S>
$75,735
</TABLE>
(1) Not applicable.
(2) Computed in accordance with Rule 457(f) under the Securities Act of 1933, as
amended, based on the average of the high and low prices reported on the
Nasdaq National Market on August 18, 1995 of the securities to be received
by the Registrant in exchange for the securities registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
NATIONSBANK CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
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<CAPTION>
FORM
S-4
ITEM PROXY STATEMENT-PROSPECTUS HEADING
<C> <S> <C>
Information About the Transaction
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page of Registration Statement; Outside Front Cover Page of
Proxy Statement-Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... TABLE OF CONTENTS; AVAILABLE INFORMATION; INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... SUMMARY
4. Terms of the Transaction........................ SUMMARY; THE MERGER; COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK
COMMON STOCK
5. Pro Forma Financial Information................. SUMMARY
6. Material Contacts with the Company Being
Acquired........................................ THE MERGER -- Background of and Reasons for the Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... *
8. Interests of Named Experts and Counsel.......... LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on Indemni-
fication for Securities Act Liabilities......... *
Information About the Registrant
10. Information with Respect to S-3 Registrants..... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; INFORMATION
ABOUT NATIONSBANK
11. Incorporation of Certain Information by
Reference....................................... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
12. Information with Respect to S-2 or
S-3 Registrants................................. *
13. Incorporation of Certain Information............ *
14. Information with Respect to Registrants other
than S-2 or S-3 Registrants..................... *
Information About the Company Being Acquired
15. Information with Respect to S-3 Companies....... INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; INFORMATION
ABOUT ICBK
16. Information with Respect to S-2 or
S-3 Companies................................... *
17. Information with Respect to Companies other than
S-2 or S-3 Companies............................ *
Voting and Management Information
18. Information if Proxies, Consents or
Authorizations are to be Solicited.............. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY; THE MEETING;
THE MERGER -- Dissenters' Rights of ICBK Shareholders; THE
MERGER -- Interests of Certain Persons in the Merger; INFORMATION ABOUT
NATIONSBANK -- Management and Additional Information; INFORMATION ABOUT
ICBK -- Management and Additional Information; SHAREHOLDER PROPOSALS
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer.................................. *
</TABLE>
* Item is omitted because answer is negative or item is inapplicable.
<PAGE>
SUBJECT TO COMPLETION
PROXY STATEMENT-PROSPECTUS , 1995
NATIONSBANK CORPORATION
COMMON STOCK
This Proxy Statement-Prospectus relates to the shares of common stock (the
"NationsBank Common Stock") of NationsBank Corporation, a North Carolina
corporation ("NationsBank"), offered hereby to the shareholders of
Intercontinental Bank, a Florida state-chartered commercial bank ("ICBK"), upon
consummation of a proposed merger (the "Merger") of ICBK into Intercontinental
Bank, N.A., a wholly owned national banking association subsidiary of
NationsBank ("New Bank"), pursuant to an Agreement and Plan of Merger between
NationsBank and ICBK, dated as of June 26, 1995 (the "Agreement"). Upon
completion of the Merger, each share of ICBK common stock, $2.00 par value per
share ("ICBK Common Stock"), will be converted into shares of NationsBank Common
Stock at a per share exchange ratio equal to $30 divided by the average closing
price of one share of NationsBank Common Stock on the New York Stock Exchange
("NYSE") Composite Transactions List computed for the ten-trading-day period
ending five business days prior to the closing of the Merger (the "Exchange
Ratio"). Any options to purchase ICBK Common Stock remaining unexercised upon
consummation of the Merger will become options to purchase a number of shares of
NationsBank Common Stock computed according to the Exchange Ratio. Each holder
of ICBK Common Stock or of options to purchase shares of ICBK Common Stock who
would otherwise be entitled to receive a fractional share of NationsBank Common
Stock (after taking into account all of a shareholder's certificates) will
receive, in lieu thereof, the equivalent cash value of such fractional share,
without interest. Each share of ICBK preferred stock, Series A, no par value
(the "ICBK Series A Preferred Stock"), issued and outstanding immediately prior
to the effective time of the Merger (the "Effective Time") will be redeemed by
ICBK at $1.00 per share (the "Redemption"). See "THE MERGER." Consummation of
the Merger is subject to several conditions, including, among others, the
affirmative vote of the holders of two-thirds of the outstanding shares of ICBK
Common Stock and ICBK Series A Preferred Stock, each voting separately as a
class, to approve the Agreement, the approval of appropriate regulatory
authorities and the completion of the Redemption. See "THE MERGER -- Conditions
to the Merger."
NationsBank Common Stock is listed on the NYSE and The Pacific Stock
Exchange Incorporated (the "PSE") under the trading symbol "NB," and certain
shares of NationsBank Common Stock are listed also on the Tokyo Stock Exchange.
The last reported sales price of NationsBank Common Stock on the NYSE Composite
Transactions List on , 1995 was $ per share and on June 22,
1995, the last trading day preceding public announcement of the proposed Merger,
was $57 3/8 per share. ICBK Common Stock is traded in the over-the-counter
market and reported by the Nasdaq National Market under the trading symbol
"ICBK." The average of the high and low sales prices of ICBK Common Stock as
reported by the Nasdaq National Market on , 1995 was $ per
share and on June 22, 1995 was $24 3/4 per share. See "PRICE RANGE OF COMMON
STOCK AND DIVIDENDS."
ANY SHAREHOLDER OF ICBK WHO DESIRES TO DISSENT FROM THE MERGER HAS THE
RIGHT TO DISSENT UNDER APPLICABLE PROVISIONS OF THE NATIONAL BANK ACT (THE
"NBA") AND, UPON COMPLIANCE WITH APPLICABLE STATUTORY PROCEDURES, TO RECEIVE
PAYMENT OF THE VALUE OF HIS OR HER SHARES OF ICBK COMMON STOCK. A SHAREHOLDER
WHO WISHES TO DISSENT FROM THE MERGER MUST NOT VOTE ANY SHARES OF ICBK COMMON
STOCK IN FAVOR OF THE AGREEMENT. SEE "THE MERGER -- DISSENTERS' RIGHTS OF ICBK
SHAREHOLDERS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH
CAROLINA (THE "COMMISSIONER") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF NATIONSBANK COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS
OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR
NONBANKING AFFILIATE OF NATIONSBANK AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
INTERCONTINENTAL BANK TO BE HELD
OCTOBER 30, 1995
THIS PROXY STATEMENT-PROSPECTUS SERVES AS A PROXY STATEMENT OF
INTERCONTINENTAL BANK IN CONNECTION WITH THE SOLICITATION OF PROXIES TO BE USED
AT THE SPECIAL MEETING OF SHAREHOLDERS OF INTERCONTINENTAL BANK TO BE HELD ON
OCTOBER 30, 1995 FOR THE PURPOSES DESCRIBED HEREIN (THE "SPECIAL MEETING") AND
IS FIRST BEING MAILED TO SHAREHOLDERS OF INTERCONTINENTAL BANK ON OR ABOUT
, 1995.
(A Redherring appears on the left-hand side of this page, rotated 90 degrees.
Text is as follows:)
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to
completion or amendment. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROXY STATEMENT-PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONSBANK OR ICBK. THIS PROXY
STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR SELL, OR A
SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS
PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR TO OR FROM ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS
OTHERWISE SPECIFICALLY INDICATED. INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS REGARDING NATIONSBANK, AND PRO FORMA INFORMATION, HAS BEEN
FURNISHED BY NATIONSBANK, AND INFORMATION HEREIN REGARDING ICBK HAS BEEN
FURNISHED BY ICBK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....... 3
SUMMARY............................................... 4
THE SPECIAL MEETING OF SHAREHOLDERS OF ICBK........... 14
General............................................. 14
Proxies............................................. 14
Solicitation of Proxies............................. 14
Record Date and Voting Rights....................... 14
Recommendation of ICBK Board........................ 15
THE MERGER............................................ 15
Description of the Merger........................... 15
Effective Time of the Merger........................ 15
Exchange of Certificates............................ 16
Background of and Reasons for the Merger............ 16
Opinion of ICBK's Financial Advisor................. 18
Effect on Options................................... 20
Conditions to the Merger............................ 20
Conduct of Business Prior to the Merger............. 21
Modification, Waiver and Termination................ 22
Certain Federal Income Tax Consequences............. 23
Interests of Certain Persons in the
Merger........................................... 23
Dissenters' Rights of ICBK Shareholders............. 25
Accounting Treatment................................ 25
Bank Regulatory Matters............................. 26
Restrictions on Resales by Affiliates............... 27
Dividend Reinvestment and Stock Purchase
Plan............................................. 27
PRICE RANGE OF COMMON STOCK AND DIVIDENDS............. 27
Market Prices....................................... 27
Dividends........................................... 28
INFORMATION ABOUT NATIONSBANK......................... 28
General............................................. 28
Operations.......................................... 28
Management and Additional Information............... 29
Supervision and Regulation.......................... 29
INFORMATION ABOUT ICBK................................ 31
General............................................. 31
Management and Additional Information............... 32
Supervision and Regulation.......................... 32
COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK COMMON
STOCK............................................... 33
NationsBank Common Stock............................ 33
ICBK Common Stock................................... 35
Comparison of Voting and Other Rights............... 36
LEGAL OPINIONS........................................ 39
EXPERTS............................................... 39
SHAREHOLDER PROPOSALS................................. 39
OTHER MATTERS......................................... 39
APPENDIX A -- Agreement and Plan
of Merger........................................... A-1
APPENDIX B -- Opinion of The Robinson-Humphrey
Company, Inc........................................ B-1
APPENDIX C -- Provisions of 12 U.S.C.
(section mark)215a Regarding Dissenters' Rights..... C-1
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
NationsBank has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), relating to the shares of NationsBank
Common Stock to be issued in connection with the Merger. For further information
pertaining to the shares of NationsBank Common Stock to which this Proxy
Statement-Prospectus relates, reference is made to such Registration Statement,
including the exhibits and schedules filed as a part thereof. As permitted by
the rules and regulations of the Commission, certain information included in the
Registration Statement is omitted from this Proxy Statement-Prospectus. In
addition, NationsBank is subject to certain of the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files certain reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference room of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
copies of such materials can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. In addition, copies of such materials are available
for inspection and reproduction at the public reference facilities of the
Commission at its New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048; and at its Chicago Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Reports,
proxy statements and other information concerning NationsBank also may be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005 and at the offices of The Pacific Stock Exchange,
Incorporated, 301 Pine Street, San Francisco, California 94104.
ICBK is subject to certain of the informational requirements of the Federal
Deposit Insurance Corporation (the "FDIC") under Section 12(i) of the Exchange
Act and, in accordance therewith, files certain reports, proxy statements and
other information with the FDIC. Such reports, proxy statements and other
information can be inspected and copied at the public reference room of the FDIC
at 550 17th Street, N.W., Washington, D.C. 20429 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by NationsBank with the Commission
are hereby incorporated by reference in this Proxy Statement-Prospectus: (a) the
NationsBank Annual Report on Form 10-K for the year ended December 31, 1994; (b)
the NationsBank Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995 and June 30, 1995; (c) the description of NationsBank Common Stock
contained in the NationsBank registration statement filed pursuant to Section 12
of the Exchange Act and any amendment or report filed for the purpose of
updating such description, including the NationsBank Current Report on Form 8-K
filed September 21, 1994; (d) the NationsBank Current Reports on Form 8-K filed
January 26, 1995, February 21, 1995, March 2, 1995 (two reports on this date),
March 21, 1995 (amended by Form 8-K/A Amendment No. 1 filed March 21, 1995),
March 27, 1995, April 24, 1995, April 25, 1995, May 16, 1995 and July 24, 1995.
The following documents previously filed by ICBK with the FDIC are hereby
incorporated by reference in this Proxy Statement-Prospectus: (a) the ICBK
Annual Report on Form F-2 for the year ended December 31, 1994; (b) the ICBK
Quarterly Reports on Form F-4 for the quarters ended March 31, 1995 and June 30,
1995; and (c) the ICBK Current Reports on Form F-3 filed January 9, 1995,
February 23, 1995, May 9, 1995 and August 10, 1995.
In addition, all documents filed by NationsBank with the Commission and by
ICBK with the FDIC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and prior to the time at which the Special
Meeting has been finally adjourned are hereby deemed to be incorporated by
reference herein. Any statements contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS RELATING TO
NATIONSBANK (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM JOHN E. MACK, SENIOR VICE PRESIDENT AND TREASURER,
NATIONSBANK CORPORATION, NATIONSBANK CORPORATE CENTER, CHARLOTTE, NORTH CAROLINA
28255, TELEPHONE (704) 386-5833. THE DOCUMENTS RELATING TO ICBK (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
THOMAS E. BEIER, EXECUTIVE VICE PRESIDENT, INTERCONTINENTAL BANK, 200 SOUTHEAST
FIRST STREET, MIAMI, FLORIDA 33131 TELEPHONE (305) 377-6900. TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1995.
PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE
COSTS OF REPRODUCTION AND MAILING.
3
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE. IT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT-PROSPECTUS, THE ACCOMPANYING APPENDICES AND
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Proxy Statement-Prospectus, notice of Special Meeting and form of
proxy solicited in connection therewith are first being mailed to ICBK
shareholders on or about , 1995. At the Special Meeting, the holders
of ICBK Common Stock and ICBK Series A Preferred Stock will consider and vote on
whether to approve the Agreement and the transactions contemplated thereby. A
copy of the Agreement is attached hereto as Appendix A.
THE COMPANIES
NATIONSBANK. NationsBank is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), was organized under
the laws of the State of North Carolina in 1968 and has as its principal assets
the stock of its subsidiaries. Through its banking subsidiaries (the "Banks")
and its various non-banking subsidiaries, NationsBank provides banking and
banking-related services, primarily throughout the Southeast and Mid-Atlantic
states and Texas. On June 30, 1995, NationsBank had total assets of $184.2
billion. The principal executive offices of NationsBank are located at
NationsBank Corporate Center, Charlotte, North Carolina 28255, and its telephone
number is (704) 386-5000. All references herein to NationsBank refer to
NationsBank Corporation and its subsidiaries, unless the context otherwise
requires. New Bank, a national banking association, is or upon formation will be
a direct, wholly owned subsidiary of NationsBank.
For additional information regarding NationsBank and the combined company
that would result from the Merger, see "THE MERGER" and "INFORMATION ABOUT
NATIONSBANK."
ICBK. ICBK is a Florida state-chartered commercial bank. ICBK provides
commercial banking services through a network of 24 branch offices located in
Dade, Broward and Palm Beach Counties, Florida. As of June 30, 1995, ICBK had
total assets of $1.1 billion and total deposits of $952 million. ICBK's
principal executive offices are located at 200 Southeast First Street, Miami,
Florida 33131, and its telephone number is (305) 377-6900.
For additional information regarding ICBK, see "THE MERGER" and
"INFORMATION ABOUT ICBK."
SPECIAL MEETING AND VOTES REQUIRED
A Special Meeting of Shareholders of ICBK will be held on October 30, 1995
at a.m., local time, at , at which time the
shareholders of ICBK will be asked to approve the Agreement and the transactions
contemplated thereby, including the Redemption. The record holders of ICBK
Common Stock and ICBK Series A Preferred Stock at the close of business on
September 25, 1995 (the "Record Date") are entitled to notice of and to vote at
the Special Meeting. On the Record Date, there were approximately
holders of record of ICBK Common Stock and shares of ICBK Common Stock
outstanding and 350,000 shares of ICBK Series A Preferred Stock held of record
by one shareholder.
The affirmative vote of the holders of two-thirds of the outstanding shares
of ICBK Common Stock and ICBK Series A Preferred Stock, each voting separately
as a class, is required to approve the Agreement and the transactions
contemplated thereby. As of the Record Date, directors and executive officers of
ICBK and their affiliates beneficially owned shares, or %, of the ICBK
Common Stock and no shares of the ICBK Series A Preferred Stock entitled to vote
at the Special Meeting. See "THE SPECIAL MEETING OF SHAREHOLDERS OF ICBK." In
addition, certain persons who on the Record Date beneficially owned an aggregate
of shares, or %, of the ICBK Common Stock have agreed to vote in favor of
the Agreement and take certain other actions in connection with the Merger. See
"THE MERGER -- Interests of Certain Persons in the Merger."
Approval of the Agreement by the shareholders of NationsBank is not
required.
THE MERGER
Under the Agreement, after satisfaction of all of the conditions set forth
therein, ICBK will merge with and into New Bank, which will be the surviving
entity, and each outstanding share of ICBK Common Stock will be converted into
shares
4
<PAGE>
of NationsBank Common Stock at the Exchange Ratio, with cash to be paid in lieu
of any resulting fractional shares of NationsBank Common Stock. Each share of
ICBK Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time will be redeemed by ICBK at the price of $1.00 per share as
provided by the ICBK Articles of Incorporation. The Exchange Ratio is equal to
$30 divided by the average closing price of one share of NationsBank Common
Stock on the NYSE Composite Transactions List computed for the ten-trading-day
period ending five business days prior to the closing of the Merger. As of the
Record Date, there were shares of ICBK Common Stock outstanding and
350,000 shares of ICBK Series A Preferred Stock outstanding. In addition, there
were outstanding options to purchase an aggregate of shares of ICBK Common
Stock.
If the Merger is consummated and assuming an Exchange Ratio equal to $30
divided by the $53 5/8 per share closing price of NationsBank Common Stock on
June 30, 1995 (the "Pro Forma Exchange Ratio"), each share of ICBK Common Stock
would be converted into approximately .5594 shares of NationsBank Common Stock.
Using the Pro Forma Exchange Ratio, a total of 4,254,476 shares of NationsBank
Common Stock would be issued in the Merger to ICBK shareholders and option
holders (assuming that all options are exercised prior to the Effective Time),
representing approximately 1.6% of the shares of NationsBank Common Stock to be
outstanding immediately after the Effective Time. The number of shares of
NationsBank Common Stock to be issued in the Merger will change if the average
per share price of NationsBank Common Stock (calculated as described above) or
the number of outstanding ICBK options changes.
The Merger is subject to the satisfaction of certain conditions, including
among others, an affirmative vote to approve the Agreement by holders of
two-thirds of the outstanding shares of ICBK Common Stock and ICBK Series A
Preferred Stock, each voting separately as a class, the effectiveness under the
Securities Act of a Registration Statement for shares of NationsBank Common
Stock to be issued in the Merger, approval of certain regulatory agencies and
the completion of the Redemption.
For additional information relating to the Merger, see "THE MERGER."
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of ICBK has approved the Agreement and the
transactions contemplated thereby. The Board of Directors of ICBK believes that
the Merger is in the best interests of ICBK and its shareholders and recommends
that the shareholders of ICBK vote "FOR" approval of the Agreement. For a
discussion of the factors considered by the Board of Directors in reaching its
conclusions, see "THE MERGER -- Background of and Reasons for the Merger."
OPINION OF ICBK'S FINANCIAL ADVISOR
The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), which has served
as financial advisor to ICBK, has rendered its written opinion to the Board of
Directors of ICBK that, from a financial point of view, the terms of the Merger
as provided in the Agreement are fair to the shareholders of ICBK. A copy of
such opinion, updated to , 1995, is attached hereto as Appendix B
and should be read in its entirety. See "THE MERGER -- Opinion of ICBK's
Financial Advisor."
EFFECTIVE TIME OF THE MERGER
Unless otherwise agreed by NationsBank and ICBK, the Effective Time is
expected to occur on or promptly after the first business day following the last
to occur of (i) the date that is 30 days after the date of the order of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
approving the Merger pursuant to the BHCA or 30 days after the date of the order
of the Comptroller approving the Merger pursuant to the Bank Merger Act, as
applicable, (ii) the effective date of the last order, approval or exemption of
any other Federal or state regulatory agency approving or exempting the Merger
if such action is required, (iii) the day of expiration of all required waiting
periods after the filing of all notices to all Federal or state regulatory
agencies for consummation of the Merger, and (iv) the date on which the ICBK
shareholders approve the Agreement and shall be a date and time specified in a
Certification of Merger to be issued by the Office of the Comptroller of the
Currency (the "Comptroller"). If approved by the ICBK shareholders and
applicable regulatory authorities, the parties currently expect that the
Effective Time will occur on or before December 31, 1995, although there can be
no assurance as to whether or when the Merger will occur. See "THE
MERGER -- Effective Time of the Merger" and " -- Conditions to the Merger."
5
<PAGE>
COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK COMMON STOCK
NationsBank is a corporation organized under the laws of North Carolina,
and, accordingly, the rights of shareholders and other corporate matters
relating to NationsBank Common Stock are controlled by the North Carolina
Business Corporation Act (the "NCBCA"). ICBK is a corporation organized under
the laws of Florida, with the rights of its shareholders and other corporate
matters relating to ICBK Common Stock controlled by the Florida Business
Corporation Act of 1989 (the "FBCA"). Shareholders of ICBK, whose rights are
governed by ICBK's Articles of Incorporation and Bylaws and the provisions of
the FBCA, will, upon consummation of the Merger, become shareholders of
NationsBank. As shareholders of NationsBank, their rights will be governed by
NationsBank's Restated Articles of Incorporation, its Amended and Restated
Bylaws and the provisions of the NCBCA. See "COMPARISON OF NATIONSBANK COMMON
STOCK AND ICBK COMMON STOCK."
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that NationsBank may at any time change the
structure of its acquisition of ICBK if and to the extent that it deems such a
change desirable. In no case, however, may any such change alter the amount or
kind of consideration to be received by ICBK shareholders under the Agreement,
adversely affect the tax treatment to ICBK shareholders as the result of the
receipt of such consideration or take the form of an asset purchase agreement.
See "THE MERGER -- Description of the Merger" and " -- Certain Federal Income
Tax Consequences."
The Agreement provides that each party may waive any of the conditions
precedent to its obligations to consummate the Merger, to the extent legally
permitted.
The Agreement further provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by mutual consent of the
Boards of Directors of NationsBank and ICBK; (ii) by the respective Board of
Directors either of NationsBank or ICBK if the Effective Time has not occurred
by March 31, 1996; (iii) by the respective Board of Directors either of
NationsBank or ICBK if the Federal Reserve Board or the Comptroller has denied
final approval of the Merger and such denial has become final and nonappealable
or has approved the Merger subject to conditions that in the judgment of
NationsBank would restrict its operations or business activities after the
Effective Time; (iv) by the respective Board of Directors of either NationsBank
or ICBK pursuant to notice in the event of a breach or failure by the other
party that is material in the context of the transactions contemplated by the
Agreement of any representation, warranty, covenant or agreement contained
therein which has not been, or cannot be, cured within 30 days after written
notice of such breach is given; (v) by NationsBank if the shareholders of ICBK
fail to approve the Merger at the Special Meeting; or (vi) by ICBK if, prior to
the Effective Time, it receives another acquisition proposal that the ICBK Board
of Directors determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel and as to financial matters on the written opinion of an investment
banking firm of national reputation, is more favorable to the ICBK shareholders
than the Exchange Ratio and the Merger and that the failure to terminate this
Agreement and accept such alternative acquisition proposal would be inconsistent
with the proper exercise of such fiduciary duties. If the Agreement is
terminated by ICBK pursuant to clause (vi), above, then ICBK has agreed to pay
NationsBank, as compensation for entering into the Agreement, a termination fee
of $4.3 million plus reasonable out-of-pocket expenses incurred by NationsBank,
but not to exceed $250,000. See "THE MERGER -- Modification, Waiver and
Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
Blanchfield Cordle & Moore, P.A., tax counsel to NationsBank, has delivered an
opinion to the effect that no gain or loss will be recognized by the ICBK
shareholders as a result of the Merger to the extent that they receive
NationsBank Common Stock solely in exchange for their ICBK Common Stock. For a
more complete description of the federal income tax consequences, see "THE
MERGER -- Certain Federal Income Tax Consequences."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of ICBK's management and Board of Directors may be deemed
to have interests in the Merger in addition to their interests, if any, as
shareholders of ICBK generally. These include, among other things, certain
employment agreements that contain change-of-control provisions providing for
severance pay. See "THE MERGER -- Interests of Certain Persons in the Merger."
6
<PAGE>
DISSENTERS' RIGHTS
Under the provisions of the NBA, holders of ICBK Common Stock will be
entitled to dissenters' rights with respect to payment for their shares of ICBK
Common Stock provided that the Merger is consummated and such shareholders
comply with the required statutory procedures. Failure to take any necessary
step in connection with the exercise of such rights may result in termination or
waiver of dissenters' rights. A shareholder who wishes to dissent from the
Merger must not vote any shares of ICBK Common Stock in favor of the approval of
the Agreement. A copy of applicable provisions of the NBA is attached hereto as
Appendix C. For a more complete description of dissenters' rights, see "THE
MERGER -- Dissenters' Rights of ICBK Shareholders."
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase under generally accepted
accounting principles. See "THE MERGER -- Accounting Treatment."
REGULATORY APPROVALS
The Merger is subject to the approval of the Federal Reserve Board and the
Comptroller. In addition, the Merger is subject to the approval or other action
of the State Corporation of the Commonwealth of Virginia (the "State
Authority"). The Merger may not be consummated until expiration of applicable
waiting periods.
NationsBank has filed all required applications for regulatory review and
approval or notice with the Federal Reserve Board, the Comptroller and the State
Authority. There can be no assurance that such approvals will be obtained or as
to the date of any such approvals.
See "THE MERGER -- Conditions to the Merger" and " -- Bank Regulatory
Matters."
RESALES BY AFFILIATES
Affiliates of ICBK have entered into agreements that they will not transfer
any shares of NationsBank Common Stock received by them as a result of the
Merger, except in compliance with the applicable provisions of the Securities
Act. See "THE MERGER -- Restrictions on Resales by Affiliates."
SHARE INFORMATION AND MARKET PRICES
The NationsBank Common Stock is listed on the NYSE and the PSE under the
symbol "NB", and certain shares are listed on the Tokyo Stock Exchange. As of
June 30, 1995, there were 269,812,113 shares of NationsBank Common Stock
outstanding held by approximately 103,335 holders of record. The ICBK Common
Stock is traded in the over-the-counter market and reported by the Nasdaq
National Market under the symbol "ICBK." As of the Record Date, there were
shares of ICBK Common Stock outstanding held by approximately holders of
record.
The following table sets forth the last sales price reported on the NYSE
Composite Transactions List for shares of NationsBank Common Stock on June 22,
1995, the last trading day preceding public announcement of the proposed Merger,
and on , 1995. It also sets forth the average of the high and low
sales prices reported by the Nasdaq National Market for shares of ICBK Common
Stock on June 22, 1995 and on , 1995. The ICBK Equivalent represents
the consideration per share of ICBK Common Stock to be received by a holder of
ICBK Common Stock in the Merger.
<TABLE>
<CAPTION>
ICBK
NATIONSBANK ICBK EQUIVALENT
<S> <C> <C> <C>
June 22, 1995.................................................... $57.375 $ 24.75 $30.00
, 1995....................................................
</TABLE>
For additional information regarding the market prices of the NationsBank
Common Stock and ICBK Common Stock during the previous two years, see "PRICE
RANGE OF COMMON STOCK AND DIVIDENDS -- Market Prices."
7
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (a) selected comparative per share data for
each of NationsBank and ICBK on an historical basis and (b) selected unaudited
pro forma comparative per share data assuming the Merger had been effective
during the periods presented for NationsBank and ICBK combined. The unaudited
pro forma data reflects the Merger using the purchase method of accounting and a
preliminary allocation of the purchase price. For a description of the effect of
purchase accounting on the Merger and the historical financial statements of
NationsBank, see "THE MERGER -- Accounting Treatment." In addition, actual pro
forma adjustments, which may include adjustments to additional assets and
liabilities, will be made on the basis of evaluations as of the Effective Time
and, therefore, will differ from those reflected in the unaudited pro forma
comparative per share data. The ICBK pro forma equivalent amounts are presented
with respect to each set of pro forma information.
The comparative per share data presented are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of NationsBank and ICBK
incorporated by reference herein. Results of each of NationsBank and ICBK for
the six months ended June 30, 1995 are not necessarily indicative of results
expected for the entire year, nor are pro forma amounts necessarily indicative
of results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the period indicated. All
adjustments necessary for a fair statement of results of interim periods have
been included.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
<S> <C> <C>
NationsBank
Earnings per common share (primary)
Historical.................................................................................... $ 3.31 $ 6.12
Pro forma combined............................................................................ 3.28 6.07
Cash dividends per common share
Historical.................................................................................... 1.00 1.88
Pro forma combined (1)........................................................................ 1.00 1.88
Shareholders' equity per common share (period end)
Historical.................................................................................... 42.49 39.70
Pro forma combined............................................................................ 42.65 39.90
ICBK
Earnings per common share (primary)
Historical.................................................................................... $ 1.16 $ 1.82
Pro forma equivalent (2)...................................................................... 1.83 3.40
Cash dividends declared per common share
Historical.................................................................................... .18 .34
Pro forma equivalent (2)...................................................................... .56 1.05
Shareholders' equity per common share (period end)
Historical.................................................................................... 14.70 12.98
Pro forma equivalent (2)...................................................................... 23.86 22.32
</TABLE>
(1) Pro forma combined dividends per share represent historical dividends per
share paid by NationsBank.
(2) ICBK pro forma equivalent amounts are calculated by multiplying the pro
forma combined amounts by the Pro Forma Exchange Ratio.
8
<PAGE>
SELECTED FINANCIAL DATA
The following tables present (a) summary selected financial data for each
of NationsBank and ICBK on an historical basis and (b) summary unaudited pro
forma selected financial data for NationsBank and ICBK for the periods and as of
the dates indicated giving effect to the Merger as if it had been consummated
(i) on January 1, 1994 and January 1, 1995 for income statement information for
the periods ended December 31, 1994 and June 30, 1995, respectively, and (ii) on
June 30, 1995 for balance sheet information. The unaudited pro forma data
reflect the Merger using the purchase method of accounting and a preliminary
allocation of the purchase price. For a description of the effect of purchase
accounting on the Merger and the historical financial statements of NationsBank,
see "THE MERGER -- Accounting Treatment." In addition, actual adjustments, which
may include adjustments to additional assets and liabilities, will be made on
the basis of evaluations as of the Effective Time and, therefore, will differ
from those reflected in the summary unaudited pro forma selected financial data.
The summary selected financial data are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of NationsBank and ICBK
incorporated by reference herein. Results of each of NationsBank and ICBK for
the six months ended June 30, 1995 are not necessarily indicative of results
expected for the entire year, nor are pro forma amounts necessarily indicative
of results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the period indicated. All
adjustments necessary for a fair statement of results of interim periods have
been included.
SELECTED HISTORICAL FINANCIAL DATA OF NATIONSBANK
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement
Income from earning assets.......... $ 6,461 $ 4,910 $ 10,529 $ 8,327 $ 7,780 $ 9,398 $ 10,278
Interest expense.................... 3,818 2,305 5,318 3,690 3,682 5,599 6,670
Net interest income................. 2,643 2,605 5,211 4,637 4,098 3,799 3,608
Provision for credit losses......... 140 170 310 430 715 1,582 1,025
Gains (losses) on sales of
securities....................... 5 19 (13) 84 249 454 67
Noninterest income.................. 1,456 1,309 2,597 2,101 1,913 1,742 1,605
Restructuring expenses.............. -- -- -- 30 -- 330 91
Noninterest expense................. 2,579 2,449 4,930 4,371 4,149 3,974 3,538
Income before income taxes and
effect of change in method of
accounting for income taxes...... 1,385 1,314 2,555 1,991 1,396 109 626
Income tax expense (benefit)........ 475 460 865 690 251 (93) 31
Net income.......................... 910 854 1,690 1,501(1) 1,145 202 595
Net income applicable to common
shareholders..................... 906 849 1,680 1,491(1) 1,121 171 559
Per common share
Net income (primary)................ 3.31 3.10 6.12 5.78(1) 4.60 .76 2.61
Net income (fully diluted).......... 3.28 3.07 6.06 5.72(1) 4.52 .75 2.60
Cash dividends paid................. 1.00 .92 1.88 1.64 1.51 1.48 1.42
Shareholders' equity (period
end)............................. 42.49 37.77 39.70 36.39 30.80 27.03 27.30
Balance sheet (period end)
Total assets (2).................... 184,188 164,398 169,604 157,686 118,059 110,319 112,791
Total loans, leases and factored
accounts receivable, net of
unearned income.................. 110,923 95,678 103,371 92,007 72,714 69,108 70,891
Total deposits...................... 100,606 92,244 100,470 91,113 82,727 88,075 89,065
Long-term debt and obligations under
capital leases................... 10,716 7,660 8,488 8,352 3,066 2,876 2,766
Common shareholders' equity......... 11,465 10,443 10,976 9,859 7,793 6,252 5,898
Total shareholders' equity.......... 11,504 10,473 11,011 9,979 7,814 6,518 6,283
</TABLE>
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF NATIONSBANK (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Common shares outstanding at period end
(in thousands)........................ 269,812 276,517 276,452 270,905 252,990 231,246 216,071
Performance ratios
Return on average assets (2).......... .99%(3) 1.07%(3) 1.02% .97%(4) 1.00% .17% .52%
Return on average common shareholders'
equity (5)......................... 16.36(3) 16.93(3) 16.10 15.00(4) 15.83 2.70 9.56
Risk-based capital ratios
Tier 1................................ 7.03 7.63 7.43 7.41 7.54 6.38 5.79
Total................................. 10.90 11.57 11.47 11.73 11.52 10.30 9.58
Leverage capital ratio.................. 5.65 6.38 6.18 6.00 6.16 5.07 4.83
Total equity to total assets............ 6.25 6.37 6.49 6.33 6.62 5.91 5.57
Asset quality ratios
Allowance for credit losses as a
percentage of total loans, leases
and factored accounts receivable,
net of unearned income, outstanding
(period end)....................... 1.95% 2.30% 2.11% 2.36% 2.00% 2.32% 1.86%
Allowance for credit losses as a
percentage of nonperforming loans
(period end)....................... 239.09 234.48 273.07 193.38 103.11 81.82 100.46
Net charge-offs as a percentage of
average loans, leases and factored
accounts receivable................ .31(3) .33(3) .33 .51 1.25 1.86 .88
Nonperforming assets as a percentage
of net loans, leases, factored
accounts receivable and other real
estate owned (period end).......... .99 1.48 1.10 1.92 2.72 4.01 2.32
</TABLE>
(1) Includes cumulative effect benefit of $200 million for the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes." The effect on fully diluted earnings per share was $.77 for
the year ended December 31, 1993. The effect on primary earnings per share
was $.78 for the year ended December 31, 1993.
(2) Excludes assets of NationsBank's Special Asset Division, a discrete business
division established by NationsBank for the purpose of managing the
disposition of certain assets specified by an assistance agreement between
NationsBank and certain of its subsidiaries and the FDIC. The assets of the
Special Asset Division were sold to the FDIC effective November 30, 1991.
(3) Annualized.
(4) In 1993, return on average assets and return on average common shareholders'
equity after the tax benefit from the impact of adopting SFAS 109
(Accounting for Income Taxes) were 1.12% and 17.33%, respectively.
(5) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF ICBK
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement
Income from earning assets............................. 40 31 67 57 56 56 65
Interest expense....................................... 14 9 21 17 21 30 40
Net interest income.................................... 26 22 46 40 35 26 25
Provision for credit losses............................ 1 -- -- 1 2 5 3
Gains (losses) on sales of securities.................. -- (2) (2) 2 2 4 --
Noninterest income..................................... 9 7 15 13 11 9 11
Noninterest expense.................................... 21 19 39 38 36 29 30
Income tax expense..................................... 5 3 7 6 2 1 1
Net income............................................. 8 5 13 11(1) 8 5 3(2)
Net income applicable to common shareholders........... 8 5 13 11(1) 8 5 3(2)
Per common share
Net income (primary)................................... 1.16 .78 1.82 1.60(1) 1.11 .69 .39(2)
Net income (fully diluted)............................. 1.15 .78 1.82 1.58(1) 1.10 .69 .39(2)
Cash dividends declared................................ .18 .16 .34 .26 .20 .20 .20
Shareholders' equity (period end)...................... 14.70 12.40 12.98 11.96 10.59 9.64 9.13
Balance sheet (period end)
Total assets........................................... 1,142 1,126 1,156 1,137 964 825 728
Total loans, net of unearned discount.................. 688 565 664 510 437 447 460
Total deposits......................................... 952 961 956 947 862 732 632
Long-term debt......................................... -- 1 -- 1 2 2 2
Common shareholders' equity............................ 102 84 89 81 71 64 61
Total shareholders' equity............................. 102 84 90 81 71 65 61
Common shares outstanding at period end (in thousands)... 6,926 6,769 6,896 6,760 6,683 6,665 6,661
Performance ratios
Return on average assets............................... 1.47 .99 1.15 1.11 .84 .62 .34
Return on average common shareholders' equity.......... 17.58 13.26 15.13 14.40 11.10 7.33 4.35
Risk-based capital ratios
Tier 1................................................. 12.80 12.33 12.09 12.85 13.86 12.28 12.22
Total.................................................. 14.10 13.63 13.40 14.16 15.19 13.85 13.80
Leverage capital ratio................................... 8.26 7.22 7.87 7.08 6.99 8.11 8.39
Total equity to total assets............................. 8.94 7.48 7.77 7.14 7.38 7.83 8.40
Asset quality ratios
Allowance for credit losses as a percentage of total
loans, net of unearned discount (period end)........ 1.73 1.72 1.77 1.87 2.13 2.08 2.20
Allowance for credit losses as a percentage of
nonperforming loans (period end).................... 179.02 258.09 159.37 386.25 78.43 52.94 52.41
Net charge-offs (recoveries) as a percentage of average
loans, net of unearned discount..................... .18(3) .01(3) (.04) .17 .53 1.49 1.26
Nonperforming assets as a percentage of loans, net of
unearned discount, and other real estate owned
(period end)........................................ 1.37 1.30 1.62 1.33 4.87 6.07 6.62
</TABLE>
(1) Includes cumulative effect of $1.1 million for the adoption of SFAS No. 109
"Accounting for Income Taxes." The effect on both primary and fully diluted
earnings per share for the year ended December 31, 1993 was $.16.
(2) Includes the effect of an extraordinary item-tax benefit from the
utilization of a net operating loss carryforward of $.6 million.
(3) Annualized.
11
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION)
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE YEAR
ENDED JUNE 30, 1995 ENDED DECEMBER 31, 1994
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
NATIONSBANK ICBK COMBINED NATIONSBANK ICBK COMBINED
<S> <C> <C> <C> <C> <C> <C>
Income statement
Income from earning assets.............. 6,461 40 6,501 10,529 67 10,598
Interest expense........................ 3,818 14 3,832 5,318 21 5,339
Net interest income..................... 2,643 26 2,669 5,211 46 5,259
Provisions for credit losses............ 140 1 141 310 -- 310
Gains (losses) on sales of securities... 5 -- 5 (13) (2) (15)
Noninterest income...................... 1,456 9 1,465 2,597 15 2,612
Noninterest expense..................... 2,579 21 2,602 4,930 39 4,973
Income before income taxes.............. 1,385 13 1,396 2,555 20 2,573
Income tax expense...................... 475 5 480 865 7 873
Net income.............................. 910 8 916 1,690 13 1,700
Net income applicable to common
shareholders......................... 906 8 912 1,680 13 1,690
Per common share
Net income (primary).................... 3.31 1.16 3.28 6.12 1.82 6.07
Net income (fully diluted).............. 3.28 1.15 3.25 6.06 1.82 6.01
Cash dividends declared (1)............. 1.00 .18 1.00 1.88 .34 1.88
Shareholders' equity (period end)....... 42.49 14.70 42.65 39.70 12.98 39.90
Balance sheet (period end)
Total assets............................ 184,188 1,142 185,433 169,604 1,156 170,875
Total loans, leases and factored
accounts receivable, net of
unearned income...................... 110,923 688 111,611 103,371 664 104,035
Total deposits.......................... 100,606 952 101,558 100,470 956 101,426
Long-term debt and obligations under
capital leases....................... 10,716 0 10,716 8,488 -- 8,488
Common shareholders' equity............. 11,465 102 11,671 10,976 89 11,181
Total shareholders' equity.............. 11,504 102 11,709 11,011 90 11,216
Common shares outstanding at period end
(in thousands).......................... 269,812 6,926 273,637 276,452 6,896 280,260
Performance ratios
Return on average assets................ .99(2) 1.47(2) .98 1.02 1.15 1.01
Return on average common shareholders'
equity (3)........................... 16.36(2) 17.58(2) 15.93 16.10 15.13 15.80
Risk-based capital ratios
Tier 1.................................. 7.03 12.80 7.05 7.43 12.09 7.45
Total................................... 10.90 14.10 10.91 11.47 13.40 11.47
Leverage capital ratio.................... 5.65 8.26 5.67 6.18 7.87 6.18
Total equity to total assets.............. 6.25 8.94 6.31 6.49 7.77 6.56
</TABLE>
12
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION)
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE YEAR
ENDED JUNE 30, 1995 ENDED DECEMBER 31, 1994
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
NATIONSBANK ICBK COMBINED NATIONSBANK ICBK COMBINED
<S> <C> <C> <C> <C> <C> <C>
Asset quality ratios
Allowance for credit losses as a
percentage of total loans, leases and
factored accounts receivable, net of
unearned income, outstanding (period
end)................................... 1.95 1.73 1.95 2.11 1.77 2.11
Allowance for credit losses as a
percentage of nonperforming loans
(period end)........................... 239.09 179.02 239.65 273.07 159.37 272.03
Net charge-offs (recoveries) as a
percentage of average loans, leases and
factored accounts receivable........... .31(2) .18(2) .15(2) .33 (.04) .33
Nonperforming assets as a percentage of
net loans, leases, factored accounts
receivable and other real estate owned
(period end)........................... .99 1.37 .99 1.10 1.62 1.10
</TABLE>
(1) Pro forma combined dividends per common share represent the historical
dividends per common share paid by NationsBank.
(2) Annualized.
(3) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
13
<PAGE>
THE SPECIAL MEETING OF SHAREHOLDERS OF ICBK
GENERAL
This Proxy Statement-Prospectus is first being mailed to the holders of
ICBK Common Stock and ICBK Series A Preferred Stock on or about ,
1995, and is accompanied by the notice of Special Meeting and a form of proxy
that is solicited by the Board of Directors of ICBK for use at the Special
Meeting of Shareholders of ICBK to be held on October 30, 1995, at a.m.,
local time, at and at any adjournments or postponements thereof. The
purpose of the Special Meeting is to take action with respect to the approval of
the Agreement and the transactions contemplated thereby.
PROXIES
A shareholder of ICBK may use the accompanying proxy if such shareholder is
unable to attend the Special Meeting in person or wishes to have his or her
shares voted by proxy even if such shareholder does attend the meeting. A
shareholder may revoke any proxy given pursuant to this solicitation by
delivering to the Corporate Secretary of ICBK, prior to or at the Special
Meeting, a written notice revoking the proxy or a duly executed proxy relating
to the same shares bearing a later date, or by voting in person at the Special
Meeting. All written notices of revocation and other communications with respect
to the revocation of ICBK proxies should be addressed to ICBK, 200 Southeast
First Street, Miami, Florida 33131 Attention: Corporate Secretary. For such
notice of revocation or later proxy to be valid, however, it must actually be
received by ICBK prior to the vote of the shareholders. All shares represented
by valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner specified therein. If no
specification is made, the proxies will be voted in favor of approval of the
Agreement. The Board of Directors of ICBK is unaware of any other matters that
may be presented for action at the Special Meeting. If other matters do properly
come before the Special Meeting, however, it is intended that shares represented
by proxies in the accompanying form will be voted or not voted by the persons
named in the proxies in their discretion.
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person, by mail, telephone or
facsimile, by directors, officers and employees of ICBK, who will not be
specially compensated for such solicitation. Nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to beneficial
owners and secure their voting instructions, if necessary, and will be
reimbursed for the expenses incurred in sending proxy materials to beneficial
owners. All costs of solicitation of proxies from ICBK shareholders will be
borne by ICBK.
RECORD DATE AND VOTING RIGHTS
The Board of Directors of ICBK has fixed September 25, 1995 as the record
date for the determination of shareholders of ICBK entitled to receive notice of
and to vote at the Special Meeting. At the close of business on the Record Date,
there were outstanding shares of ICBK Common Stock held of record by
approximately holders of record and 350,000 shares of ICBK Preferred Stock
held of record by one shareholder. Each share of ICBK Common Stock and ICBK
Series A Preferred Stock outstanding on the Record Date is entitled to one vote
as to (i) the approval of the Agreement and the transactions contemplated
thereby and (ii) any other proposal that may properly come before the Special
Meeting.
Under the terms of the NBA, approval of the Agreement will require the
affirmative vote of the holders of two-thirds of the outstanding shares of ICBK
Common Stock and the ICBK Series A Preferrred Stock, each voting separately as a
class. As of the Record Date, the directors and executive officers of ICBK and
their affiliates beneficially owned an aggregate of shares, or %, of
ICBK Common Stock and no shares of ICBK Series A Preferred Stock. Certain
persons owning an aggregate of shares, or %, of the ICBK Common
Stock have entered into separate agreements with NationsBank providing generally
that such persons will vote all shares of ICBK Common Stock held by them in
favor of the Agreement. See "THE MERGER -- Interests of Certain Persons in the
Merger."
BECAUSE APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF ICBK COMMON STOCK AND ICBK
SERIES A PREFERRED STOCK, EACH VOTING SEPARATELY AS A CLASS, ABSTENTIONS AND
BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE
BOARD OF DIRECTORS OF ICBK URGES ITS SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
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RECOMMENDATION OF ICBK BOARD
The Board of Directors of ICBK has approved the Agreement and the
transactions contemplated thereby, believes that the Merger is in the best
interests of ICBK and its shareholders and recommends that the shareholders of
ICBK vote "FOR" approval of the Agreement. See "THE ICBK MERGER -- Background of
and Reasons for the ICBK Merger."
THE MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT, WHICH IS INCORPORATED
HEREIN BY REFERENCE AND, WITH THE EXCEPTION OF THE EXHIBITS THERETO, IS INCLUDED
AS APPENDIX A TO THIS PROXY STATEMENT-PROSPECTUS.
DESCRIPTION OF THE MERGER
At the Effective Time, ICBK will be merged with and into New Bank, which
will be the surviving entity. The Articles of Incorporation and Bylaws of New
Bank in effect at the Effective Time will continue to govern New Bank until
amended or repealed in accordance with applicable law. The Merger is subject to
the approvals of the Federal Reserve Board, the Comptroller and the State
Authority. See "THE MERGER -- Bank Regulatory Matters."
At the Effective Time, each share of ICBK Common Stock outstanding
immediately prior to the Effective Time (other than shares as to which
dissenters' rights have been perfected) will be converted automatically into the
right to receive shares of NationsBank Common Stock at the Exchange Ratio. The
Exchange Ratio will be that number calculated as $30 divided by the average
closing price of one share of NationsBank Common Stock on the NYSE Composite
Transactions List computed for the ten-trading-day period ending five business
days prior to the closing of the Merger. Assuming an Exchange Ratio equal to $30
divided by the $53 5/8 per share closing price of NationsBank Common Stock on
June 30, 1995, each share of ICBK Common Stock would be converted into
approximately .5594 shares of NationsBank Common Stock. The number of shares of
NationsBank Common Stock to be issued in the Merger will change if the average
per share price of NationsBank Common Stock (calculated as described above)
changes.
No fractional shares of NationsBank Common Stock will be issued in the
Merger. Instead, each holder of shares of ICBK Common Stock who would otherwise
have been entitled to receive a fraction of a share of NationsBank Common Stock
(after taking into account all certificates delivered by such holder) will
receive, in lieu thereof, cash (without interest) in an amount equal to such
fraction of a share of NationsBank Common Stock multiplied by the Agreed Value
(as defined below) per share of NationsBank Common Stock at the Effective Time.
The Agreed Value of one share of NationsBank Common Stock at the Effective Time
is defined by the Agreement as the average closing price of one share of
NationsBank Common Stock on the NYSE Composite Transactions List (as reported by
THE WALL STREET JOURNAL or, if not reported thereby, by any other authoritative
source) computed for the ten-trading-day period ending five business days prior
to the closing of the Merger. No such holder will be entitled to dividends,
voting rights or any other rights as a shareholder in respect of any fractional
shares. See "THE MERGER -- Exchange of Certificates." Pursuant to the Agreement,
each outstanding share of ICBK Series A Preferred Stock will be redeemed for
cash, at $1.00 per share, immediately prior to the Effective Time of the Merger.
The shares of NationsBank Common Stock outstanding immediately prior to the
Merger will continue to be outstanding after the Effective Time.
EFFECTIVE TIME OF THE MERGER
Unless otherwise agreed by NationsBank and ICBK, the Effective Time is
expected to occur on or promptly after the first business day following the last
to occur of (i) the date that is 30 days after the date of the order of the
Federal Reserve Board approving the Merger pursuant to the BHCA or 30 days after
the date of the order of the Comptroller approving the Merger pursuant to the
Bank Merger Act, as applicable, (ii) the effective date of the last order,
approval or exemption of any other Federal or state regulatory agency approving
or exempting the Merger if such action is required, (iii) the day of expiration
of all required waiting periods after the filing of all notices to all Federal
or state regulatory agencies for consummation of the Merger, and (iv) the date
on which the ICBK shareholders approve the Agreement and shall be a date and
time specified in a Certification of Merger to be issued by the Comptroller. If
approved by the ICBK shareholders and applicable regulatory authorities, the
parties currently expect the Effective Time of the Merger to occur on or before
December 31, 1995, although there can be no assurance as to whether or when the
Merger will occur.
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EXCHANGE OF CERTIFICATES
Before or as soon as practicable after the Effective Time, Chemical Bank
(the "Exchange Agent") will mail to each holder of ICBK Common Stock of record
as of the Effective Time a letter of transmittal and related forms (the "Letter
of Transmittal") for use in forwarding stock certificates previously
representing ICBK Common Stock for surrender and exchange for certificates
representing NationsBank Common Stock.
ICBK SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for shares
of ICBK Common Stock, together with a properly completed Letter of Transmittal,
there will be issued and mailed to the holder thereof a certificate or
certificates representing the aggregate number of whole shares of NationsBank
Common Stock to which such holder is entitled, together with all declared but
unpaid dividends in respect of such shares and, where applicable, a check for
the amount (without interest) representing any fractional shares. A certificate
for shares of NationsBank Common Stock, or any check representing cash in lieu
of fractional shares or declared but unpaid dividends, may be issued in a name
other than the name in which the surrendered certificate is registered only if
(i) the certificate surrendered is properly endorsed, accompanied by a
guaranteed signature if required by the Letter of Transmittal and otherwise in
proper form for transfer, and (ii) the person requesting the issuance of such
certificate either pays to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate for such shares in a name
other than the registered holder of the certificate surrendered or establishes
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. The Exchange Agent will issue stock certificates evidencing
NationsBank Common Stock in exchange for lost, stolen, mutilated or destroyed
certificates of ICBK Common Stock only upon receipt of a lost stock affidavit
and a bond indemnifying NationsBank against any claim arising out of the
allegedly lost, stolen, mutilated or destroyed certificate. In no event will the
Exchange Agent, NationsBank or ICBK be liable to any persons for any NationsBank
Common Stock or dividends thereon or cash delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar law.
On and after the Effective Time and until surrender of certificates of ICBK
Common Stock to the Exchange Agent, each certificate that represented
outstanding ICBK Common Stock immediately prior to the Effective Time will be
deemed to evidence ownership of the number of whole shares of NationsBank Common
Stock into which such shares have been converted, and the holders thereof shall
be entitled to vote at any meeting of NationsBank shareholders. No shareholder
will, however, receive dividends or other distributions on such NationsBank
Common Stock until the certificates representing ICBK Common Stock are
surrendered. Upon surrender of ICBK Common Stock certificates, ICBK shareholders
will be paid any dividends or other distributions on NationsBank Common Stock
that are payable to holders as of any record date on or following the Effective
Time. No interest will be payable with respect to withheld dividends or other
distributions.
BACKGROUND OF AND REASONS FOR THE MERGER
NATIONSBANK. The strategy of the NationsBank Board of Directors for
building long-term value for NationsBank shareholders includes, in part, having
a significant market share in each of the markets its Banks serve. Pursuant to
this strategy, management of NationsBank continually explores and evaluates
acquisition opportunities, both in the banking and non-banking areas. Consistent
with this strategy, after being approached by ICBK in May 1995, NationsBank
conducted discussions and negotiated an agreement with ICBK during May and June
1995. On June 26, 1995, NationsBank entered into the Agreement with ICBK,
subject to the approval of the NationsBank Board of Directors. On June 28, 1995,
the Board of Directors of NationsBank approved the proposed Merger and the
issuance of NationsBank Common Stock in connection therewith.
The NationsBank Board of Directors considered several factors in arriving
at its decision to approve the acquisition of ICBK. It did not assign any
relative or specific weights to the factors considered. Such factors included,
without limitation, the following:
(i) The Merger will improve NationsBank's deposit market share in the Miami
market, the largest deposit market in Florida and the seventeenth largest
deposit market in the United States, moving NationsBank from fourth place to
third place in Dade County, Florida. In addition, greater Miami is a culturally
diverse market and a significant trade gateway in the Americas. Miami is one of
the primary ports of entry for Latin American manufactured goods into the United
States, and approximately 29% of all United States trade with Latin America and
the Caribbean is conducted through Miami.
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(ii) The Merger will maximize the consolidated resources of NationsBank and
ICBK and, therefore, enhance the financial performance of each institution.
Customers of ICBK will have available to them a significantly broader range of
products and services.
(iii) At the Exchange Ratio, the Merger will not significantly dilute the
earnings of the shareholders of NationsBank.
ICBK. Over the last several years, ICBK has enjoyed consistent growth in
assets, deposits and earnings in a very competitive banking environment. This
growth has been achieved through ICBK's focus on small and medium-sized
businesses and high net worth individuals located in South Florida as well as
acquisitions of other local financial institutions. Since 1992, ICBK has
acquired all or part of seven local banks. This strategy has been successful,
but management believes that future growth is likely to be achieved at a slower
rate than heretofore experienced.
In recent years, management of ICBK began to have concerns about the impact
of the changes in the banking industry on the future operations of ICBK. These
include the recently enacted interstate banking legislation, the continuing
consolidation of banks and the cost of technology involved in the future
delivery of banking services. Also, over the past several years, the banking
industry in general has experienced disintermediation as many customers moved
their deposit accounts to mutual funds, money market funds and other potentially
higher-yielding investment alternatives.
Although ICBK's current earnings and growth continue to be satisfactory,
management determined that it was in the best interest of its shareholders,
given all of the factors cited above, to engage in discussions with potential
purchasers. Between December 1994 and June 1995, management held discussions
with, and provided detailed financial information to, four financial
institutions, in addition to NationsBank, regarding the possible acquisition of
ICBK. However, none of these discussions resulted in an offer or written
indication of interest except from NationsBank. In the negotiations with other
institutions, the purchase prices discussed for ICBK were substantially lower
than the price offered by NationsBank.
In May 1995, ICBK contacted management of NationsBank to discuss a possible
acquisition and delivered detailed financial and other information to
NationsBank. Following the submission of this information, the parties conducted
negotiations over a period of several weeks. These negotiations were conducted
by William H. Allen, Jr., Chairman of ICBK, William L. Morrison, President of
ICBK, and Michael Weintraub, a principal shareholder of ICBK. See " -- Interests
of Certain Persons in the Merger." On June 9, 1995, NationsBank submitted a
letter to ICBK in which it proposed to issue NationsBank Common Stock to
purchase ICBK, at an exchange ratio which valued ICBK Common Stock at $30 per
share. Based on this letter, management of ICBK requested NationsBank to submit
a definitive agreement which would include all of the terms proposed by
NationsBank. A draft of the Agreement was received on June 20, 1995. On June 21,
1995, ICBK engaged Robinson-Humphrey to assist ICBK in its consideration of the
proposal from NationsBank. ICBK also engaged special legal counsel to assist
ICBK in connection with this transaction.
After further negotiations with ICBK's counsel and management, NationsBank
submitted a revised draft of the Agreement to ICBK on June 23, 1995. This draft
was circulated to the directors of ICBK at a meeting held on June 23, 1995. At
this meeting, the directors reviewed the terms of the Agreement. They also
discussed the feasibility of remaining independent as well as the reasons for
pursuing a transaction with NationsBank. At this meeting, representatives of
Robinson-Humphrey made a detailed presentation and distributed materials to the
directors relating to the current banking market, future trends, the current
value and future prospects of ICBK and NationsBank, and the value of the Merger.
They also discussed factors which in their opinion would create competitive
pressure and limit growth for ICBK in the future. These include ICBK's flat
yield curve, decreasing interest rates and a very competitive loan pricing
environment. Robinson-Humphrey also predicted a strong move in the banking
industry away from personal service relationships and toward banks that could
provide a multitude of diversified services and products. They stated that the
current merger and acquisition environment favored sellers, so that this would
be an opportune time to enter into a sales transaction. They also presented a
preliminary analysis of comparable bank transactions in the State of Florida and
elsewhere. Based on a variety of ratios, including book value, tangible book
value, earnings and assets, they noted that in most categories the price offered
by NationsBank for ICBK was well above the median price range in comparable
transactions. See "THE MERGER -- Opinion of ICBK's Financial Advisor."
The Board of Directors held a second meeting on June 25, 1995 to consider
the NationsBank offer. An updated draft of the Agreement was distributed at this
meeting. The directors again reviewed the terms of the Agreement. Robinson-
Humphrey reviewed its June 23 presentation regarding the value of ICBK and the
NationsBank offer and responded to directors' questions with respect to the
materials distributed at the June 23 meeting.
On June 26, 1995, the Board of Directors again met to consider the proposed
transaction with NationsBank. A new draft of the Agreement was distributed and
reviewed. Robinson-Humphrey made a presentation to the directors regarding its
opinion that the terms of the Merger are fair to the shareholders of ICBK from a
financial point of view. Copies of Robinson-
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Humphrey's fairness opinion (Appendix B to this Prospectus-Proxy Statement) were
distributed and reviewed. At the meeting, the Board approved resolutions
adopting the Agreement.
The ICBK Board of Directors believes that the Merger is fair to, and in the
best interests of, ICBK and all of its shareholders. Accordingly, the ICBK Board
of Directors adopted and approved the Agreement.
In reaching its determination that the Merger is fair to, and in the best
interests of, ICBK and its shareholders, the ICBK Board of Directors considered
a number of factors both from a short-term and long-term perspective, including,
without limitation, the following:
(i) the ICBK Board of Directors' familiarity with and review of ICBK's
business, operations, financial condition, earnings and prospects;
(ii) the current and prospective economic and competitive environment and
regulatory constraints facing financial institutions and particularly ICBK;
(iii) ICBK's ability to generate an acceptable return on equity without
taking undue risk;
(iv) the ICBK Board of Directors' review, based in part on presentations by
ICBK's management, of management's negotiations with, and the prospects of,
other potential purchasers;
(v) the opinion of Robinson-Humphrey that a business combination with, and
the acquisition proposed by, NationsBank on the terms set forth in the Agreement
were fair to ICBK's shareholders from a financial point of view;
(vi) the ICBK Board of Directors' review of the alternative of continuing
to remain independent, including without limitation, the range of possible
values to ICBK's shareholders that could potentially be obtained as an
independent entity given possible levels of future earnings and the risks of
remaining independent in an increasingly competitive market;
(vii) the ICBK Board of Directors' belief that the terms of the Agreement
are attractive in that it allows ICBK shareholders to become shareholders in
NationsBank, which, as of March 31, 1995, in terms of asset size, was the fourth
largest bank holding company in the United States;
(viii) the expectation that the Merger will be a tax-free reorganization
for Federal income tax purposes;
(ix) the effect of the Merger on the customers and employees of ICBK; and
(x) the terms and conditions of the Agreement and the other documents
executed in connection with the Merger.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the ICBK Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.
THE ICBK BOARD OF DIRECTORS RECOMMENDS THAT THE ICBK SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
OPINION OF ICBK'S FINANCIAL ADVISOR
Robinson-Humphrey was engaged by ICBK to advise ICBK's Board of Directors
as to the fairness, from a financial point of view, of the terms of the Merger
to the shareholders of ICBK. As part of its investment banking business,
Robinson-Humphrey engages in the review of the fairness of bank acquisition
transactions from a financial perspective and in the valuation of banks and
other businesses and their securities in connection with mergers, acquisitions
and other transactions. Neither Robinson-Humphrey nor any of its affiliates has
a material financial interest in ICBK or NationsBank. Robinson-Humphrey was
selected to advise ICBK's Board of Directors based upon its familiarity with
ICBK and its knowledge of the banking industry as a whole. No instructions were
given or limitations imposed by the ICBK Board of Directors upon
Robinson-Humphrey regarding the scope of its investigations or the procedures it
followed in rendering its opinion.
Robinson-Humphrey has rendered its opinion (the "Fairness Opinion") to the
Board of Directors of ICBK that, from a financial point of view, the terms of
the Merger as provided in the Agreement are fair to the shareholders of ICBK. A
COPY OF THE FAIRNESS OPINION, WHICH HAS BEEN UPDATED TO , 1995 AND
WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT-
PROSPECTUS AND SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY OF THE FAIRNESS
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT
OF THE FAIRNESS OPINION.
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In arriving at its Fairness Opinion, Robinson-Humphrey performed certain
valuation analyses described below and discussed the range of values for ICBK
resulting from such analyses with the ICBK Board of Directors. Robinson-Humphrey
also reviewed certain publicly available business and financial information
relating to ICBK and NationsBank. Robinson-Humphrey met with ICBK's management
to discuss the business and prospects of ICBK. Robinson-Humphrey also considered
certain financial and stock market data of ICBK and NationsBank, compared that
data with similar data for certain other publicly held banks and bank holding
companies, including institutions based in Florida, and considered the financial
terms of certain other recent comparable bank acquisition transactions as
further discussed below. Robinson-Humphrey also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant. In connection with its
review, Robinson-Humphrey did not independently verify the foregoing information
and relied on such information as being complete and accurate in all material
respects. Financial forecasts prepared by ICBK management and submitted to
Robinson-Humphrey were based on assumptions believed by Robinson-Humphrey to be
reasonable and to reflect currently available information, but Robinson-Humphrey
did not independently verify such information. Robinson-Humphrey did not make an
independent evaluation or appraisal of the assets of ICBK or NationsBank.
The summary set forth below does not purport to be a complete description
of the analyses performed by Robinson-Humphrey in this regard. The preparation
of a Fairness Opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized below, Robinson-Humphrey believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. In
performing its analyses, Robinson-Humphrey made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of ICBK or NationsBank. The
analyses performed by Robinson-Humphrey are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. No company or transaction considered as a comparison
in the analyses is identical to ICBK, NationsBank or the Merger. Accordingly, an
analysis of the results of such comparisons is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of companies and other factors that
could affect the public trading value of the companies involved in such
comparisons. In addition, the analyses do not purport to be appraisals or
reflect the process by which or the prices at which businesses actually may be
sold or the prices at which any securities may trade at the present time or at
any time in the future.
In connection with its opinion on the Merger and the presentation of that
opinion to ICBK's Board of Directors, Robinson-Humphrey performed two valuation
analyses with respect to ICBK: (i) an analysis of comparable prices and terms of
recent transactions involving banks buying banks; and (ii) a discounted cash
flow analysis. For purposes of the comparable transaction analyses, the
NationsBank Common Stock was valued at $57.375 per share, the closing price per
share on June 22, 1995. Each of these methodologies is discussed briefly below.
COMPARABLE TRANSACTION ANALYSIS. Robinson-Humphrey performed two
analyses of premiums paid for selected banks with comparable
characteristics to ICBK. Comparable transactions were considered to be (i)
transactions since January 1, 1994, where the seller was a bank located in
Florida, and (ii) all transactions since January 1, 1994, where the seller
was a bank with total assets between $500 million and $2.5 billion.
Based on the first of the foregoing transactions, banks buying banks
in Florida since January 1, 1994, the analysis yielded a range of
transaction values to book value of 1.00 times to 2.82 times, with a mean
of 1.90 times and a median of 1.90 times. These compare to a transaction
value for the Merger of approximately 2.18 times ICBK's book value as of
March 31, 1995.
The analysis yielded a range of transaction values as a multiple of
tangible book value for the comparable transactions ranging from 1.00 times
to 2.82 times, with a mean of 1.91 times and a median of 1.86 times. These
compare to a transaction value to tangible book value at March 31, 1995 of
approximately 2.71 times for the Merger.
The analysis yielded a range of transaction values as a multiple of
trailing twelve month earnings per share. These values ranged from 9.32
times to 33.77 times, with a mean of 19.27 times and a median of 18.24
times. These compare to a transaction value to the March 31, 1995 trailing
12 months earnings per share of 15.38 times for the Merger.
The analysis yielded a range of transaction values as a percent of
total assets. These values ranged from 6.16 percent to 24.14 percent, with
a mean of 14.44 percent and a median of 14.18 percent. These compare to a
transaction value to the March 31, 1995 total assets of 17.75 percent for
the Merger.
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Based on transactions since January 1, 1994, where the seller was a
bank with total assets between $500 million and $2.5 billion, the analysis
yielded a range of transaction values to book value of 1.13 times to 2.71
times, with a mean of 2.00 times and a median of 1.95 times. These compare
to a transaction value for the ICBK of approximately 2.18 times ICBK's book
value as of March 31, 1995.
The analysis yielded a range of transaction values as a multiple of
tangible book value for the comparable transactions ranging from 1.28 times
to 2.75 times, with a mean of 2.13 times and a median of 2.19 times. These
compare to a transaction value to tangible book value at March 31, 1995 of
approximately 2.71 times for the Merger.
The analysis yielded a range of transaction values as a multiple of
trailing 12 month earnings per share. These values ranged from 10.29 times
to 67.00 times, with a mean of 19.13 times and a median of 16.44 times.
These compare to a transaction value to the March 31, 1995 trailing 12
month earnings per share of 15.38 times for the Merger.
The analysis yielded a range of transaction values as a percent of
total assets. These values ranged from 7.34 percent to 25.13 percent, with
a mean of 16.24 percent and a median of 16.44 percent. These compare to a
transaction value to the March 31, 1995 total assets of 17.75 percent for
the Merger.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future stream of
after-tax cash flows that ICBK could produce through 1999, under various
circumstances, assuming that ICBK performed in accordance with the
earnings/return projections of management at the time that ICBK entered
into acquisition discussions in June 1995. Robinson-Humphrey estimated the
terminal value for ICBK at the end of the period by applying multiples of
earnings ranging from 10.0 to 12.0 times and then discounting the cash flow
streams, dividends paid to shareholders and terminal value using differing
discount rates (ranging from 8.0 percent to 10.0 percent) chosen to reflect
different assumptions regarding the required rates of return of ICBK and
the inherent risk surrounding the underlying projections. This discounted
cash flow analysis indicated a valuation range of $168.1 million to $202.2
million, or $23.04 to $27.72 per share, for ICBK.
Based on the results of these and other analyses, Robinson-Humphrey
concluded that, from a financial point of view, the terms of the Merger as
provided in the Agreement are fair to the shareholders of ICBK. The Fairness
Opinion is directed only to the question of the fairness of the consideration
from a financial perspective and does not constitute a recommendation to any
ICBK shareholder to vote in favor of approving the Agreement. Robinson-Humphrey
has received a fairness opinion fee of $250,000 and will receive an incremental
success fee (to be paid at closing) of $250,000. ICBK has also agreed to
reimburse Robinson-Humphrey for its reasonable expenses, including accounting
and legal fees. In addition, ICBK has agreed to indemnify Robinson-Humphrey and
its directors, officers and employees from certain liabilities in connection
with the Merger.
EFFECT ON OPTIONS
Options to purchase an aggregate of shares of ICBK Common Stock were
outstanding as of the Record Date. To the extent that shares of ICBK Common
Stock are issued pursuant to the exercise of such options in accordance with
their terms prior to the Effective Time, they will be converted into shares of
NationsBank Common Stock in the same manner as other shares of ICBK Common
Stock. At the Effective Time, each option to purchase shares of ICBK Common
Stock that has not expired and remains outstanding at the Effective Time shall
be converted into and become rights with respect to NationsBank Common Stock,
and NationsBank shall assume each such option, in accordance with the terms of
the stock option plan under which it was issued and the stock option agreement
by which it is evidenced. From and after the Effective Time, (i) each option to
purchase ICBK Common Stock assumed by NationsBank may be exercised solely for
shares of NationsBank Common Stock, (ii) the number of shares of NationsBank
Common Stock subject to each such option will be equal to the number of shares
of ICBK Common Stock subject to such option immediately prior to the Effective
Time multiplied by the Exchange Ratio, with cash having been paid in lieu of any
resulting fraction of a share of NationsBank Common Stock, and (iii) the per
share exercise price under each such option will be adjusted by dividing the per
share exercise price by the Exchange Ratio and rounding down to the nearest
cent.
CONDITIONS TO THE MERGER
The Merger will occur only if the Agreement is approved by the requisite
vote of the shareholders of ICBK. Consummation of the Merger is subject to the
satisfaction of certain other conditions, unless waived, to the extent legally
permitted. Such conditions include (i) the receipt of all required governmental
orders, permits, approvals or qualifications, provided that such approvals shall
not have imposed any condition or requirement that in the judgment of
NationsBank would restrict it or
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its subsidiaries or any of its affiliates in its respective operations and
business activities subsequent to the Effective Time; (ii) the continuing
effectiveness under the Securities Act of the Registration Statement for the
NationsBank Common Stock issuable to holders of ICBK Common Stock upon
consummation of the Merger; (iii) the absence of any active litigation which
seeks any order, decree or injunction of a court or agency of competent
jurisdiction to enjoin or prohibit the consummation of the Merger; (iv) the
absence of a material adverse change in the various representations and
warranties made by either party in the Agreement regarding assets, business,
operations, employees, revenues, income, condition (financial or otherwise),
liabilities, net worth, or results of operations, unless waived by the other
party; (v) the performance by each party of its various obligations under the
Agreement, unless waived by the other party; (vi) the completion of the
Redemption by ICBK; (vii) the receipt by NationsBank of an opinion of counsel to
ICBK, in form satisfactory to NationsBank, as to the validity of the approvals
of the Merger by the directors and shareholders of ICBK; and (viii) the receipt
of authorization to list on the NYSE, upon official notice of issuance, the
NationsBank Common Stock to be issued in the Merger.
In addition, unless waived, each party's obligation to effect the Merger is
subject to the performance by the other party of its obligations under the
Agreement and the receipt of certain closing certificates and opinions from the
other party. No assurances can be provided as to when or if all of the
conditions precedent to the Merger can or will be satisfied or waived by the
party permitted to do so.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
In the Agreement, ICBK has agreed, except as otherwise contemplated by the
Agreement, to conduct its business only in the usual, regular and ordinary
course consistent with past practice and to use its best efforts to preserve its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees.
In addition, ICBK has agreed that it will not, without the prior written
consent of NationsBank:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
ICBK or any of its subsidiaries to ICBK or any of its subsidiaries; it being
understood and agreed that incurrence of indebtedness in the ordinary course of
business shall include, without limitation, the creation of deposit liabilities,
purchases of federal funds, sales of certificates of deposit and entering into
repurchase agreements), assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity, or make any loan or advance other than in the
ordinary course of business consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend (other than regular quarterly cash dividends at a rate not
in excess of $0.10 per share) or make any other distribution on, or (other than
the Redemption) directly or indirectly redeem, purchase or otherwise acquire,
any shares of its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock; or issue any additional shares
of capital stock, or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, except pursuant to the
exercise of ICBK options outstanding as of June 15, 1995;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any individual, corporation or other entity, or cancel,
release or assign any indebtedness to any such person or any claims held by any
such person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of the
Agreement;
(d) make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity other than to Pan
American Mortgage Corp., a wholly owned subsidiary of ICBK ("PAMCO"), or
pursuant to transactions by PAMCO in connection with contracts in existence on
June 26, 1995;
(e) enter into or terminate any contract or agreement involving annual
payments in excess of $100,000 and which cannot be terminated without penalty
upon 30 days notice, or make any change in, or extension of, any of its leases
or contracts involving annual payments in excess of $100,000 and which cannot be
terminated without penalty upon 30 days notice;
(f) increase or modify in any manner the compensation or fringe benefits of
any of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees, or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment agreement with
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or for the benefit of any employee other than routine adjustments in
compensation and fringe benefits in the ordinary course of business consistent
with past practice or accelerate the vesting of any stock options or other
stock-based compensation;
(g) take any action that would prevent or impede the Merger from qualifying
as a reorganization within the meaning of Section 368 of the Code;
(h) settle any claim, action or proceeding involving the payment of money
damages in excess of $100,000, except in the ordinary course of business
consistent with past practice;
(i) amend its Articles of Incorporation or its Bylaws;
(j) fail to maintain its regulatory agreements, material licenses and
permits or to file in a timely fashion all Federal, state, local and foreign tax
returns;
(k) subject to certain exceptions, make any capital expenditures of more
than $100,000 individually or $250,000 in the aggregate;
(l) fail to maintain its benefit plans or timely make all contributions or
accruals required thereunder in accordance with generally accepted accounting
principles applied on a consistent basis;
(m) issue any additional shares of ICBK capital stock other than any shares
issued pursuant to options outstanding at June 15, 1995;
(n) agree to, or make any commitment to, take any of the foregoing actions;
or
(o) (i) initiate, encourage or solicit, directly or indirectly, the making
of any proposal or offer (an "Acquisition Proposal") to acquire all or any
significant part of the business and properties or capital stock of ICBK or its
subsidiaries, whether by merger, purchase of securities or assets, tender offer
or otherwise, or initiate, directly or indirectly, any contact with any person
in an effort to or with a view towards soliciting any Acquisition Proposal or
(ii) participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, an Acquisition Proposal; PROVIDED,
that notwithstanding the foregoing, ICBK may (i) furnish or cause to be
furnished information subject to a confidentiality agreement in a form
substantially similar to that previously executed by NationsBank, (ii) in
response to an Acquisition Proposal, issue a communication to its security
holders of the type contemplated by Rule 14d-9 (e) under the Exchange Act, and
(iii) participate in discussions and negotiations directly and through its
representatives with persons who have sought the same if the ICBK Board of
Directors determines, based as to legal matters on the written advice of outside
legal counsel, that the failure to furnish such information or to negotiate with
such entity or group or to take and disclose such position would be inconsistent
with the proper exercise of the fiduciary duties of the ICBK Board of Directors.
MODIFICATION, WAIVER AND TERMINATION
The Agreement provides that NationsBank may at any time change the
structure of the acquisition of ICBK by NationsBank if and to the extent that it
deems such a change desirable. In no case, however, may any such change alter
the amount or kind of consideration to be received by ICBK shareholders under
the Agreement, adversely affect the tax treatment to ICBK shareholders of the
receipt of such consideration or take the form of an asset purchase agreement.
The Agreement provides that it may be amended by a subsequent writing
signed by each party. However, the provision relating to the manner or basis in
which shares of ICBK capital stock will be exchanged in the Merger may not be
amended after the Special Meeting without any requisite approval of the holders
of the issued and outstanding shares of ICBK capital stock entitled to vote
thereon.
The Agreement provides that each party may waive any of the conditions
precedent to its obligations to consummate the Merger, to the extent legally
permitted. Neither of the parties intends, however, to waive any conditions of
the Merger if such waiver would, in the judgment of the waiving party, have a
material adverse effect on its shareholders.
The Agreement further provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by mutual written consent
of the Boards of Directors of each of NationsBank and ICBK; (ii) by the
respective Board of Directors of either NationsBank or ICBK if the Effective
Time has not occurred by March 31, 1996; (iii) by the respective Board of
Directors of either NationsBank or ICBK if the Federal Reserve Board or the
Comptroller has denied final approval of the Merger and such denial has become
final and nonappealable or has approved the Merger subject to conditions that in
the judgment of NationsBank would restrict its operations or business activities
after the Effective Time; (iv) by the respective Board of Directors of either
NationsBank or ICBK pursuant to notice in the event of a breach or failure by
the other party
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that is material in the context of the transactions contemplated by the
Agreement of any representation, warranty, covenant or agreement contained
therein which has not been, or cannot be, cured within 30 days after written
notice of such breach is given; (v) by NationsBank if the shareholders of ICBK
fail to approve the Merger at the Special Meeting; or (vi) by ICBK if, prior to
the Effective Time, it receives another acquisition proposal that the ICBK Board
of Directors determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel and as to financial matters on the written opinion of an investment
banking firm of national reputation, is more favorable to the ICBK shareholders
than the Exchange Ratio and the Merger and that the failure to terminate this
Agreement and accept such alternative acquisition proposal would be inconsistent
with the proper exercise of such fiduciary duties. If the Agreement is
terminated by ICBK pursuant to clause (vi), above, then ICBK has agreed to pay
NationsBank, as compensation for entering into the Agreement, a termination fee
of $4.3 million plus reasonable out-of-pocket expenses incurred by NationsBank,
but not to exceed $250,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Blanchfield Cordle & Moore, P.A., tax counsel to NationsBank, has delivered
to NationsBank and ICBK its opinion that, under Federal law as currently in
effect, (a) the proposed Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Code; (b) no gain or loss will be recognized
by the shareholders of ICBK on the exchange of their shares of ICBK Common Stock
for shares of NationsBank Common Stock pursuant to the terms of the Merger to
the extent of such exchange; (c) the Federal income tax basis of the NationsBank
Common Stock for which shares of ICBK Common Stock are exchanged pursuant to the
Merger will be the same as the basis of such shares of ICBK Common Stock
exchanged therefor (less any proportionate part of such basis allocable to any
fractional interest in any share of NationsBank Common Stock); (d) the holding
period of NationsBank Common Stock for which shares of ICBK Common Stock are
exchanged will include the period that such shares of ICBK Common Stock were
held by the holder, provided such shares were capital assets of the holder; (e)
the receipt of cash in lieu of fractional shares will be treated as if the
fractional shares were distributed as part of the exchange and then redeemed by
NationsBank, and gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the ICBK Common Stock
surrendered, which gain or loss will be capital gain or loss if the ICBK Common
Stock was a capital asset in the hands of the shareholder, and (f) cash received
by shareholders of ICBK upon the exercise of dissenter's appraisal rights will
be treated as having been received in payment for such ICBK Common Stock
surrendered, and gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the ICBK Common Stock
surrendered, which gain or loss shall be capital gain or loss if the ICBK Common
Stock was a capital asset in the hands of a shareholder.
THE FOREGOING IS A SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. IT DOES NOT INCLUDE CONSEQUENCES OF STATE, LOCAL OR OTHER TAX
LAWS OR SPECIAL CONSEQUENCES TO PARTICULAR SHAREHOLDERS HAVING SPECIAL
SITUATIONS. SHAREHOLDERS OF ICBK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND TAX CONSEQUENCES OF SUBSEQUENT
SALES OF NATIONSBANK COMMON STOCK.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, the directors and executive officers of ICBK and
their affiliates beneficially owned an aggregate of shares, or % of
the outstanding shares, of ICBK Common Stock and are expected to beneficially
own less than .5% of the shares of NationsBank Common Stock outstanding
immediately following the Effective Time. Such number of shares of ICBK Common
Stock reported as beneficially owned includes shares subject to outstanding
options held by executive officers of ICBK. For information relating to the
treatment in the Merger of ICBK Common Stock options, including the stock
options held by such persons, see "THE MERGER -- Effect on Options." As
discussed therein, all options to purchase ICBK Common Stock outstanding on the
Effective Time will be converted into rights with respect to NationsBank Common
Stock and otherwise will remain subject to the terms, including vesting
schedules, of such options. Accordingly, the value realizable upon exercise or
conversion of such securities by the holders thereof will depend upon the price
of NationsBank Common Stock at the time of such exercise or conversion.
Each of Herbert A. Wertheim, Phillip Frost, Frost-Nevada Limited
Partnership, Michael Weintraub, Michael Weintraub, as Co-Trustee under the
Joseph Weintraub 1988 Revocable Trust Agreement dated June 14, 1988, as reformed
(the "Weintraub Trust Agreement"), Hortense Weintraub, Jacqueline Simkin,
William L. Morrison, Gibson Security Corp., and the Joseph Weintraub Family
Foundation, Inc. have entered into separate agreements with NationsBank
providing generally that each will assist NationsBank in its efforts to
consummate the Merger, promote diligently the Merger on terms satisfactory to
both parties, cooperate fully in the Merger and vote all shares of ICBK Common
Stock beneficially owned by such person in
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favor of the Agreement. These agreements terminate upon the termination of the
Agreement. As of the Record Date, such persons beneficially owned an aggregate
of shares, or %, of ICBK Common Stock.
NationsBank has agreed that it will, for five years after the Effective
Time, indemnify, defend and hold harmless the current or former officers,
directors, employees and agents of ICBK and its subsidiaries against all losses,
expenses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the Effective Time to the full extent then permitted
under applicable law and by ICBK's Articles of Incorporation and bylaws as
currently in effect.
As a result of the Merger, NationsBank will assume certain benefit plans
and employment agreements currently offered to executive officers of ICBK.
Certain change-of-control provisions of ICBK's employment agreements with
William H. Allen, Jr., Chairman of the Board, and William L. Morrison,
President, may be triggered by approval of the Merger. Under these agreements, a
"change of control" is considered to have occurred if ICBK is involved in any
merger, sale of stock, sale of assets or other business combination in which
more than one-third of the currently outstanding shares of stock or assets are
sold or transferred. In the event of a change of control of ICBK, Messrs. Allen
and Morrison are each entitled to a lump sum payment equal to twice the amount
of his base annual salary as of the date of the change of control. Such
agreements are binding on successors of ICBK, including any successor by merger.
Consummation of the Merger will constitute a change of control for purposes of
these agreements, and Messrs. Allen and Morrison will receive $760,000 and
$600,000, respectively, pursuant to such change-of-control provisions, assuming
the Effective Time occurs in 1995.
ICBK has also entered into agreements with Thomas B. Brady and Thomas E.
Beier, Executive Vice Presidents of ICBK, which provide for certain payments to
these employees in the event of a change in control of ICBK. Under these
agreements, a "change of control" is considered to have occurred if ICBK is
involved in any merger, sale of stock, or other business combination in which
40% or more of the currently outstanding shares of stock are sold or
transferred. In the event of a change of control of ICBK, Messrs. Brady and
Beier are each entitled to a lump-sum payment equal to two times his annual base
salary at the rate in effect on the date such change in control occurs. These
agreements are binding on successors of ICBK, including any successor by merger.
Consummation of the Merger will constitute a change of control for purposes of
these agreements, and Messrs. Brady and Beier will receive $313,500 and
$275,000, respectively, pursuant to such change-of-control provisions, assuming
the Effective Time occurs in 1995.
In addition, ICBK has entered into agreements with David A. Minkus and
Nelson M. Alemany, senior executive officers of ICBK, which provide for certain
payments to these employees in the event of a change of control of ICBK. The
terms of these agreements are identical to those of Messrs. Brady and Beier, as
described above, except that Messrs. Minkus or Alemany is entitled to payments
thereunder only if his employment is terminated by ICBK without cause or he
resigns for "good reason" (as defined therein) within two years following a
"change of control" of ICBK. Based on their current annual base salaries,
Messrs. Minkus and Alemany would receive $270,000 and $200,000, respectively, in
the event that the payment provisions of these agreements are triggered.
Mr. Michael Weintraub and NationsBank of Florida, National Association
("NationsBank Florida"), a subsidiary of NationsBank, are co-trustees of the
trust created under the Weintraub Trust Agreement (the "Trust"). Mr. Weintraub
and NationsBank Florida share equally in all voting and dispositive rights with
respect to the ICBK Common Stock and ICBK Series A Preferred Stock owned
directly by the Trust. Mr. Weintraub, a former director of NationsBank, has a
contingent residual interest in the assets of the Trust. The Trust owns directly
438,586 shares, or %, of ICBK Common Stock and 350,000 shares, or 100%, of
ICBK Series A Preferred Stock. The Trust also owns 98% of the capital stock of
Gibson Security Corp. ("GSC"), which owns directly and through a wholly owned
subsidiary, Harrison-Gibson, Inc. ("HGI"), 341,523 shares, or %, of ICBK
Common Stock. Mr. Weintraub is president and a director of both GSC and HGI and
shares voting and dispositive rights over the ICBK Common Stock owned by those
companies with the other directors thereof. In addition, Mr. Weintraub is a
trustee and president of the Joseph Weintraub Family Foundation, Inc. (the
"Foundation"), which owns directly 111,350 shares, or %, of ICBK Common
Stock, and may be deemed to share voting and dispositive rights over the ICBK
Common Stock owned by the Foundation with the other trustees thereof. Mr.
Weintraub owns directly 186,834 shares, or %, of ICBK Common Stock and may be
deemed indirectly to beneficially own an aggregate of 891,504 shares, or %,
of ICBK Common Stock and 350,000 shares, or 100%, of the ICBK Series A Preferred
Stock held by the Trust, GSC, HGI and the Foundation. Mr. Weintraub disclaims
beneficial ownership of all shares of ICBK Common Stock and ICBK Series A
Preferred Stock not held directly by him. Assuming the consummation of the
Merger at the Pro Forma Exchange Ratio, Mr. Weintraub may be deemed to have
acquired, directly or indirectly, beneficial ownership of 603,222 shares, or
less than 1%, of NationsBank Common Stock in exchange for the above described
shares of ICBK Common Stock. Mr. Weintraub disclaims beneficial ownership of all
shares of NationsBank Common Stock not held directly by him.
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Mr. Weintraub resigned from the NationsBank Board of Directors effective
August 8, 1995. He did not attend or participate in any way as a NationsBank
director in the deliberations related to the Merger and did not vote as a
NationsBank director on the Agreement or related transactions. NationsBank
Florida, in its capacity of co-trustee of the Trust, does not intend to
participate in the voting of the shares of ICBK Common Stock and ICBK Series A
Preferred Stock owned directly
and indirectly by the Trust in respect to the Merger. All shares of ICBK Common
Stock and ICBK Series A Preferred Stock owned directly and indirectly by the
Trust shall be voted as directed by Mr. Weintraub as co-trustee.
DISSENTERS' RIGHTS OF ICBK SHAREHOLDERS
If the Agreement and the transactions contemplated thereby are consummated,
any shareholder of ICBK who properly dissents from the Merger in connection with
the Special Meeting may be entitled to receive in cash the value of his or her
shares of ICBK Common Stock determined immediately prior to the Merger,
excluding any appreciation or depreciation in anticipation of the Merger.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL
RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To preserve the right to dissent, according to the provisions of 12 U.S.C.
(section mark)215a, a shareholder must either (1) vote against the Agreement at
the Special Meeting or (2) give written notice of his or her intent to dissent
to ICBK at or prior to the Special Meeting. Failure to vote against the proposal
to approve the Merger will not, of itself, constitute a waiver of dissenters'
rights. However, a shareholder who votes in favor of the Agreement will forfeit
his or her right to dissent and obtain payment for his or her shares of ICBK
Common Stock.
If the shareholders of ICBK approve the Agreement and the transaction is
approved by the Comptroller, any shareholder who has properly perfected the
right to dissent, as described above, shall be entitled to receive the value of
his or her shares as of the Effective Date after the transaction has been
consummated. Any dissenting shareholder who wishes to receive the value of such
shares must transmit a written request for payment (a "Demand for Payment") and
surrender his or her certificate or certificates for shares of ICBK Common Stock
to New Bank within 30 days after the Effective Date. Dissenting shareholders, if
any, will be notified of the Effective Date, but not of the date by which their
Demands for Payment must be submitted, by notice mailed to their addresses on
ICBK's shareholder records. A VOTE AGAINST THE PROPOSAL TO APPROVE THE AGREEMENT
AND THE TRANSACTIONS CONTEMPLETED THEREBY WILL NOT SATISFY THE REQUIREMENT OF
SUBMITTING A DEMAND FOR PAYMENT.
Pursuant to Section 215a, the value of the shares of a dissenting
shareholder shall be determined by a committee of three persons composed of (i)
one selected by the majority vote of all dissenting shareholders, (ii) one
selected by the directors of New Bank and (iii) one selected by the two so
selected. The valuation agreed upon by any two of the three appraisers shall
govern. The committee shall notify each dissenting shareholder of the value so
agreed upon. If a dissenting shareholder believes that the value so determined
by the committee is unsatisfactory, such shareholder may, within five days of
being notified of the appraised value, appeal to the Comptroller. Upon such
appeal, the Comptroller shall cause a reappraisal to be made with respect to
such shareholder's shares, which reappraisal shall be final and binding.
If for any reason one or more of the appraisers is not selected within 90
days after the Effective Date, or if the appraisers fail to ascertain an
appraised value for the shares, then pursuant to Section 215a any dissenting
shareholder may request the Comptroller to determine a final and binding
appraised value. The expenses of the Comptroller in making reappraisal or
appraisal, as the case may be, shall be paid by New Bank.
REFERENCE IS MADE TO APPENDIX C INCLUDED HEREWITH FOR THE COMPLETE TEXT OF
12 U.S.C. (SECTION MARK)215A RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS.
STATEMENTS MADE IN THIS PROXY STATEMENT-PROSPECTUS SUMMARIZING THOSE SECTIONS
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO APPENDIX C. THE PROVISIONS OF
THE STATUTES ARE TECHNICAL IN NATURE AND COMPLEX. IT IS SUGGESTED THAT ANY
SHAREHOLDER WHO DESIRES TO AVAIL HIMSELF OR HERSELF OF HIS OR HER RIGHT TO
OBJECT TO THE AGREEMENT CONSULT COUNSEL. FAILURE TO COMPLY WITH THE PROVISIONS
OF THE STATUTE MAY DEFEAT A SHAREHOLDER'S RIGHT TO DISSENT.
ACCOUNTING TREATMENT
Upon consummation of the Merger, the transaction will be accounted for as a
purchase, and all of the assets and liabilities of ICBK will be recorded in
NationsBank's consolidated financial statements at their fair value at the
Effective Time. The amount, if any, by which the purchase price paid by
NationsBank exceeds the fair value of the assets acquired by NationsBank through
the Merger will be recorded as goodwill. NationsBank's consolidated financial
statements will include the operations of ICBK after the Effective Time. The
unaudited pro forma financial information included in this Proxy
Statement-Prospectus reflects the Merger using the purchase method of
accounting. See "SUMMARY -- Comparative Unaudited Per Share Data" and
" -- Selected Financial Data."
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BANK REGULATORY MATTERS
FEDERAL RESERVE BOARD. The Merger is subject to prior approval by the
Federal Reserve Board under the BHCA. The BHCA requires the Federal Reserve
Board, when approving a transaction such as the Merger, to take into
consideration the financial and managerial resources (including the competence,
experience and integrity of the officers, directors and principal shareholders)
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. In considering financial
resources and future prospects, the Federal Reserve Board will, among other
things, evaluate the adequacy of the capital levels of the parties to a proposed
transaction.
The BHCA prohibits the Federal Reserve Board from approving a merger if it
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of a merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of the
existing institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
Applicable Federal law provides for the publication of notice and public
comment on the application and authorizes the Federal Reserve Board to permit
interested parties to intervene in the proceedings. If an interested party is
permitted to intervene, such intervention could delay the regulatory approvals
required for consummation of the Merger.
The Merger generally may not be consummated until the 30th day following
the date of approval by the Federal Reserve Board, during which time the United
States Department of Justice may challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the effectiveness of the Federal
Reserve Board's approval unless a court specifically ordered otherwise.
NationsBank and ICBK believe that the Merger does not raise substantial
antitrust concerns.
COMPTROLLER. The Merger also is subject to prior approval by the
Comptroller. Under applicable Federal law, the Comptroller must take into
consideration the financial and managerial resources and future prospects of the
existing and proposed institutions and the convenience and needs of the
communities to be served. The Comptroller is prohibited from approving the
Merger if it would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or if its effect in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner result in a restraint of trade, unless the
Comptroller finds that the anti-competitive effects of the Merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the CRA, the Comptroller must take into account the record of performance
of the existing institution in meeting the credit needs of the entire community,
including low and moderate income neighborhoods, served by such institutions.
Applicable Federal law provides for the publication of notice and public
comment on the application and authorizes the Comptroller to permit interested
parties to intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could delay the regulatory approvals required for
consummation of the Merger.
The Merger generally may not be consummated until the 30th day following
the date of applicable Federal regulatory approval, during which time the United
States Department of Justice may challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the effectiveness of the
regulatory agency's approval unless a court specifically ordered otherwise.
STATE AUTHORITY. The Merger is subject to the approval or other action of
the State Corporation Commission of the Commonwealth of Virginia.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. NationsBank and ICBK
have filed all applications and notices and have taken (or will take) other
appropriate action with respect to any requisite approvals or other action of
any governmental authority. The Agreement provides that the obligation of each
of NationsBank and ICBK to consummate the Merger is conditioned upon the receipt
of all requisite regulatory approvals, including the approvals of the Federal
Reserve Board, the Comptroller and the State Authority. There can be no
assurance that any governmental agency will approve or take any other required
action with respect to the Merger, and, if approvals are received or action is
taken, there can be no assurance as to the date of such approvals or action,
that such approvals or action will not be conditioned upon matters that would
cause
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the parties to abandon the Merger or that no action will be brought challenging
such approvals or action, including a challenge by the United States Department
of Justice or, if such a challenge is made, the result thereof.
NationsBank and ICBK are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as described
above. Should any other approval or action be required, NationsBank and ICBK
currently contemplate that such approval or action would be sought. There can be
no assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the parties
to abandon the Merger.
See "THE MERGER -- Effective Time of the Merger," " -- Conditions to the
Merger" and " -- Modification, Waiver and Termination."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of NationsBank Common Stock to be issued to shareholders of ICBK
in the Merger have been registered under the Securities Act. Such shares may be
traded freely and without restriction by those shareholders not deemed to be
"affiliates" of ICBK as that term is defined under the Securities Act. Any
subsequent transfer of such shares, however, by any person who is an affiliate
of ICBK at the time this Proxy Statement-Prospectus is first distributed to the
shareholders of ICBK will, under existing law, require either (a) the further
registration under the Securities Act of the shares of NationsBank Common Stock
to be transferred, (b) compliance with Rule 145 promulgated under the Securities
Act (permitting limited sales under certain circumstances) or (c) the
availability of another exemption from registration. An "affiliate" of ICBK, as
defined by the rules promulgated pursuant to the Securities Act, is a person who
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with ICBK. The foregoing restrictions
are expected to apply to the directors, executive officers and the holders of
10% or more of the ICBK Common Stock (and to certain relatives or the spouse of
any such person and any trusts, estates, corporations, or other entities in
which such persons have a 10% or greater beneficial or equity interest). Stop
transfer instructions will be given by NationsBank to the transfer agent with
respect to the NationsBank Common Stock to be received by persons subject to the
restrictions described above, and the certificates for such stock will be
appropriately legended. Those individuals identified by ICBK as affiliates of
ICBK have entered into agreements that they will not make any further sales of
shares of NationsBank Common Stock received upon consummation of the Merger,
except in compliance with the applicable provisions of the Securities Act.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
NationsBank has a dividend reinvestment and stock purchase plan that
provides, for those shareholders who elect to participate, that dividends on
NationsBank Common Stock will be used to purchase either original issue shares
or shares in the open market at market value of NationsBank Common Stock on a
quarterly basis. The plan also permits participants to invest in additional
shares of NationsBank Common Stock through optional cash payments, within
certain dollar limitations, at the then-current market price of such stock at
the time of purchase on any of 12 monthly investment dates each year. It is
anticipated that NationsBank will continue its dividend reinvestment and stock
purchase plan and that shareholders of ICBK who receive shares of NationsBank
Common Stock in the Merger will have the right to participate therein.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
NationsBank Common Stock is listed on the NYSE and the PSE under the
trading symbol "NB", and certain shares are listed on the Tokyo Stock Exchange.
As of June 30, 1995, NationsBank Common Stock was held of record by
approximately 103,335 persons. The following table sets forth the high and low
sales prices of the NationsBank Common Stock as reported on the NYSE Composite
Transactions List for the periods indicated.
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<PAGE>
ICBK Common Stock is traded in the over-the-counter market and reported by
the Nasdaq National Market under the symbol "ICBK." The following table sets
forth the high and low sales prices for ICBK Common Stock as reported by the
Nasdaq National Market for the indicated periods. As of the Record Date, ICBK
Common Stock was held of record by approximately persons.
<TABLE>
<CAPTION>
NATIONSBANK ICBK SALES
SALES PRICES PRICES
HIGH LOW HIGH
<S> <C> <C> <C>
Year Ended December 31, 1993:
First Quarter....................................................... $ 58 $ 49 1/2 $ 18
Second Quarter...................................................... 57 7/8 45 18
Third Quarter....................................................... 53 5/8 48 1/4 18 1/2
Fourth Quarter...................................................... 53 1/4 44 1/2 20
Year Ended December 31, 1994:
First Quarter....................................................... 50 7/8 44 3/8 20
Second Quarter...................................................... 57 3/8 44 1/2 22 1/2
Third Quarter....................................................... 56 47 1/8 22 1/4
Fourth Quarter...................................................... 50 3/4 43 3/8 20
Year Ending December 31, 1995:
First Quarter....................................................... 51 3/4 44 5/8 23 3/4
Second Quarter...................................................... 57 3/4 49 5/8 28 5/8
Third Quarter (through )..............................
<CAPTION>
LOW
<S> <C<C>
Year Ended December 31, 1993:
First Quarter....................................................... $ 14 1/4
Second Quarter...................................................... 15
Third Quarter....................................................... 15 5/8
Fourth Quarter...................................................... 18 1/4
Year Ended December 31, 1994:
First Quarter....................................................... 18 1/4
Second Quarter...................................................... 18 1/2
Third Quarter....................................................... 19 1/2
Fourth Quarter...................................................... 18 1/4
Year Ending December 31, 1995:
First Quarter....................................................... 22
Second Quarter...................................................... 22
Third Quarter (through )..............................
</TABLE>
DIVIDENDS
The following table sets forth dividends declared per share of NationsBank
Common Stock and ICBK Common Stock, respectively, for the periods indicated. The
ability of either NationsBank or ICBK to pay dividends to its shareholders is
subject to certain restrictions. See "INFORMATION ABOUT
NATIONSBANK -- Supervision and Regulation" and "INFORMATION ABOUT
ICBK -- Supervision and Regulation."
<TABLE>
<CAPTION>
NATIONSBANK ICBK
DIVIDENDS DIVIDENDS
<S> <C> <C>
Year Ended December 31, 1993:
First Quarter.......................................................................... $ .40 $ .05
Second Quarter......................................................................... .40 .05
Third Quarter.......................................................................... .42 .08
Fourth Quarter......................................................................... .42 .08
Year Ended December 31, 1994:
First Quarter.......................................................................... $ .46 $ .08
Second Quarter......................................................................... .46 .08
Third Quarter.......................................................................... .46 .09
Fourth Quarter......................................................................... .50 .09
Year Ending December 31, 1995:
First Quarter.......................................................................... $ .50 $ .09
Second Quarter......................................................................... .50 .09
Third Quarter (through )................................................. .50 .10
</TABLE>
INFORMATION ABOUT NATIONSBANK
GENERAL
NationsBank is a bank holding company established as a North Carolina
corporation in 1968 and is registered under the BHCA, with its principal assets
being the stock of its subsidiaries. Through its banking subsidiaries and its
various non-banking subsidiaries, NationsBank provides banking and
banking-related services, primarily throughout the Southeast and Mid-Atlantic
states and Texas. The principal executive offices of NationsBank are located at
NationsBank Corporate Center in Charlotte, North Carolina 28255. Its telephone
number is (704) 386-5000.
OPERATIONS
NationsBank provides a diversified range of banking and certain non-banking
financial services and products through its various subsidiaries. NationsBank
manages its business activities through three major groups: the General Bank,
the Global Finance Group and the Financial Services Group.
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<PAGE>
The General Bank provides comprehensive service in the commercial and
retail banking fields, including trust and private banking operations, the
origination and servicing of home mortgage loans, the issuance and servicing of
credit cards (through a Delaware subsidiary) and certain insurance services. The
General Bank also offers full service brokerage services and discount brokerage
services for its customers through subsidiaries of NationsBank. As of June 30,
1995, the General Bank had banking operations in the following jurisdictions
(listed in declining order of total assets, with the approximate number of
banking offices in parentheses): Texas (280); North Carolina and South Carolina
(413); Florida (375); Georgia (188); Maryland, Virginia and the District of
Columbia (499); and Tennessee and Kentucky (100). NationsBank also has a banking
subsidiary in Delaware that issues and services credit cards. In addition to the
banking offices located in the above states, the various Banks have loan
production offices located in New York City, Chicago, Los Angeles, Denver and
Birmingham. The General Bank also provides fully automated, 24-hour cash
dispensing and depositing services throughout the states in which it is located
through approximately 2,100 automated teller machines.
The Global Finance Group provides to domestic and international customers
comprehensive corporate banking and investment banking services, including loan
syndication, treasury management and leasing; underwriting, trading or
distributing a wide range of securities (including bank-eligible securities and,
to a limited extent, bank-ineligible securities as authorized by the Federal
Reserve Board under Section 20 of the Glass-Steagall Act); and options, futures,
forwards and swaps on certain interest rate and commodity products, and spot and
forward foreign exchange contracts. The Global Finance Group provides its
services through various domestic offices as well as offices located in London,
Frankfurt, Singapore, Mexico City, Grand Cayman, Nassau, Tokyo, Osaka, Paris and
Hong Kong.
The Financial Services Group consists of NationsCredit Corporation,
primarily a consumer finance subsidiary, and Greyrock Capital Group Inc.
(formerly named Nations Financial Capital Corporation), primarily a commercial
finance subsidiary. NationsCredit Corporation, which has approximately 300
offices located in 32 states, provides consumer and retail loan programs and
also offers inventory financing to manufactures, importers and distributors.
Greyrock Capital Group Inc., which has approximately 79 offices located in 24
states, engages in commercial equipment leasing and makes commercial loans for
debt restructuring, merger and acquisition, real estate financing, equipment
acquisition and working capital purposes; it also acquires consumer loans
secured by automobiles and real estate.
As part of its operations, NationsBank regularly evaluates the potential
acquisition of, and holds discussions with, various financial institutions and
other businesses of a type eligible for bank holding company investment. In
addition, NationsBank regularly analyzes the values of, and submits bids for,
the acquisition of customer-based funds and other liabilities and assets of such
financial institutions and other businesses. As a general rule, NationsBank
publicly announces such material acquisitions when a definitive agreement has
been reached.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to NationsBank is incorporated by reference or set forth in
NationsBank's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated herein by reference. Shareholders of ICBK desiring copies of such
documents may contact NationsBank at its address or phone number indicated under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SUPERVISION AND REGULATION
GENERAL. As a registered bank holding company, NationsBank is subject to
the supervision of, and to regular inspection by, the Federal Reserve Board. The
Banks are organized as national banking associations, which are subject to
regulation, supervision and examination by the Comptroller. The Banks are also
subject to regulation by the FDIC and other federal regulatory agencies. In
addition to banking laws, regulations and regulatory agencies, NationsBank and
its subsidiaries and affiliates are subject to various other laws and
regulations and supervision and examination by other regulatory agencies, all of
which directly or indirectly affect NationsBank's operations, management and
ability to make distributions. The following discussion summarizes certain
aspects of those laws and regulations that affect NationsBank.
The activities of NationsBank, and those of companies which it controls or
in which it holds more than 5% of the voting stock, are limited to banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. In making such determinations, the Federal
Reserve Board is required to consider whether the performance of such activities
by a bank holding company or its subsidiaries can reasonably be expected to
produce benefits to the public such as greater convenience, increased
competition or gains in efficiency that
29
<PAGE>
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. Generally, bank holding companies, such as NationsBank, are required
to obtain prior approval of the Federal Reserve Board to engage in any new
activity not previously approved by the Federal Reserve Board or to acquire more
than 5% of any class of voting stock of any company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5% of any class of voting
stock of any bank which is not already majority-owned by the bank holding
company. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Banking and Branching Act"), a bank holding company
will be able to acquire banks in states other than its home state beginning
September 29, 1995. Until such provisions are effective, interstate acquisitions
by bank holding companies will be subject to current Federal law, which provides
that no application to acquire shares of a bank located outside of North
Carolina (the state in which the operations of the Banks were principally
conducted on the date NationsBank became subject to the BHCA) may be approved by
the Federal Reserve Board unless such acquisition is specifically authorized by
the laws of the state in which the bank whose shares are to be acquired is
located.
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, therefore creating interstate branches, beginning June 1,
1997. Under such legislation, each state has the opportunity to "opt out" of
this provision, thereby prohibiting interstate branching in such states, or to
"opt in" at an earlier time, thereby allowing interstate branching within that
state prior to June 1, 1997. Furthermore, pursuant to such Act, a bank is now
able to open new branches in a state in which it does not already have banking
operations, if the laws of such state permit such DE NOVO branching. Of those
states in which the Banks are located, Maryland, North Carolina and Virginia
have enacted legislation to "opt in," thereby permitting interstate branching
prior to June 1, 1997, and Texas has adopted legislation to "opt out" of the
interstate branching provisions (which Texas law currently expires on September
2, 1999).
As previously described, NationsBank regularly evaluates merger and
acquisition opportunities, and it anticipates that it will continue to evaluate
such opportunities in light of the new legislation.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. In 1995, several bills have been introduced in
Congress that would have the effect of broadening the securities underwriting
powers of bank holding companies and possibly permitting bank holding companies
to engage in nonfinancial activities. The likelihood and timing of any such
proposals or bills being enacted and the impact they might have on NationsBank
and its subsidiaries cannot be determined at this time.
CAPITAL AND OPERATIONAL REQUIREMENTS. The Federal Reserve Board, the
Comptroller and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels, whether because
of its financial condition or actual or anticipated growth.
The Federal Reserve Board risk-based guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholders' equity, less certain intangibles and other adjustments. Tier 2
capital consists of subordinated and other qualifying debt, and the allowance
for credit losses up to 1.25 percent of risk-weighted assets. The sum of Tier 1
and Tier 2 capital less investments in unconsolidated subsidiaries represents
qualifying total capital, at least 50 percent of which must consist of Tier 1
capital. Risk-based capital ratios are calculated by dividing Tier 1 and total
capital by risk-weighted assets. Assets and off-balance sheet exposures are
assigned to one of four categories of risk-weights, based primarily on relative
credit risk. The minimum Tier 1 capital ratio is 4 percent and the minimum total
capital ratio is 8 percent. NationsBank's Tier 1 and total risk-based capital
ratios under these guidelines at June 30, 1995 were 7.03 percent and 10.90
percent, respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
total assets. Although the stated minimum ratio is 3 percent, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3 percent. NationsBank's leverage ratio at June 30, 1995 was 5.65
percent. Management believes that NationsBank meets its leverage ratio
requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject
30
<PAGE>
a banking institution to capital raising requirements. An "undercapitalized"
bank must develop a capital restoration plan and its parent holding company must
guarantee that bank's compliance with the plan. The liability of the parent
holding company under any such guarantee is limited to the lesser of 5 percent
of the bank's assets at the time it became "undercapitalized" or the amount
needed to comply with the plan. Furthermore, in the event of the bankruptcy of
the parent holding company, such guarantee would take priority over the parent's
general unsecured creditors. In addition, FDICIA requires the various regulatory
agencies to prescribe certain non-capital standards for safety and soundness
relating generally to operations and management, asset quality and executive
compensation and permits regulatory action against a financial institution that
does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6 percent, a total capital ratio of at
least 10 percent and a leverage ratio of at least 5 percent and not be subject
to a capital directive order. An "adequately capitalized" institution must have
a Tier 1 capital ratio of at least 4 percent, a total capital ratio of at least
8 percent and a leverage ratio of at least 4 percent, or 3 percent in some
cases. Under these guidelines, each of the Banks is considered adequately or
well capitalized.
Banking agencies have recently adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. That
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have proposed amendments to
existing risk-based capital regulations to provide for the consideration of
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its
off-balance-sheet position) in the determination of a bank's minimum capital
requirements. Those proposals, while still under consideration, would require
banks with interest rate risk in excess of defined thresholds to maintain
additional capital beyond that generally required.
DISTRIBUTIONS. NationsBank's funds for cash distributions to its
shareholders are derived from a variety of sources, including cash and temporary
investments. The primary source of such funds, however, is dividends received
from its banking subsidiaries. The amount of dividends that each Bank may
declare in a calendar year without approval of the Comptroller is the Bank's net
profits for that year, as defined by statute, combined with its net retained
profits, as defined, for the preceding two years. In addition, from time to time
NationsBank applies for, and may receive, permission from the Comptroller for
one or more of the Banks to declare special dividends. In 1995, the Banks can
initiate dividend payments without prior regulatory approval of up to $
billion plus an additional amount equal to their net profits for 1995 up to the
date of any such dividend declaration.
In addition to the foregoing, the ability of NationsBank and the Banks to
pay dividends may be affected by the various minimum capital requirements and
the capital and non-capital standards established under FDICIA as described
above. Furthermore, the Comptroller may prohibit the payment of a dividend by a
national bank if it determines that such payment would constitute an unsafe or
unsound practice. The right of NationsBank, its shareholders and its creditors
to participate in any distribution of the assets or earnings of its subsidiaries
is further subject to the prior claims of creditors of the respective
subsidiaries.
SOURCE OF STRENGTH. According to Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each such subsidiary. This
support may be required at times when a bank holding company may not be able to
provide such support. In the event of a loss suffered or anticipated by the
FDIC -- either as a result of default of a banking or thrift subsidiary of
NationsBank or related to FDIC assistance provided to a subsidiary in danger of
default -- the other banking subsidiaries of NationsBank may be assessed for the
FDIC's loss, subject to certain exceptions.
INFORMATION ABOUT ICBK
GENERAL
ICBK is a Florida state-chartered commercial bank. It provides commercial
banking services through a network of 24 branch offices -- 16 in Dade County,
six in Broward County and two in Palm Beach County. Its deposits are insured by
the FDIC. ICBK's principal executive offices are located at 200 Southeast First
Street, Miami, Florida 33131. Its telephone
31
<PAGE>
number is (305) 377-6900. As of June 30, 1995, ICBK had total assets of $1.14
billion and total deposits of $952 million. As of June 30, 1995, ICBK had
approximately 568 employees.
In addition to its primary business as a commercial bank, ICBK owns all of
the outstanding stock of PAMCO, which services residential and commercial loans.
PAMCO's total assets were $11.7 million at June 30, 1995. PAMCO's mortgage
servicing portfolio amounted to approximately $1.1 billion at June 30, 1995. On
July 31, 1995, PAMCO sold substantially all of its residential mortgage
servicing portfolio, recognizing a pre-tax profit of approximately $6 million,
but retained the business of servicing approximately $100 million in loans.
ICBK offers a wide range of bank services to individuals and businesses
located in its primary business area. Its strategy is to focus on small to
medium-sized businesses as well as high net worth individuals. ICBK is actively
engaged in the business of seeking deposits from the public and making real
estate, commercial and consumer loans. It offers a variety of deposit accounts
to individual and commercial customers as well as related banking services.
These services include interest bearing checking accounts, savings accounts,
certificates of deposit, commercial checking accounts, individual retirement
accounts, safe deposit boxes, bank-by-mail service, drive-in teller service,
extended lobby and drive-in hours, letters of credit, draft collection and
direct deposit. ICBK's principal sources of income are interest on loans and
investments and service fees. Its principal expenses are interest paid on
deposits and general operating expenses.
ICBK's assets include a substantial portfolio of loans secured by real
estate. At June 30, 1995, these loans totaled $496 million, representing 72% of
its total loan portfolio. A significant portion of the real estate portfolio
consisted of residential loans and loans made to owner-occupied businesses. Most
of these loans are concentrated in South Florida, which makes ICBK susceptible
to adverse changes in the real estate market in this area.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to ICBK is incorporated by reference or set forth in ICBK's
Annual Report on Form F-2 for the year ended December 31, 1994, incorporated
herein by reference. Shareholders of ICBK desiring copies of such documents may
contact ICBK at its address or phone number indicated under "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
SUPERVISION AND REGULATION
ICBK is a Florida state-chartered commercial bank. As such, it is regulated
primarily by the Florida Department of Banking and Finance (the "Department")
and the FDIC. It is not a member of the Federal Reserve System.
FLORIDA REGULATION. As a state-chartered commercial bank, ICBK is subject
to the applicable provisions of Florida law and the regulations adopted by the
Department. ICBK must file various reports with, and is subject to periodic
examinations by, the Department. Florida law and the Department regulate (in
conjunction with applicable federal laws and regulations), among other things,
ICBK's capital, permissible activities, reserves, investments, lending
authority, branching, issuance of securities, payment of dividends, transactions
with affiliated parties and borrowings. Florida has permitted statewide branch
banking since 1989.
In 1992, ICBK amended its Bylaws to make inapplicable Section 607.0902,
Florida Statutes, which subjects the voting rights of holders of shares acquired
in certain "control share acquisitions" to approval by other shareholders.
Legislation has been adopted in Florida permitting banks and bank holding
companies located anywhere in the United States to acquire control of banks and
bank holding companies located in Florida if the states in which they are
located grant reciprocal rights to Florida banks and bank holding companies.
Federal legislation has also been adopted which permits banks, subject to
certain conditions, to acquire and establish branches nationwide, and which
permits bank holding companies to own banks in multiple states subject to
certain conditions.
FDIC REGULATION. The FDIC is the primary Federal banking supervisor and
regulator of ICBK. The FDIC insures deposit accounts in ICBK (up to applicable
limits) through the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF"). ICBK is subject to examination and regulation by the
FDIC. Such examination and regulation is intended primarily for the protection
of depositors. The regulatory structure provides regulatory officials with
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to
classification of assets and the establishment of adequate loss reserves for
regulatory purposes.
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<PAGE>
ICBK is subject to the FDIC's risk-based capital requirements, leverage
ratio capital requirements, and a five-category definition of capital adequacy,
as described above. See "INFORMATION ABOUT NATIONSBANK -- Supervision and
Regulation." At June 30, 1995, ICBK had Tier 1 and total risk-based capital
ratios of 12.80 percent and 14.10 percent, respectively, and a leverage ratio of
8.26 percent. In addition, ICBK was included in the highest category of
capitalization at December 31, 1994.
Under FDIC regulations, ICBK is required to pay annual insurance premiums.
As a result of its July 1990 merger with Atico Savings Bank ("ASB"), ICBK must
pay premiums to the SAIF, of which ASB was a member, based on deposits
attributable to ASB. ICBK credits these payments against premiums it would
otherwise have to pay to the BIF on such deposits.
COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK COMMON STOCK
NATIONSBANK COMMON STOCK
GENERAL. NationsBank is authorized to issue 800,000,000 shares of
NationsBank Common Stock, of which 269,812,113 shares were outstanding as of
June 30, 1995. NationsBank Common Stock is traded on the NYSE and the PSE under
the symbol "NB"; certain shares of NationsBank Common Stock are also listed and
traded on the Tokyo Stock Exchange. As of June 30, 1995, 11.2 million shares of
NationsBank Common Stock were reserved for issuance under various employee
benefit plans of NationsBank and upon the conversion of NationsBank's ESOP
Preferred Stock, Series C, 2.8 million shares were reserved for issuance under
NationsBank's Dividend Reinvestment and Stock Purchase Plan, and up to 4,500,000
shares were reserved for issuance in connection with the Merger. After taking
into account the shares reserved as described above, the number of authorized
shares of NationsBank Common Stock available for other corporate purposes as of
June 30, 1995 was 251,312,113.
VOTING AND OTHER RIGHTS. The holders of NationsBank Common Stock are
entitled to one vote per share, and, in general, a majority of votes cast with
respect to a matter is sufficient to authorize action upon routine matters.
Directors are elected by a plurality of the votes cast, and each shareholder
entitled to vote in such election is entitled to vote each share of stock for as
many persons as there are directors to be elected. In elections for directors,
such shareholders do not have the right to cumulate their votes, so long as
NationsBank has a class of shares registered under Section 12 of the Exchange
Act (unless action is taken to provide otherwise by charter amendment, which
action management does not currently intend to propose). In general, (i)
amendments to NationsBank's Restated Articles of Incorporation must be approved
by each voting group entitled to vote separately thereon by a majority of the
votes cast by that voting group, unless the amendment creates dissenters' rights
for a particular voting group, in which case such amendment must be approved by
a majority of the votes entitled to be cast by such voting group; (ii) a merger
or share exchange required to be approved by the shareholders must be approved
by each voting group entitled to vote separately thereon by a majority of the
votes entitled to be cast by that voting group; and (iii) the dissolution of
NationsBank, or the sale of all or substantially all of the property of
NationsBank other than in the usual and regular course of business, must be
approved by a majority of all votes entitled to be cast thereon.
In the event of liquidation, holders of NationsBank Common Stock would be
entitled to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them, subject to any prior rights of
any Preferred Stock (as described below) then outstanding.
NationsBank Common Stock does not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. All the outstanding
shares of NationsBank Common Stock are, and upon issuance the shares of
NationsBank Common Stock to be issued to shareholders of ICBK will be, validly
issued, fully paid and nonassessable.
Chemical Bank acts as transfer agent and registrar for NationsBank Common
Stock.
DISTRIBUTIONS. The holders of NationsBank Common Stock are entitled to
receive such dividends or distributions as the Board of Directors of NationsBank
may declare out of funds legally available for such payments. The payment of
distributions by NationsBank is subject to the restrictions of North Carolina
law applicable to the declaration of distributions by a business corporation. A
corporation generally may not authorize and make distributions if, after giving
effect thereto, it would be unable to meet its debts as they become due in the
usual course of business or if the corporation's total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if it
were to be dissolved at the time of distribution, to satisfy claims upon
dissolution of shareholders who have preferential rights superior to the rights
of the holders of its common stock. In addition, the payment of distributions to
shareholders is subject to any prior rights of outstanding Preferred Stock.
Share dividends, if any are declared, may be paid from NationsBank's authorized
but unissued shares.
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<PAGE>
The ability of NationsBank to pay distributions is affected by the ability
of the Banks to pay dividends. The ability of the Banks, as well as of
NationsBank, to pay dividends in the future currently is, and could be further,
influenced by bank regulatory requirements and capital guidelines. See
"INFORMATION ABOUT NATIONSBANK -- Supervision and Regulation -- Distributions."
PREFERRED STOCK. NationsBank has authorized 45,000,000 shares of preferred
stock and may issue such preferred stock in one or more series, each with such
preferences, limitations, designations, conversion rights, voting rights,
distribution rights, voluntary and involuntary liquidation rights and other
rights as it may determine (the "Preferred Stock"). NationsBank has designated
3,000,000 shares of ESOP Convertible Preferred Stock, Series C (the "ESOP
Preferred Stock"), of which 2,553,552 shares were issued and outstanding as of
June 30, 1995.
THE FOLLOWING SUMMARY OF THE ESOP PREFERRED STOCK IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE DESCRIPTION THEREOF CONTAINED IN NATIONSBANK'S
RESTATED ARTICLES OF INCORPORATION ATTACHED AS EXHIBIT 3(I) TO THE CORPORATION'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994, INCORPORATED
HEREIN BY REFERENCE.
The ESOP Preferred Stock was first issued in the transaction by which
NationsBank was formed from the merger of NCNB Corporation and C&S/Sovran
Corporation in 1991 upon the conversion of shares of ESOP Convertible Preferred
Stock, Series C of C&S/Sovran Corporation. All shares are held by the trustee
under the NationsBank Corporation Retirement Savings Plan (the "ESOP").
Shares of ESOP Preferred Stock have no preemptive or preferential rights to
purchase or subscribe for shares of NationsBank capital stock of any class and
are not subject to any sinking fund or other obligation of NationsBank to
repurchase or retire the series, except as discussed below.
Each share of ESOP Preferred Stock is entitled to an annual dividend,
subject to certain adjustments, of $3.30 per share, payable semiannually. Unpaid
dividends accumulate as of the date on which they first became payable, without
interest. So long as any shares of ESOP Preferred Stock are outstanding, no
dividend may be declared, paid or set apart for payment on any other series of
stock ranking on a parity with ESOP Preferred Stock as to dividends, unless like
dividends have been declared and paid, or set apart for payment, on the ESOP
Preferred Stock for all dividend payment periods ending on or before the
dividend payment date for such parity stock, ratably in proportion to their
respective amounts of accumulated and unpaid dividends. NationsBank generally
may not declare, pay or set apart for payment any dividends (except for, among
other things, dividends payable solely in shares of stock ranking junior to the
ESOP Preferred Stock as to dividends or upon liquidation) on, make any other
distribution on, or make payment on account of the purchase, redemption or other
retirement of, any other class or series of NationsBank capital stock ranking
junior to the ESOP Preferred Stock as to dividends or upon liquidation, until
full cumulative dividends on the ESOP Preferred Stock have been declared and
paid or set apart for payment when due.
The holder of the ESOP Preferred Stock is entitled to vote on all matters
submitted to a vote of the holders of NationsBank Common Stock and votes
together with the holders of NationsBank Common Stock as one class. Except as
otherwise required by applicable law, the holder of the ESOP Preferred Stock has
no special voting rights. To the extent that the holder of such shares is
entitled to vote, each share is entitled to the number of votes equal to the
number of shares of NationsBank Common Stock into which such share of ESOP
Preferred Stock could be converted on the record date for determining the
shareholders entitled to vote, rounded to the nearest whole vote.
Shares of the ESOP Preferred Stock initially are convertible into
NationsBank Common Stock at a conversion rate equal to 0.84 shares of
NationsBank Common Stock per share of ESOP Preferred Stock, and a conversion
price of $42.50 per 0.84 shares of NationsBank Common Stock, subject to certain
customary anti-dilution adjustments.
In the event of any voluntary or involuntary dissolution, liquidation or
winding-up of NationsBank, the holder of the ESOP Preferred Stock will be
entitled to receive out of the assets of NationsBank available for distribution
to shareholders, subject to the rights of the holders of any Preferred Stock
ranking senior to or on a parity with the ESOP Preferred Stock as to
distributions upon liquidation, dissolution or winding-up but before any amount
will be paid or distributed among the holders of NationsBank Common Stock or any
other shares ranking junior to the ESOP Preferred Stock as to such
distributions, liquidating distributions of $42.50 per share plus all accrued
and unpaid dividends thereon to the date fixed for distribution. If, upon any
voluntary or involuntary dissolution, liquidation or winding-up of NationsBank,
the amounts payable with respect to the ESOP Preferred Stock and any other stock
ranking on a parity therewith as to any such distribution are not paid in full,
the holder of the ESOP Preferred Stock and such other stock will share ratably
in any distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which it is entitled, the holder of the ESOP
Preferred Stock will not be entitled to any further distribution of
34
<PAGE>
assets by NationsBank. Neither a merger or consolidation of NationsBank with or
into any other corporation, nor a merger or consolidation of any other
corporation with or into NationsBank nor a sale, transfer or lease of all or any
portion of NationsBank's assets, will be deemed to be a dissolution, liquidation
or winding-up of NationsBank.
The ESOP Preferred Stock is redeemable, in whole or in part, at the option
of NationsBank, at any time. The redemption price for the shares of the ESOP
Preferred Stock will depend upon the time of redemption. Specifically, the
redemption price for the 12-month period beginning July 1, 1995, is $43.82 per
share; on each succeeding July 1, the redemption price will be reduced by $.33
per share, except that on and after July 1, 1999, the redemption price will be
$42.50 per share, and the redemption price may be paid in cash or shares of
NationsBank Common Stock. In each case, the redemption price also must include
all accrued and unpaid dividends to the date of redemption. To the extent that
the ESOP Preferred Stock is treated as Tier 1 capital for bank regulatory
purposes, the approval of the Federal Reserve Board may be required of
redemption of the ESOP Preferred Stock.
NationsBank is required to redeem shares of the ESOP Preferred Stock at the
option of the holder of such shares to the extent necessary either to provide
for distributions required to be made under the ESOP or to make payments of
principal, interest or premium due and payable on any indebtedness incurred by
the holder of the shares for the benefit of the ESOP. The redemption price in
such case will be the greater of $42.50 per share plus accrued and unpaid
dividends to the date of redemption or the fair market value of the aggregate
number of shares of NationsBank Common Stock into which a share of ESOP
Preferred Stock then is convertible.
ICBK COMMON STOCK
GENERAL. ICBK is authorized to issue 10,000,000 shares of ICBK Common
Stock, of which shares were outstanding as of the Record Date. The market
prices of the ICBK Common Stock are reported on the Nasdaq National Market under
the symbol "ICBK." As of the Record Date, a total of additional shares
were reserved for issuance in connection with various employee stock option
plans of ICBK.
VOTING AND OTHER RIGHTS. The holders of ICBK Common Stock are entitled to
one vote per share and, in general, a majority of votes cast are sufficient to
authorize action upon routine matters. Directors are elected by a plurality of
votes cast, and each shareholder entitled to vote in such elections is entitled
to vote each share of stock for as many persons as there are directors to be
elected. In an election of directors, such shareholders do not have the right to
accumulate their votes. In general, (i) amendments to ICBK's articles of
incorporation must be approved by each voting group entitled to vote separately
thereon by a majority of the votes cast by that voting group, unless the
amendment creates dissenter's rights for a particular voting group, in which
case such amendment must be approved by a majority of the votes entitled to be
cast by such voting group, (ii) a merger or share exchange required to be
approved by the shareholders must be approved by each voting group entitled to
vote thereon separately by a majority of the votes entitled to be cast by that
voting group, and (iii) the dissolution of ICBK, or the sale of all or
substantially all of the assets of ICBK, must be approved by the majority of all
votes entitled to be cast thereon.
In the event of liquidation, holders of ICBK Common Stock would be entitled
to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them, subject to any prior rights of
any outstanding shares of preferred stock (as described below).
ICBK Common Stock does not have any preemptive rights, redemption rights,
sinking fund privileges or conversion rights. All of the outstanding shares of
ICBK Common Stock are validly issued, fully paid and non-assessable.
Chemical Bank acts as transfer agent and registrar for ICBK Common Stock.
DISTRIBUTIONS. The holders of ICBK Common Stock are entitled to receive
such dividends and distributions as the Board of Directors of ICBK may declare
out of funds legally available for such payments. The payment of dividends by
ICBK is subject to restrictions of Florida law applicable to the declaration of
distributions by a commercial bank. In general, a Florida bank may declare
dividends without regulatory approval in an amount which does not exceed the sum
of net profits for the current year combined with retained net profits for the
preceding two years.
The ability of ICBK to pay dividends in the future currently is, and could
be further, influenced by bank regulatory requirements and capital guidelines.
See "INFORMATION ABOUT ICBK -- Supervision and Regulation."
ICBK PREFERRED STOCK. ICBK is authorized to issue 2,000,000 shares of
preferred stock. Such stock may be issued in one or more series, each with such
preferences, limitations, designations, conversion rights, voting rights,
distribution rights,
35
<PAGE>
voluntary and involuntary liquidation rights and other rights as the Board of
Directors of ICBK may determine (the "Preferred Stock"). As of June 30, 1995,
ICBK had established two series of Preferred Stock -- ICBK Series A Preferred
Stock, consisting of 350,000 shares, all of which were issued and outstanding,
and First Series Preferred Stock, consisting of 1,000,000 shares, none of which
were issued or outstanding.
Shares of Series A Preferred Stock have no preemptive or preferential
rights to purchase or subscribe for shares of ICBK capital stock of any class
and are not subject to any sinking fund or other obligation of ICBK to
repurchase or retire the series.
Each share of ICBK Series A Preferred Stock is entitled to an annual
dividend (subject to certain adjustments) of $.04 1/2 per share, per year,
payable quarterly. Unpaid dividends accumulate as of the date they first become
payable without interest. So long as any shares of ICBK Series A Preferred Stock
are outstanding, no dividend may be declared, paid or set aside for payment on
any other series of stock ranking on par with the ICBK Series A Preferred Stock
as to dividends, unless like dividends have been declared and paid or set apart
for payment, on the ICBK Series A Preferred Stock for all dividend payment
periods ending on or before the dividend payment date for such parity stock,
ratably in proportion to their respective amounts of accumulated and unpaid
dividends. ICBK generally may not declare, pay or set aside for payment any
dividends (except for, among other things, dividends payable solely in shares of
stock ranking junior to the ICBK Series A Preferred Stock as to dividends or
upon liquidation) on, make any other distribution on, or make payment on account
of the purchase, redemption or other retirement of, any other class or series of
ICBK capital stock ranking junior to the ICBK Series A Preferred Stock as to
dividends or upon liquidation, until cumulative dividends on the ICBK Series A
Preferred Stock have been declared and paid or set aside for payment when due.
The holder of the ICBK Series A Preferred Stock is entitled to vote on all
matters submitted to a vote at the holders of the ICBK Common Stock and votes
together with the holders of the ICBK Common Stock as one class, except as
otherwise required by applicable law. Certain actions, such as the Merger,
require the affirmative vote of the holders of the Series A Preferred Stock,
voting as a separate class. To the extent that the holder of such shares is
entitled to vote, each share is entitled to one vote per share.
In the event of any voluntary or involuntary dissolution, liquidation or
winding-up of ICBK, the holder of the ICBK Series A Preferred Stock will be
entitled to receive out of the assets of ICBK available for distribution to
shareholders, subject to the rights of the holders of any Preferred Stock
ranking senior to or on parity with the ICBK Series A Preferred Stock as to
distributions upon liquidation, dissolution or winding-up but before any amount
will be paid or distributed among the holders of ICBK Common Stock or any other
shares ranking junior to the ICBK Series A Preferred Stock as to such
distributions, a liquidating distribution of $1.00 per share, plus all accrued
and unpaid dividends thereon to the date fixed for distribution. If, upon any
voluntary or involuntary dissolution, liquidation or winding-up of ICBK, the
amounts payable with respect to the ICBK Series A Preferred Stock and any other
stock ranking on a parity therewith as to such distributions are not paid in
full, the holder of the ICBK Series A Preferred Stock and such other stock will
share ratably in any distribution of shares in proportion to the full respective
preferential amounts as to which they are entitled. After payment of the full
amount of the liquidating distribution to which it is entitled, a holder of the
Series A Preferred Stock will not be entitled to any further distribution of
assets by ICBK. Neither a merger or consolidation of ICBK with or into another
corporation nor a merger or consolidation of any other corporation with or into
ICBK, nor a sale, transfer or lease of all or any portion of ICBK's assets will
be deemed to be a dissolution, liquidation or winding-up of ICBK.
The ICBK Series A Preferred Stock is redeemable in whole or in part at the
option of ICBK at any time subject to the prior approval of the holders of the
majority of outstanding shares of ICBK Common Stock and ICBK Series A Preferred
Stock, voting together as a single class. The redemption price for the shares of
ICBK Series A Preferred Stock is an amount equal to $1.00 per share plus all
accrued and unpaid dividends to the date of redemption.
COMPARISON OF VOTING AND OTHER RIGHTS
NationsBank is a North Carolina corporation subject to the provisions of
the NCBCA. ICBK is a Florida state-chartered commercial bank regulated primarily
by the Department and the FDIC. Furthermore, ICBK is a Florida corporation
subject to the provisions of the FBCA. Shareholders of ICBK (other than those
who perfect dissenters' rights), whose rights are governed by ICBK's Articles of
Incorporation and Bylaws and by the FBCA, will upon consummation of the Merger,
become shareholders of NationsBank. As shareholders of NationsBank, their rights
will then be governed by the Restated Articles of Incorporation and the Amended
and Restated Bylaws of NationsBank and by the NCBCA. Except as set forth below,
there are no material differences between the rights of ICBK shareholders under
ICBK's Articles of Incorporation and Bylaws and under the FBCA, on the one hand,
and the rights of NationsBank's shareholders under NationsBank's Restated
Articles of
36
<PAGE>
Incorporation, its Amended and Restated Bylaws and the NCBCA, on the other hand.
This summary does not purport to be a complete discussion of, and is qualified
in its entirety by reference to, the governing law and governing corporate
documents of each corporation.
PREFERRED STOCK. The ICBK Common Stock is subject to the preferential
rights of the ICBK Series A Preferred Stock, consisting of 350,000 shares, all
of which are issued and outstanding, and any other class or series of preferred
stock that may be created pursuant to ICBK's Articles of Incorporation. The
NationsBank Common Stock is subject to the preferential rights of ESOP Preferred
Stock and any other class or series of preferred stock that may be created
pursuant to NationsBank's Restated Articles of Incorporation.
MEETINGS OF SHAREHOLDERS. A special meeting of NationsBank shareholders may
be called for any purpose by the NationsBank Board of Directors, by the Chairman
of the NationsBank Board of Directors or by NationsBank's Chief Executive
Officer or President. A quorum for a meeting of NationsBank shareholders is a
majority of the outstanding shares of NationsBank Common Stock entitled to vote.
A majority of the votes cast is generally required for an action by the
NationsBank shareholders. North Carolina law provides that these quorum and
voting requirements may only be increased with approval of NationsBank
shareholders.
A special meeting of ICBK shareholders may be called for any purpose or
purposes at any time by the Chairman of the Board, the President, or a majority
of the Board of Directors of ICBK and shall be called by the Chairman of the
Board, the President, or the Secretary upon the written request of the holders
of not less than 10% of all the shares of outstanding capital stock of ICBK
entitled to vote at the meeting. A quorum for a meeting of ICBK shareholders is
a majority of the outstanding shares of ICBK Common Stock entitled to vote at
the meeting. A majority of the votes cast at a shareholders' meeting is
generally required for an action by the ICBK shareholders. For certain actions,
such as an amendment to the Articles of Incorporation of ICBK or a merger, a
majority of the votes entitled to be cast is required to approve such action.
Florida law provides that these quorum and voting requirements may only be
changed by an amendment to the Articles of Incorporation of ICBK, which
amendment would require approval of ICBK's shareholders.
Section 607.0901 of the FBCA ("Section 607.0901") requires that, in
addition to any vote required by the FBCA and a corporation's articles of
incorporation and subject to the exceptions described below, any "Affiliated
Transaction" between a Florida corporation and any beneficial owner of 10% or
more of the corporation's voting shares, including shares held by any associate
or affiliate of such a person (an "Interested Shareholder"), be approved by the
affirmative vote of the holders of two-thirds of the voting shares of the
corporation's stock, excluding for such purposes any shares held by the
Interested Shareholder. An "Affiliated Transaction" includes, among other
transactions: (i) any merger or consolidation of the corporation or any of its
subsidiaries with an Interested Shareholder or an associate or affiliate of an
Interested Shareholder, (ii) any sale, exchange or other disposition of assets
of the corporation to an Interested Shareholder or an associate or affiliate of
an Interested Shareholder, having an aggregate market value equal to 5% or more
of the consolidated assets of the corporation or 5% or more of the aggregate
market value of all of the outstanding shares of the corporation, or
representing 5% or more of the earning power or net income of the corporation,
and (iii) the issuance or transfer to the Interested Shareholder or an associate
or affiliate of the Interested Shareholder, by the corporation, of shares of the
corporation or any of its subsidiaries which have an aggregate market value
equal to 5% or more of the aggregate market value of all of the outstanding
shares of the corporation.
The voting requirements of Section 607.0901 do not apply, however, to an
Affiliated Transaction if, among other things: (a) the Affiliated Transaction
has been approved by a majority of the disinterested directors on the
corporation's board of directors, (b) the Interested Shareholder has been the
beneficial owner of at least 80% of the corporation's outstanding voting shares
for at least five years, (c) certain fair price requirements have been met, or
(d) the corporation has not had more than 300 shareholders of record at any time
during the three years preceding the date of the first general public
announcement of a proposed Affiliated Transaction. Although ICBK is subject to
Section 607.0901, the proposed Merger is not subject to the voting requirements
of the statute because the Merger has been approved by a majority of ICBK's
disinterested directors.
DISTRIBUTIONS. The payment of distributions to holders of NationsBank
Common Stock is subject to the provisions of the NCBCA, the preferential rights
of the holders of Preferred Stock and the ability of the Banks to pay dividends
to NationsBank, as restricted by various bank regulatory agencies. See
"INFORMATION ABOUT NATIONSBANK -- Supervision and Regulation -- Distributions"
and "COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK STOCK -- NationsBank Common
Stock -- Preferred Stock." The payment of distributions to holders of ICBK stock
is subject to the provisions of Florida law applicable to the declaration of
distributions by commercial banks, the FBCA and the preferential rights of the
holders of Preferred Stock. See "COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK
STOCK -- ICBK Common
37
<PAGE>
Stock -- Distributions" and "COMPARISON OF NATIONSBANK COMMON STOCK AND ICBK
STOCK -- ICBK Common Stock -- Preferred Stock."
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS. The size of the
NationsBank Board of Directors may be established by the shareholders or by the
NationsBank Board of Directors, provided that the NationsBank Board of Directors
may not set the number of directors at less than five nor more than 30. Any
change to this permissible range for the size of the NationsBank Board of
Directors must be approved by the NationsBank shareholders. The NationsBank
Board of Directors is not divided into classes, and all directors are elected
annually. The size of the ICBK Board of Directors may be set by the shareholders
or by the Board of Directors of ICBK; provided that the ICBK Board of Directors
may not set the number of directors at less than five nor more than 25; and
provided further that a majority of the full Board of Directors may, at any time
during the year following the annual meeting of shareholders in which such
action has been authorized, increase the number of directors by not more than
two and appoint persons to fill the resulting vacancies. The ICBK Board of
Directors is not divided into classes. All directors are elected annually by the
shareholders, except that vacancies on the Board of Directors may be filled by
the affirmative vote of a majority of the directors then in office, even if less
than a quorum.
REMOVAL OF DIRECTORS. Generally, directors of NationsBank may be removed by
the shareholders with or without cause by the affirmative vote of a majority of
the votes cast, unless NationsBank's Restated Articles of Incorporation are
amended to provide otherwise. In addition, the NCBCA provides that an
appropriate court can remove a director upon petition of the holders of at least
10% of the outstanding shares of any class of stock of NationsBank upon certain
findings by such court. The shareholders of ICBK may, at any special meeting the
notice of which shall state that it is called for that purpose, remove, with or
without cause, any director by the affirmative vote of a majority of the votes
cast.
SHAREHOLDER INSPECTION RIGHTS; SHAREHOLDER LISTS. Under North Carolina law,
qualified shareholders have the right to inspect and copy (a) certain of
NationsBank's official corporate documents and (b) NationsBank's books and
records in good faith and for a proper purpose. Such right of inspection
requires that the shareholder give NationsBank written notice of the demand,
describing with reasonable particularity his purpose and the requested records.
The right of inspection extends not only to shareholders of record but also
beneficial owners whose beneficial ownership is certified to NationsBank by the
shareholder of record. However, NationsBank is under no duty to provide any
accounting records or any records with respect to any matter that it determines
in good faith may, if disclosed, adversely effect NationsBank in the conduct of
its business or may constitute material nonpublic information, and the right of
inspection is limited to NationsBank shareholders who either have been
NationsBank shareholders at least six months or who hold at least 5% of the
outstanding shares of any class of NationsBank stock. In addition, NationsBank
is required to prepare a shareholder list with respect to any shareholders'
meeting and to make such list available to NationsBank shareholders beginning
two business days after notice of such meeting is given and continuing through
such meeting and any adjournments thereof.
Under Florida law, shareholders of a bank, other than a qualified director,
officer or employee thereof, may not examine any of the books or records of the
bank other than the general statement of condition of its general assets and
liabilities, the quarterly reports of condition and quarterly reports of income
required to be submitted to the Department, and a complete record of the names
and residences of all the shareholders of the bank and the number of shares held
by each. ICBK is required to maintain a current shareholder list and to make
such list available to ICBK shareholders for a period beginning ten days prior
to any shareholders' meeting and continuing through such meeting and any
adjournments thereof.
DISSENTER'S RIGHTS. The NCBCA generally provides dissenter's rights for
mergers and share exchanges that require shareholder approval, sales of
substantially all the assets (other than sales that are in the usual and regular
course of business and certain liquidations and court-ordered sales), and
certain amendments to the articles of incorporation of a North Carolina
corporation. The FBCA generally provides dissenter's rights in mergers and share
exchanges that require shareholder approval, sales of substantially all the
assets (other than sales that are in the usual and regular course of business),
and certain amendments to the Articles of Incorporation of a Florida
corporation.
MISCELLANEOUS. Chemical Bank acts as transfer agent and registrar for the
NationsBank Common Stock and the ICBK Common Stock. NationsBank Common Stock is
listed and traded on the NYSE and the PSE. Certain shares of NationsBank Common
Stock are also listed and traded on the Tokyo Stock Exchange. ICBK Common Stock
is traded in the over-the-counter market and reported by the Nasdaq National
Market.
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LEGAL OPINIONS
The legality of the NationsBank Common Stock to be issued in connection
with the Merger and certain other legal matters in connection with the Merger
will be passed upon by Smith Helms Mulliss & Moore, L.L.P., Charlotte, North
Carolina. As of the date of this Proxy Statement-Prospectus, certain members of
Smith Helms Mulliss & Moore, L.L.P., beneficially owned approximately 25,000
shares of NationsBank Common Stock. Certain tax consequences of the Merger will
be passed upon by Blanchfield Cordle & Moore, P.A.
EXPERTS
The consolidated financial statements of NationsBank incorporated in this
Proxy Statement-Prospectus by reference to the NationsBank Annual Report on Form
10-K for the year ended December 31, 1994, have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of ICBK incorporated in this Proxy
Statement-Prospectus by reference to the ICBK Annual Report on Form F-2 for the
year ended December 31, 1994 have been so incorporated in reliance on the report
of Arthur Andersen LLP, independent certified public accountants, given on the
authority of said firm as experts in giving said reports.
SHAREHOLDER PROPOSALS
It is not anticipated that ICBK will hold a 1996 Annual Meeting of
Shareholders unless the Merger is not consummated. If the Agreement is
terminated, any shareholder proposal intended for inclusion in the proxy
statement and form of proxy relating to the 1996 Annual Meeting of Shareholders
must be received by ICBK no later than , 1995.
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the Board of Directors
of ICBK knows of no matters that will be presented for consideration at the
Special Meeting other than as described in this Proxy Statement-Prospectus.
However, if any other matters shall properly come before the Special Meeting or
any adjournments or postponements thereof and be voted upon, the enclosed
proxies shall be deemed to confer discretionary authority on the individuals
named as proxies therein to vote the shares represented by such proxies as to
any such matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of ICBK.
39
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
NATIONSBANK CORPORATION
AND
INTERCONTINENTAL BANK
JUNE 26, 1995
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions........................................................................................... A-5
<CAPTION>
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
<S> <C> <C>
2.01 Merger........................................................................................................ A-8
2.02 Time and Place of Closing..................................................................................... A-9
2.03 Effective Time................................................................................................ A-9
2.04 Reservation of Right to Revise Transaction.................................................................... A-9
<CAPTION>
ARTICLE III
MANNER OF CONVERTING SHARES
<S> <C> <C>
3.01 Conversion.................................................................................................... A-9
3.02 Anti-Dilution Provisions...................................................................................... A-10
<CAPTION>
ARTICLE IV
EXCHANGE OF SHARES
<S> <C> <C>
4.01 Exchange Procedures........................................................................................... A-10
4.02 Voting and Dividends.......................................................................................... A-10
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ICBK
<S> <C> <C>
5.01 Organization, Standing, and Authority......................................................................... A-11
5.02 ICBK Capital Stock............................................................................................ A-11
5.03 Subsidiaries.................................................................................................. A-11
5.04 Authorization of Merger and Related Transactions.............................................................. A-12
5.05 Securities Reporting Documents and Financial Statements....................................................... A-12
5.06 Absence of Undisclosed Liabilities............................................................................ A-12
5.07 Tax Matters................................................................................................... A-13
5.08 Allowance for Credit Losses................................................................................... A-13
5.09 Other Tax and Regulatory Matters.............................................................................. A-13
5.10 Properties.................................................................................................... A-13
5.11 Compliance with Laws.......................................................................................... A-13
5.12 Employee Benefit Plans........................................................................................ A-14
5.13 Commitments and Contracts..................................................................................... A-15
5.14 Material Contract Defaults.................................................................................... A-15
5.15 Legal Proceedings............................................................................................. A-15
5.16 Absence of Certain Changes or Events.......................................................................... A-16
5.17 Reports....................................................................................................... A-16
5.18 Statements True and Correct................................................................................... A-16
5.19 Insurance..................................................................................................... A-16
5.20 Labor......................................................................................................... A-16
5.21 Material Interests of Certain Persons......................................................................... A-16
5.22 Registration Obligations...................................................................................... A-16
5.23 Brokers and Finders........................................................................................... A-17
5.24 State Takeover Laws........................................................................................... A-17
5.25 Environmental Matters......................................................................................... A-17
5.26 Support of Stockholders....................................................................................... A-17
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NATIONSBANK
<S> <C> <C>
6.01 Organization, Standing and Authority.......................................................................... A-17
6.02 NationsBank Capital Stock..................................................................................... A-17
6.03 Authorization of Merger and Related Transactions.............................................................. A-18
6.04 Financial Statements.......................................................................................... A-18
6.05 NationsBank SEC Reports....................................................................................... A-18
6.06 Statements True and Correct................................................................................... A-18
6.07 Capital Stock................................................................................................. A-18
6.08 Tax and Regulatory Matters.................................................................................... A-19
6.09 Litigation.................................................................................................... A-19
6.10 Brokers and Finders........................................................................................... A-19
<CAPTION>
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
<S> <C> <C>
7.01 Conduct of Business Prior to the Effective Time............................................................... A-19
7.02 Forbearances.................................................................................................. A-19
<CAPTION>
ARTICLE VIII
ADDITIONAL AGREEMENTS
<S> <C> <C>
8.01 Access and Information........................................................................................ A-20
8.02 Registration Statement; Regulatory Matters.................................................................... A-21
8.03 Stockholders' Approvals....................................................................................... A-21
8.04 Press Releases................................................................................................ A-21
8.05 Notice of Defaults............................................................................................ A-21
8.06 Miscellaneous Agreements and Consents; Affiliates Agreements.................................................. A-21
8.07 Indemnification............................................................................................... A-22
8.08 Conversion of Stock Options; Restricted Stock................................................................. A-22
8.09 Certain Change of Control Matters............................................................................. A-22
8.10 Stock Exchange Listing........................................................................................ A-22
8.11 Declaration of Dividends...................................................................................... A-22
8.12 Employee Benefits............................................................................................. A-23
8.13 Certain Actions............................................................................................... A-23
8.14 Acquisition Proposals......................................................................................... A-23
8.15 Termination Fee............................................................................................... A-23
8.16 Delivery of ICBK Disclosure Schedule.......................................................................... A-24
<CAPTION>
ARTICLE IX
CONDITIONS
<S> <C> <C>
9.01 Conditions to Each Party's Obligation to Effect the Merger.................................................... A-24
9.02 Conditions to Obligations of ICBK to Effect the Merger........................................................ A-24
9.03 Conditions to Obligations of NationsBank to Effect the Merger................................................. A-24
<CAPTION>
ARTICLE X
TERMINATION
<S> <C> <C>
10.01 Termination................................................................................................... A-25
10.02 Effect of Termination......................................................................................... A-25
10.03 Non-Survival of Representations, Warranties and Covenants Following the Effective Time........................ A-26
10.04 NationsBank Shareholders Vote................................................................................. A-26
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
GENERAL PROVISIONS
<S> <C> <C>
11.01 Expenses...................................................................................................... A-26
11.02 Entire Agreement.............................................................................................. A-26
11.03 Amendments.................................................................................................... A-26
11.04 Waivers....................................................................................................... A-26
11.05 No Assignment................................................................................................. A-26
11.06 Notices....................................................................................................... A-26
11.07 Specific Performance.......................................................................................... A-27
11.08 Arbitration................................................................................................... A-27
11.09 Governing Law................................................................................................. A-27
11.10 Counterparts.................................................................................................. A-27
11.11 Captions...................................................................................................... A-27
11.12 Severability.................................................................................................. A-28
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 26,
1995, between NATIONSBANK CORPORATION ("NationsBank"), a North Carolina
corporation and a registered bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), and INTERCONTINENTAL BANK, a Florida
state-chartered commercial bank ("ICBK"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed in Article I.
W I T N E S S E T H :
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, NationsBank will acquire ICBK through the merger of ICBK with and
into a wholly owned banking subsidiary (the "Bank") of NationsBank, or by such
other means as provided for herein (the "Merger"); and
WHEREAS, the respective Boards of Directors of NationsBank and ICBK have
resolved that the transactions described herein are in the best interests of the
parties and their respective stockholders and have approved the transactions
described herein; and
WHEREAS, NationsBank and ICBK desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "ACQUISITION PROPOSAL" shall have the meaning set forth in Section
8.14.
(b) "ACQUISITION TRANSACTION" shall have the meaning set forth in
Section 8.14.
(c) "AFFILIATE" shall mean, with respect to any Person, any Person
that, directly or indirectly, controls or is controlled by or is under
common control with such Person.
(d) "AGREED VALUE" shall have the meaning set forth in Section
3.01(c).
(e) "AGREEMENT" shall have the meaning set forth in the introduction
to this Agreement.
(f) "ALLOWANCE" shall have the meaning set forth in Section 5.08.
(g) "APPROVALS" shall mean any and all permits, consents,
authorizations and approvals of any governmental or regulatory authority or
of any other third person necessary to give effect to the arrangement
contemplated by this Agreement or necessary to consummate the Merger.
(h) "AUTHORIZATIONS" shall have the meaning set forth in Section 5.01.
(i) "BANK" shall have the meaning set forth in the introduction to
this Agreement.
(j) "BHCA" shall have the meaning set forth in the recitals to this
Agreement.
(k) "CLOSING" shall have the meaning set forth in Section 2.02.
(l) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
(m) "CONDITION" shall have the meaning set forth in Section 5.01.
(n) "DEPARTMENT" shall mean the Department of Banking and Finance of
the State of Florida.
(o) "EFFECTIVE TIME" shall have the meaning set forth in Section 2.03.
(p) "EMPLOYEE" shall mean any current or former employee, officer or
director, independent contractor or retiree of ICBK or its Subsidiaries and
any dependent or spouse thereof.
(q) "ENVIRONMENTAL LAW" shall have the meaning set forth in Section
5.25.
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<PAGE>
(r) "ERISA" shall have the meaning set forth in Section 5.12.
(s) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(t) "EXCHANGE AGENT" shall have the meaning set forth in Section
3.01(d).
(u) "EXCHANGE RATIO" shall mean $30 divided by the NationsBank Common
Stock Exchange Value Per Share.
(v) "EXPENSES" shall have the meaning set forth in Section 8.15.
(w) "FDIC" shall mean the Federal Deposit Insurance Corporation.
(x) "FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System and any Federal Reserve Bank.
(y) "GAAP" shall mean generally accepted accounting principles in the
United States.
(z) "HEADQUARTERS CITY" shall have the meaning set forth in Section
2.01.
(aa) "ICBK" shall have the meaning set forth in the introduction to
this Agreement.
(ab) "ICBK BENEFIT PLAN" shall have the meaning set forth in Section
5.12(a).
(ac) "ICBK BOARD" shall mean the Board of Directors of ICBK.
(ad) "ICBK COMMON STOCK" shall mean the common stock, par value $2.00
per share, of ICBK.
(ae) "ICBK DISCLOSURE SCHEDULE" shall mean that document containing
the written detailed information prepared by ICBK and delivered by ICBK to
NationsBank which appropriately cross-references each Section of the
Agreement to which that Section of the ICBK Disclosure Schedule applies.
(af) "ICBK ERISA PLAN" shall have the meaning set forth in Section
5.12(a).
(ag) "ICBK FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 5.05.
(ah) "ICBK OPTIONS" shall have the meaning set forth in Section 8.08.
(ai) "ICBK PREFERRED STOCK" shall mean the Series A preferred stock,
no par value, of ICBK.
(aj) "ICBK STOCK PLAN" shall have the meaning set forth in Section
5.12.
(ak) "INDEMNIFIED PARTY" shall have the meaning set forth in Section
8.07.
(al) "LIENS" shall have the meaning set forth in Section 5.03.
(am) "MATERIAL ADVERSE EFFECT" shall have the meaning set forth in
Section 5.01.
(an) "MERGER" shall have the meaning set forth in the recitals to this
Agreement.
(ao) "MERGER CONSIDERATION" shall mean the combination of (i)
NationsBank Common Stock and (ii) cash in lieu of fractional shares to be
issued by NationsBank in the Merger.
(ap) "NASD" shall mean the National Association of Securities Dealers,
Inc.
(aq) "NATIONSBANK" shall have the meaning set forth in the
introduction to this Agreement.
(ar) "NATIONSBANK COMMON STOCK" shall mean the common stock of
NationsBank.
(as) "NATIONSBANK COMMON STOCK EXCHANGE VALUE PER SHARE" shall mean
the average closing price of one share of NationsBank Common Stock computed
for the 10 trading day period on the NYSE Composite Transactions List (as
reported by THE WALL STREET JOURNAL or, if not reported thereby, any other
authoritative source) ending five business days prior to the Closing.
(at) "NATIONSBANK FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 6.04.
(au) "NATIONSBANK SEC DOCUMENTS" shall have the meaning set forth in
Section 6.04.
(av) "NON-KEY EMPLOYMENT AGREEMENT" shall have the meaning set forth
in Section 5.13.
(aw) "NYSE" shall mean the New York Stock Exchange, Inc.
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<PAGE>
(ax) "OCC" shall mean the Office of the Comptroller of the Currency.
(ay) "PAMCO" shall mean Pan American Mortgage Corp., a wholly-owned
subsidiary of ICBK.
(az) "PERSON" or "PERSON" shall mean any individual, corporation,
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
(ba) "PROXY STATEMENT" shall have the meaning set forth in Section
5.18.
(bb) "REDEMPTION" shall have the meaning set forth in Section 3.01.
(bc) "REGISTRATION STATEMENT" shall have the meaning set forth in
Section 5.18
(bd) "REGULATORY AGREEMENTS" shall have the meaning set forth in
Section 5.11(b).
(be) "REGULATORY AUTHORITIES" shall have the meaning set forth in
Section 5.11(b).
(bf) "REMEDIES EXCEPTION" shall mean bankruptcy, insolvency,
reorganization, moratorium and similar laws.
(bg) "REPORTS" shall have the meaning set forth in Section 5.17.
(bh) "RESTRICTED STOCK" SHALL HAVE THE MEANING SET FORTH IN SECTION
8.08.
(bi) "SEC" shall mean the Securities and Exchange Commission.
(bj) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(bk) "SECURITIES LAWS" shall have the meaning set forth in Section
5.04(c).
(bl) "SECURITIES REPORTING DOCUMENTS" shall have the meaning set forth
in Section 5.05.
(bm) "STATE REGULATORY COMMISSIONERS" shall have the meaning set forth
in Section 5.04(c).
(bn) "STOCKHOLDERS' MEETINGS" shall have the meaning set forth in
Section 5.18.
(bo) "SUBSIDIARY" shall mean, in the case of either NationsBank or
ICBK, any corporation, association or other entity in which it owns or
controls, directly or indirectly, 25% or more of the outstanding voting
securities or 25% or more of the total equity interest; PROVIDED, HOWEVER,
that the term shall not include any such entity in which such voting
securities or equity interest is owned or controlled in a fiduciary
capacity, without sole voting power, or was acquired in securing or
collecting a debt previously contracted in good faith.
(bp) "SURVIVING ASSOCIATION" shall have the meaning set forth in
Section 2.01.
(bq) "TAX" or "TAXES" shall mean all federal, state, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments,
including, without limitation, income, gross receipts, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use,
commercial rent, customs duties, capital stock, paid up capital, profits,
withholding, Social Security, single business and unemployment, disability,
real property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposed or required to be withheld by the United
States or any state, local, foreign government or subdivision or agency
thereof, including, without limitation, any interest, penalties or
additions thereto.
(br) "TAXABLE PERIOD" shall mean any period prescribed by any
governmental authority, including, but not limited to, the United States or
any state, local, foreign government or subdivision or agency thereof for
which a Tax Return is required to be filed or Tax is Required to be paid.
(bs) "TAX RETURN" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in
connection with Taxes, including, without limitation, any return of an
affiliated or combined or unitary group that includes ICBK or its
Subsidiary.
(bt) "TERMINATION FEE" shall have the meaning set forth in Section
8.15.
(bu) "VOTING POWER" shall mean the right to vote generally in the
election of Directors of ICBK through the beneficial ownership of ICBK
Common Stock, ICBK Preferred Stock or other securities entitled to vote
generally in the election of Directors of ICBK.
A-7
<PAGE>
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
2.01 MERGER.
(a) NationsBank shall cause the Bank to be formed as an interim or DE
NOVO banking association under the banking laws of the United States and a
wholly-owned subsidiary of NationsBank, which association shall have its
principal place of business located in Miami, Florida or another city in
Florida designated by NationsBank (the "Headquarters City"). The Bank shall
be authorized by its Articles of Association to issue at least 560,000
shares of stock, $5 par value (the "Bank Common Stock") and shall have
stated capital of approximately $2,800,000 and surplus of approximately
$560,000. Upon organization of the Bank, NationsBank shall cause the Board
of Directors of the Bank (i) to approve this Agreement and the transactions
contemplated hereunder and (ii) to authorize and direct an officer of the
Bank to execute and deliver this Agreement.
(b) Subject to the terms and conditions of this Agreement, at the
Effective Time of the Merger (as defined in Section 2.03 of this
Agreement), ICBK shall be merged with and into the Bank in accordance with
the provisions of the Florida Banking Code and the banking laws of the
United States of America and with the effect provided therein. The separate
corporate existence of ICBK shall thereupon cease, and the Bank shall be
the surviving association in the Merger (the "Surviving Association") and
shall continue to be governed by the banking laws of the United States.
(c) The name of the Surviving Association shall be "Intercontinental
Bank, N.A." or some other name designated by NationsBank. As of the
Effective Time of the Merger, the Articles of Association of the Surviving
Association shall be amended to increase the par value of the common stock
of the Surviving Association from $5 per share to $100 per share. The
Articles of Association, as amended, and Bylaws of the Surviving
Association shall continue in effect until amended as provided by law.
(d) All assets of ICBK as they exist at the Effective Time of the
Merger shall pass to and vest in the Surviving Association without any
conveyance or other transfer. The Surviving Association shall be
responsible and liable for all of the liabilities of every kind and
description, including liabilities arising from the operation of a trust
department, of each of the merging banks existing as of the Effective Time
of the Merger. The members of a committee of six members, three to be
appointed by the Board of Directors of each of ICBK and the Bank at the
time of the Merger, shall have satisfied themselves that the statement of
condition of ICBK as of March 31, 1995 fairly presents its financial
condition and since that date there has been no change which would have a
Material Adverse Effect in the financial condition or business of ICBK.
(e) The business of the Surviving Association after the Merger shall
continue to be that of a national banking association and shall be
conducted at its main office located at the Headquarters City and at its
legally established branches.
(f) Except as otherwise contemplated herein, ICBK shall contribute to
the Surviving Association acceptable assets having a book value, over and
above its liability to its creditors, of at least $90,000,000. At the
Effective Time, the Bank shall have on hand acceptable assets having a book
value, over and above its liability to its creditors, of at least
$2,800,000.
(g) At the Effective Time and based on March 31, 1995 financial
information for ICBK, the Surviving Association will have (i) 560,000
authorized shares of common stock, all of which shares will be issued and
outstanding, (ii) surplus of an amount equal to the value of the
NationsBank Common Stock issued to ICBK Stockholders in the Merger minus
$52,640,000 and (iii) undivided profits (including capital reserves) equal
to any earnings and expenses of the Bank between its formation date and the
Effective Time.
(h) The following named persons shall serve as the board of directors
of the Surviving Association until the next annual meeting of its
stockholders or until such time as their successors shall have been elected
and qualified:
Hugh M. Chapman
H. Michael Dye
William L. Morrison
Adelaide A. Sink
Karen L. Wren
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<PAGE>
2.02 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at the offices of counsel to
ICBK in Miami, Florida at 10:00 A.M. on the date that the Effective Time occurs,
or at such other time, and at such place, as may be mutually agreed upon by
NationsBank and ICBK.
2.03 EFFECTIVE TIME. The Effective Time shall occur on or promptly after
the first business day following the last to occur of (i) the date that is 30
days after the date of the order of the Federal Reserve Board approving the
Merger pursuant to the BHCA or 30 days after the date of the Order of the OCC
approving the Merger pursuant to the Bank Merger Act, as applicable, (ii) the
effective date of the last order, approval, or exemption of any other federal or
state regulatory agency approving or exempting the Merger if such action is
required, (iii) the expiration of all required waiting periods after the filing
of all notices to all federal or state regulatory agencies required for
consummation of the Merger, and (iv) the date on which the stockholders of ICBK
approve this Agreement, in each case as contemplated hereby, AND shall be a date
and time specified in a Certification of Merger to be issued by the OCC.
2.04 RESERVATION OF RIGHT TO REVISE TRANSACTION; FURTHER ACTIONS. (a)
NationsBank may at any time change the method of effecting the acquisition of
ICBK by NationsBank (including, without limitation, the provisions as set forth
in Article III) if and to the extent that it deems such a change to be
desirable; provided, however, that no such change shall (A) alter or change the
amount or the kind of the consideration to be received by the holders of ICBK
Common Stock as provided for in this Agreement; (B) adversely affect the tax
treatment to ICBK stockholders as a result of receiving the consideration (in
the opinion of NationsBank's tax counsel); or (C) take the form of an asset
purchase agreement.
(b) To facilitate the Merger and the acquisition, each of the parties will
execute such additional agreements and documents and take such other actions as
NationsBank determines necessary or appropriate.
ARTICLE III
MANNER OF CONVERTING SHARES
3.01 CONVERSION.
(a) Subject to the provisions of this Article III and of Article I, at
the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations
shall be converted as follows:
(i) Each of the shares of capital stock of the Bank issued and
outstanding immediately prior to the Effective Time shall remain
outstanding as one share of Common Stock of the Surviving Association;
(ii) Each share of ICBK Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and
become the right to receive a whole or a fractional number of shares of
NationsBank Common Stock equal to the Exchange Ratio;
(iii) Each ICBK Option outstanding as of the Effective Time shall
be treated in accordance with the provisions of Section 8.08; and
(iv) Each share of ICBK Preferred Stock issued and outstanding
immediately prior to the Effective Time shall be redeemed at the $1.00
per share price provided in the ICBK Articles of Incorporation (the
"Redemption").
(b) Each of the shares of ICBK capital stock held by NationsBank or
any of its wholly owned Subsidiaries or ICBK or its wholly owned
Subsidiaries, other than shares held by NationsBank or any of its wholly
owned Subsidiaries or ICBK or its wholly owned Subsidiaries in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled
and retired at the Effective Time and no consideration shall be issued in
exchange therefor.
(c) Notwithstanding any other provision of this Agreement, each holder
of shares of ICBK capital stock exchanged pursuant to the Merger or of
options to purchase shares of ICBK Common Stock, who would otherwise have
been entitled to receive a fraction of a share of NationsBank Common Stock
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of NationsBank Common Stock multiplied by
the agreed value (the "Agreed Value") of one share of NationsBank Common
Stock at the Effective Time. The Agreed Value of one share of NationsBank
Common Stock at the Effective Time shall be the NationsBank Common Stock
Exchange Value Per Share. No such holder will be entitled to dividends,
voting rights or any other rights as a stockholder in respect of any
fractional share.
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<PAGE>
(d) At the Effective Time, the stock transfer books of ICBK shall be
closed as to holders of ICBK capital stock immediately prior to the
Effective Time and no transfer of ICBK capital stock by any such holder
shall thereafter be made or recognized. If, after the Effective Time,
certificates are properly presented in accordance with Article IV of this
Agreement to the exchange agent, which shall be selected by NationsBank
(the "Exchange Agent"), such certificates shall be canceled and exchanged
for certificates representing the number of whole shares of NationsBank
Common Stock and a check representing the amount of cash in lieu of
fractional shares, if any, into which the ICBK capital stock or ICBK
Options represented thereby was converted in the Merger. Any other
provision of this Agreement notwithstanding, neither NationsBank, the
Surviving Association nor the Exchange Agent shall be liable to a holder of
ICBK capital stock for any amount paid or property delivered in good faith
to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
3.02 ANTI-DILUTION PROVISIONS. The Exchange Ratio shall be adjusted
appropriately to reflect any stock dividends, splits, recapitalizations or other
similar transactions with respect to the NationsBank Common Stock where the
record date occurs prior to the Effective Time.
ARTICLE IV
EXCHANGE OF SHARES
4.01 EXCHANGE PROCEDURES. Before or promptly after the Effective Time,
NationsBank and ICBK shall cause the Exchange Agent to mail appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
ICBK capital stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent) to the former stockholders of ICBK. After the Effective
Time, each holder of shares of ICBK capital stock issued and outstanding at the
Effective Time (other than shares to be canceled pursuant to Section 3.01(b))
shall surrender the certificate or certificates theretofore representing such
shares, together with such transmittal materials properly executed, to the
Exchange Agent and promptly upon surrender shall receive in exchange therefor
the consideration provided in Section 3.01 of this Agreement, together with all
declared but unpaid dividends in respect of such shares. The certificate or
certificates for ICBK capital stock so surrendered shall be duly endorsed as the
Exchange Agent may require. To the extent provided by Section 3.01(c), each
holder of shares of ICBK capital stock issued and outstanding at the Effective
Time also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional shares of NationsBank
Common Stock to which such holder would otherwise be entitled. NationsBank shall
not be obligated to deliver the consideration to which any former holder of ICBK
capital stock is entitled as a result of the Merger until such holder surrenders
his certificate or certificates representing shares of ICBK capital stock for
exchange as provided in this Article IV. In addition, certificates surrendered
for exchange by any person constituting an "affiliate" of ICBK for purposes of
Rule 145(c) under the Securities Act shall not be exchanged for certificates
representing whole shares of NationsBank Common Stock until NationsBank has
received a written agreement from such person as provided in Section 8.06. If
any certificate for shares of NationsBank Common Stock, or any check
representing cash or declared but unpaid dividends, is to be issued in a name
other than that in which a certificate surrendered for exchange is issued, the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the certificate surrendered or provide
funds for their purchase or establish to the satisfaction of the Exchange Agent
that such taxes are not payable.
4.02 VOTING AND DIVIDENDS. Former stockholders of record of ICBK shall be
entitled to vote after the Effective Time at any meeting of NationsBank
stockholders the number of whole shares of NationsBank Common Stock into which
their respective shares of ICBK capital stock are converted, regardless of
whether such holders have exchanged their certificates representing ICBK capital
stock for certificates representing NationsBank Common Stock in accordance with
the provisions of this Agreement. Until surrendered for exchange in accordance
with the provisions of Section 4.01, each certificate theretofore representing
shares of ICBK capital stock (other than shares to be canceled pursuant to
Section 3.01) shall from and after the Effective Time represent for all purposes
only the right to receive shares of NationsBank Common Stock and cash, as set
forth in this Agreement. No dividend or other distribution payable to the
holders of record of NationsBank Common Stock, at or as of any time after the
Effective Time, shall be paid to the holder of any certificate representing
shares of ICBK capital stock issued and outstanding at the Effective Time until
such holder physically surrenders such certificate for exchange as provided in
Section 4.01, promptly after which time all such dividends or distributions
shall be paid (without interest).
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ICBK
ICBK represents and warrants to NationsBank, subject to such exceptions and
limitations as are set forth below or in the ICBK Disclosure Schedule, as
follows:
5.01 ORGANIZATION, STANDING, AND AUTHORITY. ICBK is a Florida
state-chartered commercial bank. ICBK is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be duly qualified
would have a material adverse effect on the financial condition, results of
operations or business (the "Condition") of ICBK and its Subsidiaries on a
consolidated basis or on the ability of ICBK to consummate the transactions
contemplated hereby (a "Material Adverse Effect"). ICBK has all requisite
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its assets, properties and business, except where the
failure to have such power and authority would not have a Material Adverse
Effect, and to execute and deliver this Agreement and perform the terms of this
Agreement. ICBK has in effect all federal, state, local and foreign
governmental, regulatory and other authorizations, permits and licenses
(collectively, "Authorizations") necessary for it to own or lease its properties
and assets and to carry on its business as now conducted, the absence of which,
either individually or in the aggregate, would have a Material Adverse Effect.
5.02 ICBK CAPITAL STOCK.
(a) The authorized capital stock of ICBK consists of 10,000,000 shares
of ICBK Common Stock and 2,000,000 shares of ICBK Preferred Stock. At March
31, 1995, there were outstanding 6,922,475 shares of ICBK Common Stock and
350,000 shares of ICBK Preferred Stock. At the same date, ICBK had stated
capital of $14,195,000, capital surplus of $59,429,000 and undivided
profits of $21,969,000. All of the issued and outstanding shares of ICBK
capital stock are duly and validly issued and outstanding and are fully
paid and nonassessable. None of the outstanding shares of the ICBK capital
stock has been issued in the violation of any preemptive rights or any
provision of ICBK's Articles of Incorporation. As of March 31, 1995, ICBK
has reserved 656,400 shares of ICBK Common Stock for issuance under the
ICBK Options and no other shares of capital stock have been reserved for
any purpose.
(b) Except as set forth in Section 5.12 of the ICBK Disclosure
Schedule, there are no shares of capital stock, or other equity securities
of ICBK outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of ICBK or contracts, commitments, understandings or
arrangements by which ICBK is or may be bound to issue additional shares of
its capital stock or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. There are no contracts,
commitments, understandings or arrangements by which ICBK or any of its
Subsidiaries is or may be bound to transfer any shares of the capital stock
of any Subsidiary of ICBK, except for a transfer to ICBK or any of its
wholly owned Subsidiaries and except as set forth in the ICBK Disclosure
Schedule, and there are no agreements, understandings or commitments
relating to the right of ICBK to vote or to dispose of such shares, other
than such as are held in a fiduciary capacity.
(c) Except as set forth in Section 5.02(c) of the ICBK Disclosure
Schedule, there are no securities required to be issued by ICBK under any
ICBK Stock Plan, dividend reinvestment or similar plan.
5.03 SUBSIDIARIES. Section 5.03 of the ICBK Disclosure Schedule contains a
complete list of ICBK's subsidiaries. All of the outstanding shares of each
Subsidiary are owned by ICBK and no equity securities are or may become required
to be issued by reason of any options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any Subsidiary, and there
are no contracts, commitments, understandings or arrangements by which any
Subsidiary is bound to issue additional shares of its capital stock or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock. All of the shares of capital stock of each Subsidiary are fully paid and
nonassessable and are owned free and clear of any claim, lien, pledge or
encumbrance of whatsoever kind ("Liens"). Each Subsidiary (i) is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, (ii) is duly qualified to do business and
in good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be so qualified would
have a Material Adverse Effect, (iii) has all requisite corporate power and
authority to own or lease its properties and assets and to carry on its business
as now conducted and (iv) has in effect all Authorizations necessary for it to
own or lease its properties and assets and to carry on its business as now
conducted, the absence of which Authorizations, individually or in the
aggregate, would have a Material Adverse Effect.
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5.04 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of ICBK, including approval of the Merger by its Board of Directors,
subject to the approval of the stockholders of ICBK with respect to the
Merger to the extent required by the applicable law. This Agreement,
subject to any requisite stockholder approval hereof with respect to the
Merger, represents a valid and legally binding obligation of ICBK,
enforceable against ICBK in accordance with its terms, except as such
enforcement may be limited by the Remedies Exception.
(b) Except as set forth in the ICBK Disclosure Schedule, neither the
execution and delivery of this Agreement by ICBK, nor the consummation by
ICBK of the transactions contemplated hereby or thereby nor compliance by
ICBK with any of the provisions hereof or thereof will (i) conflict with or
result in a breach of any provision of ICBK's Articles of Incorporation or
bylaws or (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give rise to any
right of termination, cancellation or acceleration with respect to, or
result in the creation of any Lien upon, any property or assets of any of
ICBK or its Subsidiaries pursuant to any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which any of
them is a party or by which any of them or any of their properties or
assets may be subject and that would have in any such event, a Material
Adverse Effect, or (iii) subject to receipt of the requisite approvals
referred to in Sections 9.01(a) and 9.01(b) of this Agreement, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
ICBK or its Subsidiaries or any of their properties or assets.
(c) Other than (i) in connection or compliance with the provisions of
applicable state corporate and securities laws, the Securities Act, the
Exchange Act, and the rules and regulations of the SEC or the FDIC
promulgated thereunder (the "Securities Laws"), and (ii) consents,
authorizations, approvals or exemptions required from the Department and
necessary state insurance commissioners (collectively, the "State
Regulatory Commissioners"), the OCC or from the Federal Reserve Board, no
notice to, filing with, authorization of, exemption by, or consent or
approval of any public body or authority is necessary for the consummation
by ICBK of the Merger and the other transactions contemplated in this
Agreement.
5.05 SECURITIES REPORTING DOCUMENTS AND FINANCIAL STATEMENTS. ICBK (i) has
delivered to NationsBank copies of the consolidated balance sheets and the
related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes and schedules) of ICBK and its
consolidated Subsidiaries as of and for the periods ended March 31, 1995 and
December 31, 1994 included in a quarterly report on Form F-4 or an annual report
on Form F-2, as the case may be, filed by ICBK pursuant to the Securities Laws,
and (ii) has furnished NationsBank with a true and complete copy of each
material report, schedule, registration statement and definitive proxy statement
filed by ICBK with the FDIC from and after January 1, 1993 (each a "Securities
Reporting Document"), which are all the material documents (other than
preliminary material) that ICBK was required to file with the FDIC since such
date and all of which complied when filed in all material respects with all
applicable laws and regulations (clauses (i) and (ii), and the financial
statements and related notes and schedules included in the Securities Reporting
Documents, collectively, the "ICBK Financial Statements"). The ICBK Financial
Statements (as of the dates thereof and for the periods covered thereby) (A) are
or will be in accordance with the books and records of ICBK and its
Subsidiaries, which are or will be complete and accurate in all material
respects and which have been or will have been maintained in accordance with
good business practices, and (B) present or will present fairly the consolidated
financial position and the consolidated results of operations, changes in
stockholders' equity and cash flows of ICBK and its Subsidiaries as of the dates
and for the periods indicated, in accordance with GAAP consistently applied
except as disclosed, subject in the case of interim financial statements to
normal recurring year-end adjustments and except for the absence of certain
footnote information in the unaudited statements. ICBK has delivered to
NationsBank (i) copies of all management letters prepared by Arthur Andersen LLP
(and any predecessor thereto) delivered to ICBK since January 1, 1993 and (ii)
copies of audited balance sheets and related statements of income, changes in
stockholders' equity and cash flows for any Subsidiary of ICBK since January 1,
1993 for which a separate audit has been performed.
5.06 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the ICBK
Disclosure Schedule, neither ICBK nor any of its Subsidiaries has any
obligations or liabilities (contingent or otherwise) in the amount of $100,000
or more, except obligations and liabilities (i) which are fully accrued or
reserved against in the consolidated balance sheet of ICBK and its Subsidiaries
as of December 31, 1994 included in the ICBK Financial Statements or reflected
in the notes thereto, or (ii) which were incurred after December 31, 1994 in the
ordinary course of business consistent with past practice. Except as set forth
in the ICBK Disclosure Schedule, since December 31, 1994, neither ICBK nor any
of its Subsidiaries has incurred or paid any obligation or liability which would
have a Material Adverse Effect.
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5.07 TAX MATTERS. Except as set forth in Section 5.07 of the ICBK
Disclosure Schedule:
(a) All Tax Returns required to be filed by or on behalf of ICBK or
any of its Subsidiaries have been timely filed, or requests for extensions
have been timely filed, granted and have not expired, for periods ending on
or before December 31, 1994, and all such returns filed are complete and
accurate in all material respects.
(b) There is no audit examination, deficiency or refund litigation or
matter in controversy with respect to any Taxes that might reasonably be
expected to result in a determination the effect of which would have a
Material Adverse Effect. All Taxes due with respect to completed and
settled examinations or concluded litigation have been paid or adequately
reserved for.
(c) ICBK has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due that is
currently in effect.
(d) Adequate provision for any Taxes due or to become due for ICBK and
any of its Subsidiaries for any period or periods through and including
March 31, 1995, has been made and is reflected on the March 31, 1995
financial statements included in the ICBK Financial Statements. Deferred
Taxes of ICBK and its Subsidiaries have been provided for in the ICBK
Financial Statements in accordance with GAAP, applied on a consistent
basis.
(e) ICBK and its Subsidiaries have collected and withheld all Taxes
which they have been required to collect or withhold and have timely
submitted all such collected and withheld amounts to the appropriate
authorities. ICBK and its Subsidiaries are in compliance with the back-up
withholding and information reporting requirements under (1) the Code, and
(2) any state, local or foreign laws, and the rules and regulations,
thereunder.
(f) Neither ICBK nor any of its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any contract, agreement or
other arrangement that could obligate it to make any payments that would
not be deductible under Section 280G of the Code.
5.08 ALLOWANCE FOR CREDIT LOSSES. The allowance for credit losses (the
"Allowance") shown on the consolidated statement of condition of ICBK and its
Subsidiaries as of March 31, 1995 included in the ICBK Financial Statements and
the Allowance shown on the consolidated statement of condition of ICBK and its
Subsidiaries, as of dates subsequent to the execution of this Agreement included
in the ICBK Financial Statements will be, in each case as of the dates thereof,
adequate to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of ICBK and its
Subsidiaries; other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by ICBK and its Subsidiaries; and
the off balance sheet exposures of ICBK and its Subsidiaries.
5.09 OTHER TAX AND REGULATORY MATTERS. Neither ICBK nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent the transactions contemplated
hereby, including the Merger, from qualifying as a reorganization within the
meaning of Section 368 of the Code, or (ii) materially impede or delay receipt
of any approval referred to in Section 9.01(b).
5.10 PROPERTIES. Except as disclosed in any Securities Reporting Document
filed since December 31, 1994 and prior to the date hereof and except for Liens
arising in the ordinary course of business after the date hereof, ICBK and its
Subsidiaries have good and marketable title, free and clear of all Liens that
are material to the Condition of ICBK and its Subsidiaries on a consolidated
basis, to all their material properties and assets whether tangible or
intangible, real, personal or mixed, reflected in the ICBK Financial Statements
as being owned by ICBK and its Subsidiaries as of the date hereof. All
buildings, and all fixtures, equipment and other property and assets which are
material to its business on a consolidated basis, held under leases or subleases
by any of ICBK or its Subsidiaries are held under valid instruments enforceable
in accordance with their respective terms, subject to the Remedies Exception.
Substantially all of ICBK's and ICBK's Subsidiaries' equipment in regular use
has been well maintained and is in good serviceable condition, reasonable wear
and tear excepted.
5.11 COMPLIANCE WITH LAWS.
(a) Except as set forth in the ICBK Disclosure Schedule, each of ICBK
and its Subsidiaries is in compliance with all laws, rules, regulations,
policies, guidelines, reporting and licensing requirements and orders
applicable to its business or to its employees conducting its business, and
with its internal policies and procedures except for failures to comply
which will not result in a Material Adverse Effect.
(b) Except as set forth in the ICBK Disclosure Schedule, neither ICBK
nor any of its Subsidiaries has received any notification or communication
from any agency or department of any federal, state or local government,
including the
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Federal Reserve Board, or the OCC, the FDIC, the State Regulatory
Commissioners, the SEC and the NASD and the staffs thereof (collectively,
the "Regulatory Authorities") (i) asserting that any of ICBK or its
Subsidiaries is not in substantial compliance with any of the statutes,
regulations, or ordinances which such agency, department or Regulatory
Authority enforces, or the internal policies and procedures of such
company, (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to the Condition of ICBK and
its Subsidiaries on a consolidated basis, (iii) requiring or threatening to
require ICBK or any of its Subsidiaries, or indicating that ICBK or any of
its Subsidiaries may be required to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement restricting
or limiting or purporting to restrict or limit in any manner the operations
of ICBK or any of its Subsidiaries, including, without limitation, any
restriction on the payment of dividends, or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit in any manner the
operations of ICBK or any of its Subsidiaries, including, without
limitation, any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence
herein referred to as a "Regulatory Agreement").
(c) Neither ICBK nor any of its Subsidiaries has consented to or
entered into any Regulatory Agreement or memorandum of understanding.
(d) Neither ICBK nor any of its Subsidiaries is required by Section 32
of FDIA to give prior notice to a federal banking agency of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior executive officer.
5.12 EMPLOYEE BENEFIT PLANS.
(a) ICBK has delivered or made available to NationsBank prior to the
execution of this Agreement true and complete copies (or, in the case of
bonus or other incentive plans, summaries thereof and financial data with
respect thereto) of all material pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance
pay, vacation, bonus or other material incentive plans, all other material
employee programs, arrangements or agreements, whether arrived at through
collective bargaining or otherwise, all material medical, vision, dental or
other health plans, all life insurance plans and all other material
employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently adopted by, maintained by, sponsored in whole or in
part by, or contributed to by ICBK or any of its Subsidiaries or any
affiliate thereof for the benefit of any Employee or under which any
Employee is eligible to participate and under which ICBK or any of its
Subsidiaries could have any liability contingent or otherwise
(collectively, the "ICBK Benefit Plans"). Any of the ICBK Benefit Plans
which is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "ICBK ERISA Plan." Any of
the ICBK Benefit Plans pursuant to which ICBK is or may become obligated
to, or obligated to cause any of its Subsidiaries or any other Person to,
issue, deliver or sell shares of capital stock of ICBK or any of its
Subsidiaries, or grant, extend or enter into any option, warrant, call,
right, commitment or agreement to issue, deliver or sell shares, or any
other interest in respect of capital stock of ICBK or any of its
Subsidiaries, is referred to herein as a "ICBK Stock Plan." No ICBK Benefit
Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA. ICBK has set forth in Section 5.12 of the ICBK Disclosure
Schedule (i) a list of all of the ICBK Benefit Plans, (ii) a list of ICBK
Benefit Plans that are ICBK ERISA Plans, (iii) a list of ICBK Benefit Plans
that are ICBK Stock Plans and (iv) a list of the number of shares covered
by, exercise prices for, and holders of, all stock options granted and
available for grant under the ICBK Stock Plans.
(b) All ICBK Benefit Plans are in substantial compliance with the
applicable terms of ERISA and the Code and any other applicable laws, rules
and regulations the breach or violation of which could reasonably be
expected to result in a Material Adverse Effect.
(c) All liabilities under any ICBK Benefit Plan are fully accrued or
reserved against in the ICBK Financial Statements in accordance with GAAP.
No ICBK ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of
any such plan exceeds the plan's "benefit liabilities," as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements.
(d) Neither ICBK nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any ICBK Benefit Plan or otherwise,
except as set forth in the ICBK Disclosure Schedule. There are no
restrictions on the rights of
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ICBK or its Subsidiaries to amend or terminate any such ICBK Benefit Plan
without incurring any material liability thereunder, except for such
restrictions as would not have a Material Adverse Effect.
(e) Except as set forth in the ICBK Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby or thereby will (i) result in any payment
(including, without limitation, severance, golden parachute or otherwise)
becoming due to any Employees under any ICBK Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any ICBK Benefit Plan or
(iii) result in any acceleration of the time of payment or vesting of any
such benefits.
5.13 COMMITMENTS AND CONTRACTS. Except as set forth in the ICBK Disclosure
Schedule, neither ICBK nor any of its Subsidiaries is a party or subject to, or
has amended or waived any rights under, any of the following (whether written or
oral, express or implied):
(a) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any Employees, including in any such
person's capacity as a consultant (other than those which either (i) are
terminable at will by ICBK or such Subsidiary or (ii) do not involve
payments with a present value of more than $100,000 by ICBK or such
Subsidiary during the remaining term thereof without giving effect to
extensions or renewals made after the date hereof (any such contract or
understanding involving payments with a present value of $100,000 or less
being referred to herein as a "Non-Key Employment Agreement"));
(b) any labor contract or agreement with any labor union;
(c) any contract not made in the usual, regular and ordinary course of
business containing non-competition covenants which limit the ability of
ICBK or any of its Subsidiaries to compete in any line of business or which
involve any restriction of the geographical area in which ICBK or its
Subsidiaries may carry on its business (other than as may be required by
law or applicable Regulatory Authorities);
(d) any other contract or agreement which would be required to be
disclosed as an exhibit to ICBK's annual report on Form F-2 and which has
not been so disclosed;
(e) any real property lease with annual rental payments aggregating
$50,000 or more;
(f) any employment or other contract requiring the payment of
additional amounts as "change of control" payments as a result of
transactions contemplated by this Agreement;
(g) any agreement with respect to (i) the acquisition of the assets or
stock of another financial institution or (ii) the sale of one or more bank
branches which would require additional payments by ICBK after the date of
this Agreement; or
(h) any outstanding interest rate exchange or other derivative
contracts.
ICBK has set forth in the ICBK Disclosure Schedule financial information with
respect to the aggregate present value of all of ICBK's liabilities and
obligations associated with its Non-Key Employment Agreements.
5.14 MATERIAL CONTRACT DEFAULTS. Neither ICBK nor any of its Subsidiaries
is, or has received any notice or has any knowledge that any party is, in
default in any respect under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which ICBK or any of its
Subsidiaries is a party or by which ICBK or any of its Subsidiaries or the
assets, business or operations thereof may be bound or affected or under which
it or its respective assets, business or operations receives benefits, except
for those defaults which would not have, individually or in the aggregate, a
Material Adverse Effect; and there has not occurred any event that with the
lapse of time or the giving of notice of both would constitute such a default.
5.15 LEGAL PROCEEDINGS. Except as set forth in the ICBK Disclosure
Schedule, there are no actions, suits, proceedings or investigations by
Regulatory Authorities instituted or pending or, to the best knowledge of ICBK's
management, threatened against ICBK or any of its Subsidiaries, or against any
property, asset, interest or right of any of them, that might reasonably be
expected to result in a judgment in excess of $100,000 or that might reasonably
be expected to threaten or impede the consummation of the transactions
contemplated by this Agreement. Neither ICBK nor any of its Subsidiaries is a
party to any agreement or instrument or is subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule,
regulation, code or ordinance that, individually or in the aggregate, might
reasonably be expected to have a Material Adverse Effect or, might reasonably be
expected to threaten or impede the consummation of the transactions contemplated
by this Agreement.
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5.16 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994, except
(i) as disclosed in any Securities Reporting Document filed since December 31,
1994 and prior to the date hereof or (ii) as set forth in the ICBK Disclosure
Schedule, neither ICBK nor any of its Subsidiaries has (A) incurred any
liability which has had a Material Adverse Effect, (B) suffered any change in
its Condition which would have a Material Adverse Effect, (C) failed to operate
its business consistent in all material respects with past practice or (D)
changed any accounting practices.
5.17 REPORTS. Since January 1, 1992, ICBK and each of its Subsidiaries have
filed on a timely basis all reports and statements, together with all amendments
required to be made with respect thereto (collectively "Reports"), that they
were required to file with (i) the FDIC, including, without limitation, all
Forms F-2, F-3, F-4 and F-5, (ii) the Federal Reserve Board, (iii) the
Department, (iv) any other applicable state securities or banking authorities
(except, in the case of state securities authorities, filings which are not
material) and (v) the NASD. No Securities Reporting Document with respect to
periods beginning on or after January 1, 1992, contained any information that
was false or misleading with respect to any material fact or omitted to state
any material fact necessary in order to make the statements therein not
misleading.
5.18 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by ICBK for inclusion in the registration statement on Form S-4, or
other appropriate form, to be filed with the SEC by NationsBank under the
Securities Act in connection with the transactions contemplated by this
Agreement (the "Registration Statement"), or the proxy statement to be used by
ICBK to solicit any required approval of its stockholders as contemplated by
this Agreement (the "Proxy Statement") will, in the case of the Proxy Statement,
when it is first mailed to the stockholders of ICBK, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which such statements are made, not misleading, or, in the case of the
Registration Statement, when it becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the meetings of the stockholders of ICBK to be held pursuant to Section 8.03 of
this Agreement, including any adjournments thereof (the "Stockholders'
Meetings"), be false or misleading with respect to any material fact or omit to
state any material fact necessary to correct any statement or remedy any
omission in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meetings. All documents that ICBK is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable law, including applicable provisions of the Securities
Laws. The information which is deemed to be set forth in the ICBK Disclosure
Schedule by ICBK for the purposes of this Agreement is true and accurate in all
material respects.
5.19 INSURANCE. ICBK and each of its Subsidiaries are presently insured,
and during each of the past five calendar years have been insured, for
reasonable amounts against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily be insured. The
policies of fire, theft, liability (including directors and officers liability
insurance) and other insurance maintained with respect to the assets or
businesses of ICBK and its Subsidiaries provide adequate coverage against all
pending or threatened claims, and the fidelity bonds in effect as to which any
of ICBK or any of its Subsidiaries is a named insured are sufficient for their
purpose, except where the failure to have such coverage would not have a
Material Adverse Effect.
5.20 LABOR. No material work stoppage involving ICBK or its Subsidiaries is
pending or, to the best knowledge of ICBK's management, threatened. Neither ICBK
nor any of its Subsidiaries is involved in, or, to the best knowledge of ICBK's
management, threatened with or affected by, any labor or other
employment-related dispute, arbitration, lawsuit or administrative proceeding
which might reasonably be expected to have a Material Adverse Effect. Employees
of ICBK and its Subsidiaries are not represented by any labor union, and, to the
best knowledge of ICBK's management, no labor union is attempting to organize
employees of ICBK or any of its Subsidiaries.
5.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in ICBK's
Proxy Statement for its 1994 Annual Meeting of Stockholders or as set forth in
the ICBK Disclosure Schedule, no executive officer or director of ICBK, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such executive officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of ICBK or any of its Subsidiaries.
5.22 REGISTRATION OBLIGATIONS. Neither ICBK nor any of its Subsidiaries is
under any obligation, contingent or otherwise, presently in effect or which will
survive the Merger by reason of any agreement to register any of its securities
under the Securities Act.
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5.23 BROKERS AND FINDERS. Except as set forth in the ICBK Disclosure
Schedule, neither ICBK nor any of its Subsidiaries nor any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for ICBK
or any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
5.24 STATE TAKEOVER LAWS. ICBK has taken all steps necessary to irrevocably
exempt the transactions contemplated by this Agreement from any applicable state
takeover law and from any applicable charter or contractual provision containing
change of control or anti-takeover provisions.
5.25 ENVIRONMENTAL MATTERS. To ICBK's best knowledge, neither ICBK, any of
its Subsidiaries, nor any properties owned or operated by ICBK or any of its
Subsidiaries or held as collateral by any of its Subsidiaries has been or is in
violation of or liable under any Environmental Law (as hereinafter defined),
except for such violations or liabilities that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect. There
are no actions, suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or pending, or to the
best knowledge of ICBK's management, threatened relating to the liability of any
properties owned or operated by ICBK or any of its Subsidiaries under any
Environmental Law, except for liabilities or violations that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
5.26 SUPPORT OF STOCKHOLDERS. To induce NationsBank to enter into this
Agreement ICBK has obtained and delivered to NationsBank letter agreements with
each of the following larger stockholders committing these stockholders to
actively support the Merger by, among other things, voting in favor of the
Merger at the Stockholders Meeting and not disposing of any ICBK Common Stock
other than pursuant to the Merger: Michael Weintraub, individually and as
Co-Trustee, the Joseph Weintraub Family Foundation, Inc., Hortense Weintraub,
Gibson Security Corp., Phillip Frost, Frost-Nevada Limited Partnership, Herbert
A. Wertheim, William L. Morrison and Jacqueline Simkin.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NATIONSBANK
NationsBank represents and warrants to ICBK as follows:
6.01 ORGANIZATION, STANDING AND AUTHORITY. NationsBank is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina. NationsBank is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be duly qualified
would have a Material Adverse Effect on the Condition of NationsBank and its
Subsidiaries taken as a whole. NationsBank has all requisite corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its assets, properties and business, and to execute and deliver this
Agreement and perform the terms of this Agreement. NationsBank is duly
registered as a bank holding company under the BHCA. NationsBank has in effect
all Authorizations necessary for it to own or lease its properties and assets
and to carry on its business as now conducted, the absence of which, either
individually or in the aggregate, would have a material adverse effect on the
Condition of NationsBank and its Subsidiaries on a consolidated basis.
6.02 NATIONSBANK CAPITAL STOCK. The authorized capital stock of NationsBank
consists of 800,000,000 shares of NationsBank Common Stock and 45,000,000 shares
of Preferred Stock. At March 31, 1995, there were outstanding approximately
275,418,000 shares of NationsBank Common Stock and approximately 2,591,000
shares of NationsBank Preferred Stock and no other shares of capital stock of
any class. All of the issued and outstanding shares of NationsBank Common Stock
are duly and validly issued and outstanding and are fully paid and
nonassessable.
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6.03 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of NationsBank, to the extent required by applicable law. This Agreement
represents a valid and legally binding obligation of NationsBank,
enforceable against NationsBank in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
NationsBank, nor the consummation by NationsBank of the transactions
contemplated hereby or thereby nor compliance by NationsBank with any of
the provisions hereof or thereof will (i) conflict with or result in a
breach of any provision of NationsBank's Articles of Incorporation or
bylaws or (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give rise to any
right of termination, cancellation or acceleration with respect to, or
result in the creation of any Lien upon any property or assets of any of
NationsBank or its Subsidiaries pursuant to any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to
which any of them is a party or by which any of them or any of their
properties or assets may be subject, and that would, in any such event,
have a Material Adverse Effect on the Condition of NationsBank and its
Subsidiaries on a consolidated basis or the transactions contemplated
hereby or thereby or (iii) subject to receipt of the requisite approvals
referred to in Section 9.01 of this Agreement, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to NationsBank
or any of its Subsidiaries or any of their properties or assets.
6.04 FINANCIAL STATEMENTS. NationsBank (i) has delivered to ICBK copies of
the consolidated balance sheets and the related consolidated statements of
income, consolidated statements of changes in shareholders' equity and
consolidated statements of cash flows (including related notes and schedules) of
NationsBank and its consolidated Subsidiaries as of and for the periods ended
March 31, 1995 and December 31, 1994 included in a quarterly report filed on
Form 10-Q or an annual report filed on Form 10-K, as the case may be, filed by
NationsBank pursuant to the Securities Laws (a "NationsBank SEC Document"), and
(ii) until the Closing will deliver to ICBK promptly upon the filing thereof
with the SEC copies of the consolidated balance sheets and related consolidated
statements of income, consolidated statements of changes in shareholders' equity
and consolidated statements of cash flows (including related notes and
schedules) included in any NationsBank SEC Documents filed subsequent to the
execution of this Agreement (clauses (i) and (ii) collectively, the "NationsBank
Financial Statements"). The NationsBank Financial Statements (as of the dates
thereof and for the periods covered thereby) (A) are or will be in accordance
with the books and records of NationsBank and its Consolidated Subsidiaries,
which are or will be complete and accurate in all material respects and which
have been or will have been maintained in accordance with good business
practices, and (B) present or will present fairly the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of NationsBank and its Subsidiaries as of the dates and
for the periods indicated, in accordance with GAAP, subject in the case of
interim financial statements to normal recurring year-end adjustments and except
for the absence of certain footnote information in the unaudited statements.
6.05 NATIONSBANK SEC REPORTS. Since January 1, 1993, NationsBank has filed
on a timely basis all reports and statements, together with all amendments
required to be made with respect thereto that it is required to file with the
SEC. No NationsBank SEC Document with respect to periods beginning on or after
January 1, 1993 and until the Closing contained or will contain any information
that was false or misleading with respect to any material fact or omitted or
will omit to state any material fact necessary in order to make the statements
therein not misleading.
6.06 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by NationsBank for inclusion in the Registration Statement or the Proxy
Statement will, in the case of the Proxy Statement, when it is first mailed to
the stockholders of ICBK, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which such statements are made, not
misleading or, in the case of the Registration Statement, when it becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Stockholders' Meetings, be false or
misleading with respect to any material fact or omit to state any material fact
necessary to correct any statement or remedy any omission in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meetings. All documents that NationsBank is responsible for filing
with any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Laws.
6.07 CAPITAL STOCK. At the Effective Time, the NationsBank Common Stock
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
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6.08 TAX AND REGULATORY MATTERS. Neither NationsBank nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would materially impede or delay receipt of any
approval referred to in Section 9.01(b).
6.09 LITIGATION. There are no judicial proceedings of any kind or nature
pending or, to the knowledge of NationsBank, threatened against NationsBank
before any court or arbitral tribunal or before or by any governmental
department, agency or instrumentality involving the validity of the NationsBank
Common Stock or the transactions contemplated by this Agreement.
6.10 BROKERS AND FINDERS. Except as previously disclosed to ICBK, neither
NationsBank nor any of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
NationsBank or any of its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE VII
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
7.01 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. During the period
from the date of this Agreement to the Effective Time, ICBK shall, and shall
cause each of its Subsidiaries to, (i) conduct its business in the usual,
regular and ordinary course consistent with past practice (other than
transactions made pursuant to contracts in existence on the date hereof and
described in Sections 7.01 or 7.02 of the ICBK Disclosure Schedule) and (ii) use
its best efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of its
officers and key Employees.
7.02 FORBEARANCES. During the period from the date of this Agreement to the
Effective Time, ICBK shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of NationsBank (and ICBK shall provide
NationsBank with prompt notice of any events referred to in this Section 7.02
occurring after the date hereof):
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness
of ICBK or any of its Subsidiaries to ICBK or any of its Subsidiaries; it
being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of
deposit liabilities, purchases of federal funds, sales of certificates of
deposit and entering into repurchase agreements), assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make
any loan or advance other than in the ordinary course of business
consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (other than regular quarterly cash dividends at
a rate not in excess of $0.10 per share) or make any other distribution on,
or (other than the Redemption) directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock, or grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock; or issue any additional shares of capital stock, or any securities
or obligations convertible into or exchangeable for any shares of its
capital stock, except pursuant to the exercise of ICBK Options outstanding
as of the date hereof.
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity, or
cancel, release or assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in
force at the date of this Agreement;
(d) make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation or other entity
other than to PAMCO or pursuant to transactions by PAMCO in connection with
contracts in existence on the date hereof and described in the ICBK
Disclosure Schedule;
(e) enter into or terminate any contract or agreement involving annual
payments in excess of $100,000 and which cannot be terminated without
penalty upon 30 days notice, or make any change in, or extension of, any of
its leases or contracts involving annual payments in excess of $100,000 and
which cannot be terminated without penalty upon 30 days notice;
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(f) increase or modify in any manner the compensation or fringe
benefits of any of its Employees or pay any pension or retirement allowance
not required by any existing plan or agreement to any such Employees, or
become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement
with or for the benefit of any Employee other than routine adjustments in
compensation and fringe benefits in the ordinary course of business
consistent with past practice or accelerate the vesting of any stock
options or other stock-based compensation;
(g) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code.
(h) settle any claim, action or proceeding involving the payment of
money damages in excess of $100,000, except in the ordinary course of
business consistent with past practice;
(i) amend its Articles of Incorporation or its bylaws;
(j) fail to maintain its Regulatory Agreements, material licenses and
permits or to file in a timely fashion all federal, state, local and
foreign tax returns;
(k) except in connection with the branch purchase and the furniture
purchase described in the ICBK Disclosure Schedule, make any capital
expenditures of more than $100,000 individually or $250,000 in the
aggregate;
(l) fail to maintain each ICBK Benefit Plan or timely make all
contributions or accruals required thereunder in accordance with GAAP
applied on a consistent basis;
(m) issue any additional shares of ICBK capital stock other than any
shares issued pursuant to ICBK Options outstanding at June 15, 1995; or
(n) agree to, or make any commitment to, take any of the actions
prohibited by this Section 7.02.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ACCESS AND INFORMATION.
(a) During the period from the date of this Agreement through the
Effective Time:
(i) ICBK shall, and shall cause its Subsidiaries to, afford
NationsBank, and its accountants, counsel and other representatives,
full access during normal business hours to the properties, books,
contracts, tax returns, commitments and records of ICBK and its
Subsidiaries at any time, and from time to time, for the purpose of
conducting any review or investigation reasonably related to the Merger,
and ICBK and its Subsidiaries will cooperate fully with all such reviews
and investigations.
(ii) NationsBank shall upon reasonable notice make personnel and
copies of its SEC reports available to ICBK and its advisors for
purposes of any review or report to its Board of Directors in evaluating
the Merger.
(b) During the period from the date of this Agreement through the
Effective Time, ICBK shall furnish to NationsBank (i) all Reports referred
to in Section 5.17 promptly upon the filing thereof, (ii) a copy of each
Tax Return filed by it and (iii) monthly and other interim financial
statements in the form prepared by ICBK for its internal use. During this
period, ICBK also shall notify NationsBank promptly of any material change
in the Condition of ICBK or any of its Subsidiaries.
(c) Notwithstanding the foregoing provisions of this Section 8.01, no
investigation by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive
such investigation.
(d) NationsBank agrees that it will keep confidential any information
furnished to it in connection with the transactions contemplated by this
Agreement which is reasonably designated as confidential at the time of
delivery, except to the extent that such information (i) was already known
to NationsBank and was received from a source other than ICBK or any of its
Subsidiaries, directors, officers, employees or agents, (ii) thereafter was
lawfully obtained from another source, or (iii) is required to be disclosed
to the SEC, the NASD, the OCC, the Federal Reserve Board, FDIC or any other
governmental agency or authority, or is otherwise required to be disclosed
by law. NationsBank agrees not to use
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such information, and to implement safeguards and procedures that are
reasonably designed to prevent such information from being used, for any
purpose other than in connection with the transactions contemplated by this
Agreement.
(e) ICBK shall cooperate, and shall cause its Subsidiaries,
accountants, counsel and other representatives to cooperate, with
NationsBank and its accountants, counsel and other representatives, in
connection with the preparation by NationsBank of any applications and
documents required to obtain the Approvals which cooperation shall include
providing all information, documents and appropriate representations as may
be necessary in connection therewith.
(f) From and after the date of this Agreement, each of NationsBank and
ICBK shall use its reasonable best efforts to satisfy or cause to be
satisfied all conditions to their respective obligations under this
Agreement. While this Agreement is in effect, neither NationsBank nor ICBK
shall take any actions, or omit to take any actions, which would cause this
Agreement to become unenforceable in accordance with its terms.
8.02 REGISTRATION STATEMENT; REGULATORY MATTERS.
(a) NationsBank shall (i) prepare and file the Registration Statement
with the SEC as soon as is reasonably practicable, (ii) use its best
efforts to cause the Registration Statement to become effective, (iii) take
any action required to be taken under any applicable state blue sky or
securities laws in connection therewith and (iv) maintain an effective
Registration Statement with respect to the NationsBank Common Stock to be
issued in connection with the ICBK Options. ICBK and its Subsidiaries shall
furnish NationsBank with all information concerning ICBK, its Subsidiaries
and the holders of ICBK capital stock as NationsBank may reasonably request
in connection with the foregoing and also shall promptly prepare and file
the Proxy Statement with the FDIC.
(b) NationsBank and ICBK shall cooperate and use their respective best
efforts (i) to prepare all documentation, to effect all filings and to
obtain all permits, consents, approvals and authorizations of all third
parties, Regulatory Authorities and other governmental authorities
necessary to consummate the transactions contemplated by this Agreement,
including, without limitation, any such approvals or authorizations
required by the Federal Reserve, the OCC and the Department and (ii) to
cause the Merger to be consummated as expeditiously as reasonably
practicable.
8.03 STOCKHOLDERS' APPROVALS. ICBK shall call a meeting of its stockholders
to be held as soon as practicable for the purpose of voting upon the Merger and
related matters. The Board of Directors of ICBK shall, submit for approval of
its stockholders the matters to be voted upon at the Stockholders' Meetings, and
shall recommend approval of such matters and use its best efforts (including,
without limitation, soliciting proxies for such approvals) to obtain such
stockholder approvals. The covenants under this Section 8.03 are subject to the
exercise by the Board of Directors of its fiduciary obligations.
8.04 PRESS RELEASES. Prior to the public dissemination of any press release
or other public disclosure of information about this Agreement, the Merger or
any other transaction contemplated hereby, the parties to this Agreement shall
mutually agree as to the form and substance of such release or disclosure.
8.05 NOTICE OF DEFAULTS. ICBK shall promptly notify NationsBank of (i) any
material change in its business, operations or prospects, (ii) any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any Regulatory Authority, (iii) the institution or the threat
of material litigation involving such party, or (iv) any event or condition that
might be reasonably expected to cause any of its representations, warranties or
covenants set forth herein not to be true and correct in all material respects
as of the Effective Time.
8.06 MISCELLANEOUS AGREEMENTS AND CONSENTS; AFFILIATES AGREEMENTS. Subject
to the terms and conditions of this Agreement, each of the parties hereto agrees
to use its respective best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as reasonably
practicable, including, without limitation, using their respective best efforts
to lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby. NationsBank and ICBK shall, and shall cause each of their respective
Subsidiaries to, use their best efforts to obtain consents of all third parties
and Regulatory Authorities necessary or, in the reasonable opinion of
NationsBank or ICBK, desirable for the consummation of the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of NationsBank shall be deemed to
have been granted authority in the name of ICBK to take all such necessary or
desirable action.
Without limiting the foregoing, ICBK will, at the request of NationsBank,
take such actions, or forbear from taking such actions, as may be reasonably
necessary to identify each of its "affiliates" for purposes of Rule 145 under
the Securities Act
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and to cause each person so identified to deliver to NationsBank within 10 days
after the execution of this Agreement a written agreement in form and substance
satisfactory to NationsBank providing that such person shall not sell, pledge,
transfer or otherwise dispose of any capital stock to be received by such person
as part of the Merger Consideration except in compliance with the applicable
provisions of the Securities Act.
8.07 INDEMNIFICATION. For five years after the Effective Time, NationsBank
shall, and shall cause the Surviving Association to, indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of
ICBK and its Subsidiary (each, an "Indemnified Party") after the Effective Time
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time to the full
extent then permitted under Florida law and by ICBK's Articles of Incorporation
and bylaws as in effect on the date hereof except the right to indemnification
shall not arise in those instances in which the party seeking indemnification
has participated in the breach of any covenant or agreement contained herein or
knowingly caused any representation or warranty of ICBK contained herein to be
false or inaccurate in any respect and the claim arises principally from such
breach or the falsity or inaccuracy of such representation or warranty.
If the Surviving Association or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of the
Surviving Association shall assume the obligations set forth in this Section
8.07.
8.08 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, all rights with respect to ICBK Common
Stock pursuant to stock options or stock appreciation rights ("ICBK
Options") granted by ICBK under the ICBK Benefit Plans, which are
outstanding at the Effective Time, whether or not then exercisable, shall
be converted into and become rights with respect to NationsBank Common
Stock, and NationsBank shall assume each ICBK Option, in accordance with
the terms of the stock option plan under which it was issued and the stock
option agreement by which it is evidenced. From and after the Effective
Time, and subject to the provisions of Section 3.01(c), (i) each ICBK
Option assumed by NationsBank may be exercised solely for shares of
NationsBank Common Stock, (ii) the number of shares of NationsBank Common
Stock subject to each ICBK Option shall be equal to the number of shares of
ICBK Common Stock subject to such ICBK Option immediately prior to the
Effective Time multiplied by the Exchange Ratio and (iii) the per share
exercise price under each such ICBK Option shall be adjusted by dividing
the per share exercise price under each such option by the Exchange Ratio
and rounding down to the nearest cent; PROVIDED, HOWEVER, that the terms of
each ICBK Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the Effective
Time. It is intended that the foregoing assumption shall be undertaken in a
manner that will not constitute a "modification" as defined in Section 425
of the Code, as to any ICBK Option which is an "incentive stock option," as
defined in Section 422 of the Code.
(b) All restrictions or limitations on transfer with respect to ICBK
Common Stock awarded under a ICBK Stock Plan or any other plan, program or
arrangement ("Restricted Stock"), to the extent that such restrictions or
limitations shall not have already lapsed, shall remain in full force and
effect with respect to the NationsBank Common Stock into which such
Restricted Stock is converted pursuant to Section 3.01.
(c) Except as provided herein or as otherwise agreed in writing by the
parties, (i) the provisions of the ICBK Stock Plans and any other plan,
program or arrangement pursuant to which ICBK may, or may be required to,
issue stock or stock-based compensation, shall be terminated by the
Effective Time, and (ii) ICBK shall ensure that following the Effective
Time no holder of ICBK Options or any participant in any ICBK Stock Plan
shall have any right thereunder to acquire any equity securities of ICBK or
any of its Subsidiaries.
8.09 CERTAIN CHANGE OF CONTROL MATTERS. From and after the date hereof,
ICBK shall take all action necessary so that the execution and delivery of this
Agreement will not increase any benefits otherwise payable under any ICBK
Benefit Plan.
8.10 STOCK EXCHANGE LISTING. NationsBank shall use its best efforts to
list, prior to the Effective Time, on the NYSE and the Pacific Stock Exchange,
upon official notice of issuance, the shares of NationsBank Common Stock to be
issued to holders of ICBK Common Stock in the Merger.
8.11 DECLARATION OF DIVIDENDS. After the date of this Agreement, ICBK shall
coordinate with NationsBank the declaration of any dividends in respect of
NationsBank Common Stock and ICBK Common Stock and the record dates and payment
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dates relating thereto, it being the intention of the parties hereto that
holders of ICBK Common Stock shall not receive two dividends, or fail to receive
one dividend, for any single calendar quarter with respect to their shares of
ICBK Common Stock.
8.12 EMPLOYEE BENEFITS. As soon as practicable following the Effective
Time, NationsBank shall provide generally to officers and employees of ICBK and
its Subsidiaries employee benefits, including without limitation pension
benefits, health and welfare benefits, life insurance and vacation arrangements,
on terms and conditions which when taken as a whole are substantially similar to
those provided from time to time by NationsBank and its Subsidiaries to their
similarly situated officers and employees. In that regard, such officers and
employees of ICBK shall be credited under the employee benefit plans of
NationsBank for their years of "eligibility service" and "vesting service"
earned under the ICBK Benefit Plans as if such service had been earned with
NationsBank, while such officers and employees of ICBK shall be credited with
"benefit service" under the employee benefit plans of NationsBank only with
respect to their period of employment with NationsBank and its Subsidiaries
after the Effective Time in accordance with the terms and conditions of such
employee benefit plans.
8.13 CERTAIN ACTIONS. No party shall take any action which would adversely
affect or delay the ability of either NationsBank or ICBK to obtain any
necessary approvals of any Regulatory Authority or other governmental authority
required for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement. No party shall take any action that would
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code.
8.14 ACQUISITION PROPOSALS. ICBK shall not, and shall use its best efforts
to cause its officers, directors and employees and any investment banker,
attorney, accountant, or other agent retained by it or its Subsidiaries not to
(i) initiate, encourage or solicit, directly or indirectly, the making of any
proposal or offer (an "Acquisition Proposal") to acquire all or any significant
part of the business and properties or capital stock of ICBK or its
Subsidiaries, whether by merger, purchase of securities or assets, tender offer
or otherwise (an "Acquisition Transaction"), or initiate, directly or
indirectly, any contact with any person in an effort to or with a view towards
soliciting any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any other person any information with
respect to, an Acquisition Proposal. Notwithstanding the foregoing, ICBK may (i)
furnish or cause to be furnished information subject to a confidentiality
agreement in a form substantially similar to that previously executed by
NationsBank, (ii) in response to an Acquisition Proposal, issue a communication
to its security holders of the type contemplated by Rule 14d-9(e) under the
Exchange Act, and (iii) participate in discussions and negotiations directly and
through its representatives with persons who have sought the same if the ICBK
Board determines, based as to legal matters on the written advice of outside
legal counsel, that the failure to furnish such information or to negotiate with
such entity or group or to take and disclose such position would be inconsistent
with the proper exercise of the fiduciary duties of the ICBK Board. In the event
ICBK receives an Acquisition Proposal or such discussions are sought to be
initiated or continued with ICBK, it shall promptly inform NationsBank as to the
material terms thereof.
8.15 TERMINATION FEE. To compensate NationsBank for entering into this
Agreement, taking action to consummate the transactions hereunder and incurring
the costs and expenses related thereto and other losses and expenses, including
the foregoing by NationsBank of other opportunities, ICBK and NationsBank agree
as follows:
(a) Provided that NationsBank shall not be in material breach of its
obligations under this Agreement (which breach has not been cured promptly
following receipt of written notice thereof by ICBK specifying in
reasonable detail the basis of such alleged breach), ICBK shall pay to
NationsBank the sum of $4.3 million (the "Termination Fee") plus reasonable
out-of-pocket expenses, not in excess of $250,000 (including, without
limitation, amounts paid or payable to banks and investment bankers, fees
and expenses of counsel and printing expenses) (such expenses are
hereinafter referred to as the "Expenses") incurred by NationsBank or any
of its affiliates in connection with or arising out of transactions
contemplated by this Agreement, regardless of when those expenses are
incurred, if this Agreement is terminated by ICBK under the provisions of
Section 10.01(f). NationsBank shall provide ICBK with an itemization of
Expenses.
(b) Any payment required by paragraph (a) of this Section shall become
payable within two business days after termination of the Agreement.
(c) ICBK acknowledges that the agreements contained in this Section
8.15 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, NationsBank would not enter
into this Agreement; accordingly, if ICBK fails to promptly pay the
Termination Fee or Expenses when due, ICBK shall in addition thereto pay to
NationsBank all costs and expenses (including fees and disbursements of
counsel) incurred in collecting such
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Termination Fee or Expenses, as the case may be, together with interest on
the amount of the Termination Fee or Expenses (or any unpaid portion
thereof) from the date such payment was required to be made until the date
such payment is received by NationsBank at the prime rate of NationsBank
Florida, National Association as in effect from time to time during such
period.
8.16 DELIVERY OF ICBK DISCLOSURE SCHEDULE. ICBK will deliver the completed
ICBK Disclosure Schedule to NationsBank by noon, June 27, 1995. NationsBank
shall approve or reject the ICBK Disclosure Schedule by close of business on
June 29, 1995. A failure to reject by such date and time shall be deemed an
automatic acceptance.
ARTICLE IX
CONDITIONS
9.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each of NationsBank and ICBK to effect the Merger and
the other transactions contemplated hereby shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following conditions:
(a) Stockholders of ICBK shall have approved all matters relating to
the Merger required under applicable law at the Stockholders' Meeting.
(b) This Agreement, the Merger and the other transactions contemplated
hereby shall have been approved by the Federal Reserve Board, the OCC and
any other Regulatory Authorities whose approval is required for
consummation of the transactions contemplated hereby, which approvals are
subject to no conditions that in the judgment of NationsBank would restrict
it or its Subsidiaries or affiliates in their respective spheres of
operations and business activities after the Effective Time.
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) Neither NationsBank nor ICBK shall be subject to any active
litigation which seeks any order, decree or injunction of a court or agency
of competent jurisdiction to enjoin or prohibit the consummation of the
Merger.
(e) The shares of NationsBank Common Stock issuable pursuant to the
Merger shall have been authorized for listing on the NYSE upon official
notice of issuance.
(f) Each of NationsBank and ICBK shall have received an opinion of
Blanchfield, Cordle and Moore, P.A., tax counsel to NationsBank, or other
counsel to NationsBank, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and no gain or
loss will be recognized by the stockholders of ICBK to the extent that they
receive NationsBank Common Stock solely in exchange for their ICBK capital
stock in the Merger.
9.02 CONDITIONS TO OBLIGATIONS OF ICBK TO EFFECT THE MERGER. The
obligations of ICBK to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of NationsBank set forth in Article VI hereof shall be true and correct in
all material respects as of the date of this Agreement and as of the
Effective Time (as though made on and as of the Effective Time except to
the extent such representations and warranties are by their express
provisions made as of a specified date) and ICBK shall have received a
certificate signed by the chairman and chief executive officer, executive
vice president or other duly authorized officer of NationsBank to that
effect.
(b) PERFORMANCE OF OBLIGATIONS. NationsBank shall have performed in
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and ICBK shall have received a
certificate signed by the chairman and chief executive officer, executive
vice president or other duly authorized officer of NationsBank to that
effect.
9.03 CONDITIONS TO OBLIGATIONS OF NATIONSBANK TO EFFECT THE MERGER. The
obligations of NationsBank to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) The Board of Directors of NationsBank shall have approved this
Agreement, the Merger and all matters related to the Merger, including the
issuance of the NationsBank Common Stock no later than the close of
business on June 28, 1995.
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<PAGE>
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of ICBK set forth in Article V hereof shall be true and correct in all
material respects as of the date of this Agreement as of the Effective Time
(as though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and NationsBank shall have received a certificate signed by
the chairman or the chief executive officer or other duly authorized
officer of ICBK to that effect.
(c) PERFORMANCE OF OBLIGATIONS. ICBK shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and NationsBank shall have received
a certificate signed by the chairman or the chief executive officer or
other duly authorized officer of ICBK to that effect.
(d) ICBK shall have completed the Redemption.
(e) OPINION OF COUNSEL. NationsBank shall have received an opinion of
counsel for ICBK addressed to NationsBank and in form satisfactory to it as
to the validity of the approvals of the Merger by the directors and
stockholders of ICBK.
(f) The ICBK Disclosure Schedule and the items described therein shall
be acceptable to NationsBank.
ARTICLE X
TERMINATION
10.01 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the stockholders of NationsBank and ICBK or
both, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual consent of the Board of Directors of NationsBank and the
Board of Directors of ICBK; or
(b) by the Board of Directors of NationsBank or the Board of Directors
of ICBK if (i) the Federal Reserve or the OCC has denied approval of the
Merger and such denial has become final and nonappealable or has approved
the Merger subject to conditions that in the judgment of NationsBank would
restrict it or its Subsidiaries or affiliates in their respective spheres
of operations and business activities after the Effective Time or (ii) the
Effective Time does not occur by March 31, 1996; or
(c) by NationsBank (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by ICBK
that is material in the context of the transactions contemplated hereby of
any representation, warranty, covenant or agreement by ICBK contained
herein which has not been, or cannot be, cured within 30 days after written
notice of such breach is given to ICBK; or
(d) by ICBK (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by
NationsBank that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or agreement
by NationsBank contained herein which has not been, or cannot be, cured
within 30 days after written notice of such breach is given to NationsBank;
or
(e) by NationsBank if the stockholders of ICBK fail to approve the
Merger at the Stockholder's Meeting; or
(f) by ICBK if (i) there shall not have been a material breach of any
covenant or agreement on the part of ICBK under this Agreement and (ii)
prior to the Effective Time, a corporation, partnership, person or other
entity or group shall have made a bona fide Acquisition Proposal that the
ICBK Board determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel and as to financial matters on the written opinion of an investment
banking firm of national reputation, is more favorable to the ICBK
stockholders than the Exchange Ratio and the Merger and that the failure to
terminate this Agreement and accept such alternative Acquisition Proposal
would be inconsistent with the proper exercise of such fiduciary duties;
PROVIDED, HOWEVER, that termination under this clause (ii) shall not be
deemed effective until payment of the Termination Fee required by Section
8.15.
10.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.01, this Agreement shall
become void and have no effect, except that (i) the provisions of Section
8.01(d), 8.15 and Section 11.01 shall survive any such termination and
abandonment, and (ii) no party shall be relieved or released from any liability
arising out of an intentional breach of any provision of this Agreement.
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<PAGE>
10.03 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for Articles III, IV and VI and Sections 8.07 and
8.08, none of the respective representations, warranties, obligations, covenants
and agreements of the parties shall survive the Effective Time.
10.04 NATIONSBANK SHAREHOLDERS VOTE. This Agreement may be terminated and
the Merger abandoned by NationsBank at any time on or before August 15, 1995 if
NationsBank concludes that it is unable to obtain a final determination by the
NYSE that NationsBank is not required to submit the Merger, this Agreement or
the transactions described herein to its shareholders for a vote (the "Final
Determination"). NationsBank shall use its best efforts to secure such Final
Determination under the terms of this Agreement and prior to filing any
materials or correspondence with the NYSE in connection therewith, shall provide
ICBK copies of such filings and correspondence and shall permit ICBK to make
comments with respect thereto (which comments may be incorporated or disregarded
by NationsBank in its sole discretion). NationsBank shall provide ICBK copies of
all correspondence or materials received from the NYSE relating to the Final
Determination. Any such termination will be effective only after at least 15
days prior notice to ICBK of NationsBank's termination and only if a Final
Determination has not been received by the effective date of termination.
ARTICLE XI
GENERAL PROVISIONS
11.01 EXPENSES. Unless otherwise agreed by the parties in writing, each
party hereto shall bear its own expenses incident to preparing, entering into
and carrying out this Agreement and to consummating the Merger, except that
NationsBank and ICBK shall divide equally all printing expenses and filing fees
incurred in connection with this Agreement, the Registration Statement and the
Proxy Statement.
11.02 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement between the parties hereto with respect
to the transactions contemplated hereunder and thereunder, and such agreements
supersede all prior arrangements or understandings with respect thereto, written
or oral. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors. Other
than Section 8.07, nothing in this Agreement, expressed or implied, is intended
to confer upon any individual, corporation or other entity, other than
NationsBank, ICBK and the Bank or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.03 AMENDMENTS. To the extent permitted by law, this Agreement may be
amended by a subsequent writing signed by each of NationsBank and ICBK;
PROVIDED, HOWEVER, that the provisions hereof relating to the manner or basis in
which shares of ICBK capital stock will be exchanged for the Merger
Consideration shall not be amended after the Stockholders' Meeting without any
requisite approval of the holders of the issued and outstanding shares of ICBK
capital stock entitled to vote thereon.
11.04 WAIVERS. Prior to or at the Effective Time, each of NationsBank and
ICBK shall have the right to waive any default in the performance of any term of
this Agreement by the other, to waive or extend the time for the compliance or
fulfillment by the other of any and all of the other's obligations under this
Agreement and to waive any or all of the conditions precedent to its obligations
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any law or applicable governmental regulation.
11.05 NO ASSIGNMENT. None of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
person or entity. Any such purported assignment or delegation that is made
without the prior written consent of the other parties to this Agreement shall
be void and of no effect.
11.06 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, or by registered or certified mail, postage prepaid to
the persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
<TABLE>
<S> <C>
ICBK: Intercontinental Bank
200 Southeast First Street
Miami, Florida 33131
Attention: William H. Allen, Jr.
Chairman
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Copy to Counsel: Bowman Brown
Shutts & Bowen
201 South Biscayne Boulevard, Suite 1500
Miami, Florida 33131
NationsBank: NationsBank Corporation
NationsBank Corporate Center
Charlotte, North Carolina 28255
Attention: Frank L. Gentry
Executive Vice President
Copy to Counsel: NationsBank Corporation
NationsBank Corporate Center
Charlotte, North Carolina 28255
Attention: Paul J. Polking
General Counsel
</TABLE>
11.07 SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree that
the failure of either party to fulfill any of its covenants and agreements
hereunder, including the failure to take all such actions as are necessary on
its part to cause the consummation of the Merger, will cause irreparable injury
for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of the other party's
obligations or any arbitration award hereunder and to the granting by any such
court of the remedy of the specific performance hereunder.
11.08 ARBITRATION. (a) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, NORTH CAROLINA LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OR
JUDICIAL ARBITRATION AND MEDIATION SERVICES/ENDISPUTE, INC. ("JAMS"), AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM UNDER THIS AGREEMENT IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.
(b) THE ARBITRATION SHALL BE CONDUCTED (1) IN THE CITY OF MIAMI, FLORIDA IF
INITIATED BY NATIONSBANK, (2) IN THE CITY OF CHARLOTTE, NORTH CAROLINA IF
INITIATED BY ICBK, OR (3) IN SUCH OTHER LOCATION AS AGREED BY THE PARTIES AND BY
JAMS WHO WILL APPOINT AN ARBITRATOR; IF JAMS IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR AN ADDITIONAL 60 DAYS.
(c) ANY SERVICE OF PROCESS UNDER AN ARBITRATION OR ANY OTHER LEGAL
PROCEEDING WILL BE DEEMED TO BE EFFECTIVE AS TO EITHER PARTY TO THIS AGREEMENT
WHEN SUCH SERVICE OF PROCESS IS DELIVERED TO THE COUNSEL FOR THE RESPECTIVE
PARTIES AS IDENTIFIED IN SECTION 11.06.
11.09 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of North Carolina.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
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<PAGE>
11.12 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement, or in any other instrument referred to herein,
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
IN WITNESS WHEREOF, NationsBank and ICBK have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
NATIONSBANK CORPORATION
By: /s/ HARRIS A. RAINEY, JR.
Executive Vice President
INTERCONTINENTAL BANK
By: /s/ WILLIAM H. ALLEN, JR.
Chairman and Chief Executive Officer
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<PAGE>
THE ROBINSON-HUMPHREY COMPANY, INC.
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
APPENDIX B
June 26, 1995
Board of Directors
Intercontinental Bank
200 Southeast First Street
Miami, Florida 33131
Ladies and Gentlemen:
In connection with the proposed acquisition of Intercontinental Bank
("ICBK") by NationsBank Corporation ("NB") (the "Merger"), you have asked us to
render an opinion as to whether the financial terms of the Merger, as provided
in the Agreement and Plan of Merger dated as of June 26, 1995 among such parties
(the "Merger Agreement"), are fair, from a financial point of view, to the
stockholders of ICBK. Under the terms of the Merger, holders of all outstanding
shares of ICBK common stock will receive consideration equal to $30.00 per share
of NB common stock for each share of ICBK common stock, subject to certain
conditions.
Our firm, as part of its investment banking business, is frequently
involved in the valuation of securities as related to public underwritings,
private placements, mergers, acquisitions, recapitalizations and other purposes.
In connection with our study for rendering this opinion, we have reviewed
the Merger Agreement, ICBK's financial results for fiscal years 1990 through
1994 and for the quarter ended March 31, 1995, the projections for ICBK for the
years 1995 through 1999, and certain documents and information we deem relevant
to our analysis. We have also held discussions with senior management of ICBK
for the purpose of reviewing the historical and current operations of, and
outlook for ICBK, industry trends, the procedures followed by ICBK in the
proposed merger, the negotiations with NB, the terms of the proposed Merger, and
related matters.
We have also studied published financial data concerning certain other
publicly traded financial institutions which we deem comparable to ICBK as well
as certain financial data relating to acquisitions of other financial
institutions that we deem relevant or comparable. In addition, we have reviewed
other published information, performed certain financial analyses and considered
other factors and information which we deem relevant.
We have reviewed similar information and data relating to NB including its
historical financial statements, from fiscal 1990 up through and including the
quarter ended March 31, 1995.
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE (Bullet) ATLANTA, GEORGIA 30326
(404) 206-6000
B-1
<PAGE>
Board of Directors
Intercontinental Bank
June 26, 1995
Page 2
In rendering this opinion, we have relied upon the accuracy of the Merger
Agreement, the financial information listed above, and other information
furnished to us by ICBK and NB. We have not separately verified this information
nor have we made an independent evaluation of any of the assets or liabilities
of ICBK and NB.
Based upon the foregoing and upon current market and economic conditions,
we are of the opinion that, from a financial point of view, the terms of the
Merger as provided in the Merger Agreement are fair to the stockholders of ICBK.
Very truly yours,
(Signature of The Robinson-Humphrey Company, Inc.)
THE ROBINSON-HUMPHREY COMPANY, INC.
B-2
<PAGE>
APPENDIX C
PROVISIONS OF THE NATIONAL BANK ACT
RELATING TO DISSENTERS' APPRAISAL RIGHTS
12 U.S.C. (SECTION MARK) 215A MERGER OF NATIONAL BANKS OR STATE BANKS INTO
NATIONAL BANKS.
(A) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT; NOTICE;
CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with
sections 215-215c of Title 12, may merge into a national banking association
located within the same State, under the charter of the receiving association.
The merger agreement shall --
(1) be agreed upon in writing by a majority of the board of directors of
each association or State bank participating in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the shareholders
of each such association or State bank owning at least two-thirds of its capital
stock outstanding, or by a greater proportion of such capital stock in the case
of a State bank if the laws of the State where it is organized so require, at a
meeting to be held on the call of the directors, after publishing notice of the
time, place, and object of the meeting for four consecutive weeks in a newspaper
of general circulation published in the place where the association or State
bank is located, or, if there is no such newspaper, then in the newspaper of
general circulation published nearest thereto, and after sending such notice to
each shareholder of record by certified or registered mail at least ten days
prior to the meeting, except to those shareholders who specifically waive
notice, but any additional notice shall be given to the shareholders of such
State bank which may be required by the laws of the State where it is organized.
Publication of notice may be waived, in cases where the Comptroller determines
that an emergency exists justifying such waiver, by unanimous action of the
shareholders of the association or State bank;
(3) specify the amount of the capital stock of the receiving association,
which shall not be less than that required under existing law for the
organization of a national bank in the place in which it is located and which
will be outstanding upon completion of the merger, the amount of stock (if any)
to be allocated, and cash (if any) to be paid, to the shareholders of the
association or State bank being merged into the receiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the receiving
association.
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
C-1
<PAGE>
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES;
STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest therefor, for the purpose of reselling such shares
within thirty days thereafter to such person or persons and at such price not
less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
(E) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTEREST VESTED AND
HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises and interests of the individual merging banks or
banking associations in and to every type of property (real, personal, and
mixed) and choses in action shall be transferred to and vested in the receiving
association by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights or property,
franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of lunatics, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by any one of the merging banks or banking
associations at the time of the merger, subject to the conditions hereinafter
provided.
(F) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, or
committee of estates of lunatics, or in any other fiduciary capacity, the
receiving association shall be subject to removal by a court of competent
jurisdiction in the same manner and to the same extent as was such merging bank
or banking association prior to the merger. Nothing contained in this section
shall be considered to impair in any manner the right of any court to remove the
receiving association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be exercised in
such a manner as to discriminate against national banking associations, nor
shall any receiving association be removed solely because of the fact that it is
a national banking association.
(G) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the shareholders of
the respective merging banks.
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<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are no provisions in the Registrant's Restated Articles of
Incorporation and no contracts between the Registrant and its directors and
officers relating to indemnification. The Registrant's Restated Articles of
Incorporation prevent the recovery by the Registrant of monetary damages against
its directors. However, in accordance with the provisions of the NCBCA, the
Registrant's Amended and Restated Bylaws provide that, in addition to the
indemnification of directors and officers otherwise provided by the NCBCA, the
Registrant shall, under certain circumstances, indemnify its directors,
executive officers and certain other designated officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status or activities as directors and officers, except for
liability or litigation expense incurred on account of activities that were at
the time known or reasonably should have been known by such director or officer
to be clearly in conflict with the best interests of the Registrant. Pursuant to
such bylaw and as authorized by statute, the Registrant maintains insurance on
behalf of its directors and officers against liability asserted against such
persons in such capacity whether or not such directors or officers have the
right to indemnification pursuant to the bylaw or otherwise.
In addition to the above-described provisions, Sections 55-8-50 through
55-8-58 of the NCBCA contain provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 55-8-51 of the NCBCA
permits a corporation, with certain exceptions, to indemnify a current or former
director against liability if (i) he conducted himself in good faith, (ii) he
reasonably believed (x) that his conduct in his official capacity with the
corporation was in its best interests and (y) in all other cases his conduct was
at least not opposed to the corporation's best interests, and (iii) in the case
of any criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful. A corporation may not indemnify a current or former director in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or in connection with a
proceeding charging improper personal benefit to him in which he was adjudged
liable on such basis. The above standard of conduct is determined by the Board
of Directors or a committee thereof or special legal counsel or the shareholders
as prescribed in Section 55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful in his defense, unless the articles of
incorporation provide otherwise. Upon application, the court may order
indemnification of the director or officer if he is adjudged fairly and
reasonably so entitled under Section 55-8-54. Section 55-8-56 allows a
corporation to indemnify and advance expenses to an officer, employee or agent
who is not a director to the same extent as a director or as otherwise set forth
in the Corporation's articles of incorporation or bylaws or by resolution of the
Board of Directors.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
THE FOREGOING IS ONLY A GENERAL SUMMARY OF CERTAIN ASPECTS OF NORTH
CAROLINA LAW DEALING WITH INDEMNIFICATION OF DIRECTORS AND OFFICERS AND DOES NOT
PURPORT TO BE COMPLETE. IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
RELEVANT STATUTES WHICH CONTAIN DETAILED SPECIFIC PROVISIONS REGARDING THE
CIRCUMSTANCES UNDER WHICH AND THE PERSON FOR WHOSE BENEFIT INDEMNIFICATION SHALL
OR MAY BE MADE AND ACCORDINGLY ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBIT
99.11 OF THIS REGISTRATION STATEMENT.
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits and financial statement schedules are filed with or
incorporated by reference in this Registration Statement:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<C> <S>
2.1 Agreement and Plan of Merger between NationsBank and ICBK dated as of June 26, 1995 (included as Appendix A to the
Proxy Statement-Prospectus, with the exception of a list of schedules filed as an exhibit hereto)
3(i) Restated Articles of Incorporation of NationsBank (incorporated herein by reference to Exhibit 3(i) of
NationsBank's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
3(ii) Amended and Restated Bylaws of NationsBank (incorporated herein by reference to Exhibit 3(b) of NationsBank's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991)
5.1 Opinion of Smith Helms Mulliss & Moore, L.L.P.
8.1 Opinion of Blanchfield Cordle & Moore, P.A.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1)
23.4 Consent of Blanchfield Cordle & Moore, P.A. (included in Exhibit 8.1)
23.5 Consent of The Robinson-Humphrey Company, Inc.
24.1 Power of Attorney and Certified Resolutions
99.1 Notice of Special Meeting of Shareholders of ICBK
99.2 Form of Proxy for Special Meeting of Shareholders of ICBK
99.3 President's letter to ICBK Shareholders
99.4 ICBK Annual Report on Form F-2 for the year ended December 31, 1994
99.5 ICBK Quarterly Report on Form F-4 for the three months ended March 31, 1995
99.6 ICBK Quarterly Report on Form F-4 for the six months ended June 30, 1995
99.7 ICBK Current Report on Form F-3 filed January 9, 1995
99.8 ICBK Current Report on Form F-3 filed February 23, 1995
99.9 ICBK Current Report on Form F-3 filed May 9, 1995
99.10 ICBK Current Report on Form F-3 filed August 10, 1995
99.11 Provisions of North Carolina law regarding indemnification of directors and officers (incorporated herein by
reference to Exhibit 28.1 of NationsBank's Registration Statement on Form S-3, Registration No. 33-45542)
99.12 Opinion of The Robinson-Humphrey Company, Inc. (included as Appendix B to the Proxy Statement-Prospectus)
</TABLE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change in such information in the registration statement:
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, State of North
Carolina, on August 23, 1995.
NATIONSBANK CORPORATION
By: HUGH L. MCCOLL, JR.*
HUGH L. MCCOLL, JR.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
HUGH L. MCCOLL, JR.* Chairman of the Board, Chief Executive Officer August 23, 1995
and Director (Principal Executive Officer)
HUGH L. MCCOLL, JR.
JAMES H. HANCE, JR.* Vice Chairman and Chief Financial Officer August 23, 1995
(Principal Financial Officer)
JAMES H. HANCE, JR.
MARC D. OKEN* Executive Vice President and Chief Accounting August 23, 1995
Officer (Principal Accounting Officer)
MARC D. OKEN
RONALD W. ALLEN* Director August 23, 1995
RONALD W. ALLEN
WILLIAM M. BARNHARDT* Director August 23, 1995
WILLIAM M. BARNHARDT
THOMAS E. CAPPS* Director August 23, 1995
THOMAS E. CAPPS
CHARLES W. COKER* Director August 23, 1995
CHARLES W. COKER
THOMAS G. COUSINS* Director August 23, 1995
THOMAS G. COUSINS
ALAN T. DICKSON Director August 23, 1995
ALAN T. DICKSON
W. FRANK DOWD, JR.* Director August 23, 1995
W. FRANK DOWD, JR.
A. L. ELLIS* Director August 23, 1995
A. L. ELLIS
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
PAUL FULTON* Director August 23, 1995
PAUL FULTON
L. L. GELLERSTEDT, JR.* Director August 23, 1995
L. L. GELLERSTEDT, JR.
TIMOTHY L. GUZZLE* Director August 23, 1995
TIMOTHY L. GUZZLE
W. W. JOHNSON* Director August 23, 1995
W. W. JOHNSON
BUCK MICKEL* Director August 23, 1995
BUCK MICKEL
JOHN J. MURPHY* Director August 23, 1995
JOHN J. MURPHY
JOHN C. SLANE* Director August 23, 1995
JOHN C. SLANE
JOHN W. SNOW* Director August 23, 1995
JOHN W. SNOW
MEREDITH R. SPANGLER* Director August 23, 1995
MEREDITH R. SPANGLER
ROBERT H. SPILMAN* Director August 23, 1995
ROBERT H. SPILMAN
RONALD TOWNSEND* Director August 23, 1995
RONALD TOWNSEND
JACKIE M. WARD* Director August 23, 1995
JACKIE M. WARD
*By: /s/ CHARLES M. BERGER
CHARLES M. BERGER
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
2.1 Agreement and Plan of Merger between NationsBank and ICBK dated as of
June 26, 1995 (included as Appendix A to the Proxy Statement-Prospectus,
with the exception of a list of schedules filed as an exhibit hereto)
3(i) Restated Articles of Incorporation of NationsBank (incorporated herein
by reference to Exhibit 3(i) of NationsBank's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994)
3(ii) Amended and Restated Bylaws of NationsBank (incorporated herein by
reference to Exhibit 3(b) of NationsBank's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991)
5.1 Opinion of Smith Helms Mulliss & Moore, L.L.P.
8.1 Opinion of Blanchfield Cordle & Moore, P.A.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1)
23.4 Consent of Blanchfield Cordle & Moore, P.A. (included in Exhibit 8.1)
23.5 Consent of The Robinson-Humphrey Company, Inc.
24.1 Power of Attorney and Certified Resolutions
99.1 Notice of Special Meeting of Shareholders of ICBK
99.2 Form of Proxy for Special Meeting of Shareholders of ICBK
99.3 President's letter to ICBK Shareholders
99.4 ICBK Annual Report on Form F-2 for the year ended December 31, 1994
99.5 ICBK Quarterly Report on Form F-4 for the three months ended March 31,
1995
99.6 ICBK Quarterly Report on Form F-4 for the six months ended June 30, 1995
99.7 ICBK Current Report on Form F-3 filed January 9, 1995
99.8 ICBK Current Report on Form F-3 filed February 23, 1995
99.9 ICBK Current Report on Form F-3 filed May 9, 1995
99.10 ICBK Current Report on Form F-3 filed August 10, 1995
99.11 Provisions of North Carolina law regarding indemnification of directors
and officers (incorporated herein by reference to Exhibit 28.1 of
NationsBank's Registration Statement on Form S-3, Registration No.
33-45542)
99.12 Opinion of The Robinson-Humphrey Company, Inc. (included as Appendix B
to the Proxy Statement-Prospectus)
</TABLE>
<PAGE>
SMITH HELMS MULLISS & MOORE, L.L.P.
ATTORNEYS AT LAW
CHARLOTTE, NORTH CAROLINA
EXHIBIT 5.1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GREENSBORO MAILING ADDRESS STREET ADDRESS RALEIGH
MAILING ADDRESS POST OFFICE BOX 31247 227 NORTH TRYON STREET MAILING ADDRESS
POST OFFICE BOX 21927 CHARLOTTE, N.C. 28231-1247 CHARLOTTE, N.C. 28202 POST OFFICE BOX 27525
GREENSBORO, N.C. 27420-1927 RALEIGH, N.C. 27611-7525
TELEPHONE 704/343-2000
STREET ADDRESS FACSIMILE 704/334-8467 STREET ADDRESS
SUITE 1400 316 WEST EDENTON STREET
300 NORTH GREEN STREET RALEIGH, N.C. 27603
GREENSBORO, N.C. 27401
TELEPHONE 919/755-8700
TELEPHONE 910/378-5200 FACSIMILE 919/828-7938
FACSIMILE 910/379-9558
WRITER'S DIRECT DIAL
</TABLE>
August 23, 1994
NationsBank Corporation
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
RE: Registration Statement on Form S-4 Related to 4,500,000 Shares of Common
Stock
Ladies and Gentlemen:
We have acted as special counsel to NationsBank Corporation, a North
Carolina corporation (the "Corporation"), in connection with the registration
under the Securities Act of 1933, as amended, pursuant to the Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") on August 23, 1995 related to
4,500,000 shares (the "Shares") of the Corporation's common stock (the "Common
Stock"), to be issued by the Corporation in connection with the merger of
Intercontinental Bank, a Florida state-chartered commercial bank ("ICBK"), with
and into Intercontinental Bank, N.A., a wholly owned national banking
association subsidiary of the Corporation in the process of formation (the
"Merger"). This opinion letter is Exhibit 5.1 to the Registration Statement.
In rendering this opinion, we have reviewed resolutions of the Board of
Directors of the Corporation approving the Merger and issuance of the Shares.
Based on the foregoing, we are of the opinion that the Shares are legally
authorized, and when the Registration Statement shall have been declared
effective by order of the Commission and such Shares shall have been issued upon
the terms and conditions set forth in the Registration Statement, then the
Shares shall be validly issued, fully paid and nonassessable.
We hereby consent (1) to be named in the Registration Statement and in the
prospectus contained therein as attorneys who passed upon the legality of the
Shares and (2) to the filing of a copy of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ SMITH HELMS MULLISS & MOORE, L.L.P
<PAGE>
EXHIBIT 8.1
BLANCHFIELD CORDLE & MOORE, P.A.
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET, SUITE 2400
CHARLOTTE, NORTH CAROLINA 28202
<TABLE>
<S> <C>
TELEPHONE (704) 377-3788
TELECOPIER (704) 377-2033
</TABLE>
August 23, 1995
NationsBank Corporation
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies/Gentlemen:
We have acted as counsel to NationsBank Corporation, a North Carolina
corporation ("NationsBank"), in connection with the proposed merger (the
"Merger") of Intercontinental Bank, a bank duly organized under the laws of the
State of Florida, with and into Intercontinental Bank, N.A., a wholly owned
national banking association subsidiary of NationsBank, upon the terms and
conditions set forth in the Agreement and Plan of Merger (the "Agreement") dated
as of June 26, 1995 and the Proxy Statement-Prospectus dated August 23, 1995
(the "Proxy Statement-Prospectus").
For purposes of the opinion set forth below, we have relied, with the
consent of NationsBank and the consent of ICBK, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of NationsBank and ICBK (which
are incorporated herein by reference), and have assumed that such certificates
will be complete and accurate as of the Effective Time. We have also relied upon
the accuracy of the Proxy Statement-Prospectus. Any capitalized term used and
not defined herein has the meaning given to it in the Proxy Statement Prospectus
or the appendices thereto (including the Agreement).
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and that the Merger will qualify as
a statutory merger under the applicable state and national banking laws.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable law, the Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that, accordingly, the following will be the material federal
income tax consequences of the Merger:
(i) No gain or loss will be recognized by the shareholders of ICBK on
the exchange of their shares of ICBK Common Stock for shares of
NationsBank Common Stock pursuant to the terms of the Merger to
the extent of such exchange.
(ii) The federal income tax basis of the shares of NationsBank Common
Stock for which shares of ICBK Common Stock are exchanged
pursuant to the Merger will be the same as the basis of such
shares of ICBK Common Stock exchanged therefor (less any
proportionate part of such basis allocable to any fractional
interest in any share of NationsBank Common Stock).
(iii) The holding period for shares of NationsBank Common Stock for
which shares of ICBK Common Stock are exchanged will include the
period that such shares of ICBK Common Stock were held by the
holder, provided such shares were a capital asset of the holder.
(iv) The receipt of cash in lieu of fractional shares of NationsBank
Common Stock by a ICBK shareholder will be treated as if the
fractional shares were distributed as part of the exchange and
then were redeemed by NationsBank, and gain or loss will be
recognized in an amount equal to the difference between the cash
received and the basis of the ICBK Common Stock surrendered,
which gain or loss shall be capital gain or loss if the ICBK
Common Stock was a capital asset in the hands of a shareholder.
<PAGE>
NationsBank Corporation
August 23, 1995
Page 2
(v) Cash received by shareholders of ICBK upon the exercise of
dissenters' appraisal rights will be treated as having been
received in payment for such ICBK Common Stock surrendered, and
gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the ICBK
Common Stock surrendered, which gain or loss shall be capital
gain or loss if the ICBK Common Stock was a capital asset in the
hands of a shareholder.
This opinion may not be applicable to ICBK shareholders who received their
ICBK Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation or who are not citizens or residents of the United
States.
The foregoing opinion is addressed only to certain consequences of a
nontaxable reorganization for federal income tax purposes. We have not
considered the effect on this transaction, if any, of state and local taxes,
sales and use taxes, or any other taxes.
We hereby consent to be named in the Registration on Form S-4 of
NationsBank filed with the Securities and Exchange Commission on August 23, 1995
as the attorneys who passed on certain federal income tax matters specified
therein and to the filing of a copy of this opinion as Exhibit 8.1 to the
Registration Statement.
Very truly yours,
/s/ BLANCHFIELD CORDLE & MOORE, P.A.
BLANCHFIELD CORDLE & MOORE, P.A.
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the incorporation by reference in the Proxy
Statement-Prospectus constituting part of this Registration Statement on Form
S-4 of NationsBank Corporation of our report dated January 13, 1995, which
appears on page 57 of the NationsBank Corporation's 1994 Annual Report to
Shareholders, which is incorporated by reference in its Annual Report on Form
10-K for the year ended December 31, 1994. We also consent to the reference to
us under the heading "Experts" in such Proxy Statement-Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Charlotte, North Carolina
August 23, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 18,
1995, included in Intercontinental Bank's Form F-2 for the year ended December
31, 1994, and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Miami, Florida
August 21, 1995
<PAGE>
EXHIBIT 23.5
THE ROBINSON-HUMPHREY COMPANY, INC.
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, INC.
We consent to the inclusion in this Registration Statement on Form S-4 of
our opinion, dated June 26, 1995, set forth as Appendix C to the Proxy
Statement/Prospectus and to the summarization thereof in the Proxy
Statement/Prospectus under the caption "Approval of the Merger." In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
Rules and Regulations of the Securities and Exchange Commission thereunder.
/s/ THE ROBINSON-HUMPHREY COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
Atlanta, Georgia
August 23, 1995
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of NationsBank Corporation,
and the several undersigned Officers and Directors thereof whose signatures
appear below, hereby makes, constitutes and appoints James W. Kiser and Charles
M. Berger, and each of them acting individually, its, his and her true and
lawful attorneys with power to act without any other and with full power of
substitution, to execute, deliver and file in its, his and her name and on its,
his and her behalf, and in each of the undersigned Officer's and Director's
capacity or capacities as shown below, (a) a Registration Statement of
NationsBank Corporation on Form S-4 (or other appropriate form) with respect to
the registration under the Securities Act of 1933, as amended, of up to
4,500,000 shares of common stock of NationsBank Corporation to be issued in
exchange for shares of common stock, par value $2.00 per share of
Intercontinental Bank, upon consummation of the proposed merger of
Intercontinental Bank with and into a wholly owned subsidiary of NationsBank
Corporation and any and all documents in support thereof or supplemental thereto
and any and all amendments, including any and all post-effective amendments, to
the foregoing (hereinafter called the "Registration Statement"), and (b) such
registration statements, petitions, applications, consents to service of process
or other instruments, any and all documents in support thereof or supplemental
thereto, and any and all amendments or supplements to the foregoing, as may be
necessary or advisable to qualify or register the securities covered by said
Registration Statement under such securities laws, regulations or requirements
as may be applicable; and each of NationsBank Corporation and said Officers and
Directors hereby grants to said attorneys, and to each of them, full power and
authority to do and perform each and every act and thing whatsoever as said
attorneys or attorney may deem necessary or advisable to carry out fully the
intent of this power of attorney to the same extent and with the same effect as
NationsBank Corporation might or could do, and as each of said Officers and
Directors might or could do personally in his or her capacity or capacities as
aforesaid, and each of NationsBank Corporation and said Officers and Directors
hereby ratifies and confirms all acts and things which said attorneys or
attorney might do or cause to be done by virtue of this power of attorney and
its, his or her signature as the same may be signed by said attorneys or
attorney, or any of them, to any or all of the following (and/or any and all
amendments and supplements to any or all thereof): such Registration Statement
under the Securities Act of 1933, as amended, and all such registration
statements, petitions, applications, consents to service of process and other
instruments, and any and all documents in support thereof or supplemental
thereto, under such securities laws, regulations and requirements as may be
applicable.
IN WITNESS WHEREOF, NationsBank Corporation has caused this power of
attorney to be signed on its behalf, and each of the undersigned Officers and
Directors in the capacity or capacities noted has hereunto set his or her hand
as of the date indicated below.
NATIONSBANK CORPORATION
(Registrant)
By: /s/ HUGH L. MCCOLL, JR.
HUGH L. MCCOLL, JR.
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
Dated: August 23, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ HUGH L. MCCOLL, JR. Chairman, Chief Executive Officer and Director
(HUGH L. MCCOLL, JR.) (Principal Executive Officer)
/s/ JAMES H. HANCE, JR. Vice Chairman and Chief Financial Officer
(JAMES H. HANCE, JR.) (Principal Financial Officer) August 23, 1995
/s/ MARC D. OKEN Executive Vice President and Chief Accounting August 23, 1995
(MARC D. OKEN) Officer (Principal Accounting Officer) August 23, 1995
SIGNATURE TITLE DATE
/s/ RONALD W. ALLEN Director August 23, 1995
(RONALD W. ALLEN)
/s/ WILLIAM M. BARNHARDT Director August 23, 1995
(WILLIAM M. BARNHARDT)
/s/ THOMAS E. CAPPS Director August 23, 1995
(THOMAS E. CAPPS)
/s/ CHARLES W. COKER Director August 23, 1995
(CHARLES W. COKER)
/s/ THOMAS G. COUSINS Director August 23, 1995
(THOMAS G. COUSINS)
/s/ ALAN T. DICKSON Director August 23, 1995
(ALAN T. DICKSON)
/s/ W. FRANK DOWD, JR. Director August 23, 1995
(W. FRANK DOWD, JR.)
/s/ A. L. ELLIS Director August 23, 1995
(A. L. ELLIS)
/s/ PAUL FULTON Director August 23, 1995
(PAUL FULTON)
/s/ L. L. GELLERSTEDT, JR. Director August 23, 1995
(L. L. GELLERSTEDT, JR.)
/s/ TIMOTHY L. GUZZLE Director August 23, 1995
(TIMOTHY L. GUZZLE)
/s/ W. W. JOHNSON Director August 23, 1995
(W. W. JOHNSON)
/s/ BUCK MICKEL Director August 23, 1995
(BUCK MICKEL)
/s/ JOHN J. MURPHY Director August 23, 1995
(JOHN J. MURPHY)
2
<PAGE>
SIGNATURE TITLE DATE
/s/ JOHN C. SLANE Director August 23, 1995
(JOHN C. SLANE)
/s/ JOHN W. SNOW Director August 23, 1995
(JOHN W. SNOW)
/s/ MEREDITH R. SPANGLER Director August 23, 1995
MEREDITH R. SPANGLER
/s/ ROBERT H. SPILMAN Director August 23, 1995
(ROBERT H. SPILMAN)
/s/ RONALD TOWNSEND Director August 23, 1995
(RONALD TOWNSEND)
/s/ JACKIE M. WARD Director August 23, 1995
(JACKIE M. WARD)
</TABLE>
3
<PAGE>
NATIONSBANK CORPORATION
BOARD OF DIRECTORS
RESOLUTIONS
ACQUISITION OF INTERCONTINENTAL BANK
AND REPURCHASE OF SHARES
JUNE 28, 1995
ACQUISITION OF INTERCONTINENTAL BANK
WHEREAS, it is proposed that NationsBank Corporation (the "Corporation")
purchase all of the outstanding capital stock of Intercontinental Bank ("ICB")
pursuant to a merger of ICB with and into a subsidiary of the Corporation (the
"Acquisition"); and
WHEREAS, the purchase price for the Acquisition will be paid in shares of
the Corporation's common stock (the "NationsBank Common Stock") in accordance
with the terms and provisions of the Acquisition Agreement (as defined below);
and
WHEREAS, it is deemed to be fair, advisable and in the best interests of
the Corporation to effect the Acquisition;
NOW, THEREFORE, BE IT:
RESOLVED, that the Board of Directors of the Corporation hereby approves
the Acquisition and the other transactions contemplated by that certain
Agreement and Plan of Merger dated June 26, 1995 by and between NationsBank
Corporation and Intercontinental Bank (the "Acquisition Agreement"), including
the issuance of NationsBank Common Stock in exchange for the outstanding shares
of ICB capital stock upon consummation of the Acquisition; and
RESOLVED, that the Board of Directors of the Corporation hereby determines
that the ICB capital stock as the consideration to be received by the
Corporation in exchange for shares of NationsBank Common Stock is adequate; and
RESOLVED, that the Board of Directors of the Corporation hereby ratifies,
approves and confirms the appointment of Harris A. Rainey as Executive Vice
President of the Corporation solely for the purpose of executing and delivering
the Acquisition Agreement; and
RESOLVED, that the Board of Directors of the Corporation hereby approves,
ratifies and confirms the terms and conditions of the Acquisition Agreement, the
execution and delivery thereof by Harris A. Rainey, and all actions taken by the
officers of the Corporation in connection therewith; and
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed, subject to the terms and
conditions of the Acquisition Agreement, to do any and all things necessary to
effectuate and consummate the transactions contemplated by the Acquisition
Agreement as may be prescribed by law or as they may deem necessary or
advisable, to prepare all documentation and to effect all filings and obtain
appropriate permits, consents, approvals and authorizations of all third
parties, including the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Department of Banking and Finance of the State of Florida and
any other applicable federal or state regulatory authority, and to execute
personally or by attorney-in-fact such required filings or amendments or
supplements to such required filings, and otherwise to cause such filings and
any amendments thereto to become effective or otherwise approved; and
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed to do any and all things
necessary, appropriate or convenient to cause either a DE NOVO national bank or
an interim national bank, as such officers may determine, to be organized as a
subsidiary of the Corporation for purposes of effecting the Acquisition by means
of a merger of ICB with and into such DE NOVO or interim national bank, as the
case may be; and
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed to vote any shares of any
subsidiary of the Corporation (other than those shares held by any subsidiary in
a fiduciary capacity, in which event the fiduciary shall make all decisions
related to such shares, including whether or not and how to vote any shares held
by it in such capacity) as may be necessary to effect the consummation of the
Acquisition; and
4
<PAGE>
RESOLVED, that the Corporation hereby reserves, sets aside and authorizes
for issuance up to 4,500,000 shares of the authorized but unissued shares of
NationsBank Common Stock (the "Shares"), and that the appropriate officers of
the Corporation be, and each of them hereby is, authorized and empowered to
issue the Shares, or such portion thereof, as may be necessary in connection
with the conversion and exchange of the issued and outstanding shares of ICB, as
well as the preferred stock and outstanding stock options of ICB, in accordance
with the provisions of such conversion and exchange as set forth in the
Acquisition Agreement; and
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed to convert any rights with
respect to ICB Common Stock pursuant to stock options or stock appreciation
rights which are outstanding as of the closing of the Acquisition into rights
with respect to NationsBank Common Stock, such conversion and the terms of any
converted stock options or stock appreciation rights to be in accordance with
the terms of the Acquisition Agreement; and
RESOLVED, that, in connection with the issuance of the Shares pursuant to
the Acquisition Agreement, the appropriate officers of the Corporation be, and
each of them hereby is, authorized, empowered and directed to execute and file
with the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-4 (or such other form as such officers, upon advice of
counsel, may determine to be necessary or appropriate) under the Securities Act
of 1933, as amended (the "Securities Act"), to execute and file all such other
instruments and documents, and to do all such other acts and things in
connection with the Registration Statement, including the execution and filing
of such amendment or amendments (including any post-effective amendments)
thereto, as they may deem necessary or advisable to effect such filings and to
procure the effectiveness of the Registration Statement (and any such
post-effective amendments thereto) and to make such supplements to the
Prospectus forming a part of said Registration Statement as may be required or
otherwise as they may deem advisable; and
RESOLVED, that Paul J. Polking and Charles M. Berger be, and each of them
with full power to act without the other hereby is, authorized and empowered to
sign the aforesaid Registration Statement and any amendment or amendments
thereto (including any post-effective amendments) on behalf of and as attorneys
for the Corporation and on behalf of and as attorneys for any of the following:
the Principal Executive Officer, the Principal Financial Officer, the Principal
Accounting Officer and any other officer of the Corporation; and
RESOLVED, that Paul J. Polking be, and he hereby is, designated as Agent
for Service of the Corporation with all such powers and functions as are
provided by the General Rules and Regulations of the Commission under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and
RESOLVED, that the Shares, when issued and distributed in accordance with
and pursuant to the Acquisition Agreement, shall be fully paid and
non-assessable and the holders of such Shares shall be subject to no further
call or liability with respect thereto; and
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed, in the name of and on behalf
of the Corporation, to take all such actions and to execute all such documents
as such officers may deem necessary or appropriate for compliance with the
Securities Act or the Exchange Act in connection with the transactions
contemplated by the Acquisition Agreement; and
RESOLVED, that the listing of the Shares to be issued pursuant to the
Acquisition Agreement on the New York Stock Exchange and the Pacific Stock
Exchange hereby is approved, and that the appropriate officers of the
Corporation be, and each of them hereby is, authorized, empowered and directed,
with the assistance of counsel, to prepare, execute and file listing
applications and any requests for determinations as to the application of
certain rules to the Acquisition with the New York Stock Exchange and the
Pacific Stock Exchange and to take all actions necessary or appropriate to
effect such listings and requests; and
RESOLVED, that it is desirable and in the best interests of the Corporation
that the Shares to be issued in accordance with and pursuant to the Acquisition
Agreement be qualified or registered for distribution in various states where
appropriate, that the Chairman and Chief Executive Officer, the Chief Financial
Officer, any Executive Vice President, any Senior Vice President or any
Associate General Counsel and the Secretary or any Assistant Secretary hereby
are authorized, empowered and directed to determine the states in which
appropriate action shall be taken to qualify or register for distribution the
Shares as such officers may deem advisable; that said officers be, and each of
them hereby is, authorized, empowered and directed to perform on behalf of the
Corporation any and all such acts as they may deem necessary or advisable in
order to comply with the applicable laws of any such states, and in connection
therewith to execute and file all requisite papers and documents,
5
<PAGE>
including, without limitation, resolutions, applications, reports, surety bonds,
irrevocable consents and appointments of attorneys for service of process; and
the execution by such officers of any such paper or document or the doing by
them of any act in connection with the foregoing matters shall establish
conclusively their authority therefor from the Corporation and the approval and
ratification by the Corporation of the papers and documents so executed and the
actions so taken; and
RESOLVED, that the foregoing officers be, and each of them hereby is,
authorized, empowered and directed to do any and all things which in their
judgment may be necessary or appropriate in order to obtain a permit, exemption,
registration or qualification for, and a dealer's license with respect to, the
distribution of the Shares in accordance with and under the securities or
insurance laws of any one or more of the states as such officers may deem
advisable, and in connection therewith to execute, acknowledge, verify, deliver,
file and publish all applications, reports, resolutions, consents, consents to
service of process, powers of attorneys, commitments and other papers and
instruments as may be required under such laws and to take any and all further
action which they may deem necessary or appropriate in order to secure and to
maintain such permits, exemptions, registrations and qualifications in effect
for so long as they shall deem in the best interests of the Corporation; and
RESOLVED, that Chemical Bank be, and it hereby is, appointed Transfer Agent
and Registrar for the Shares; that Chemical Bank be, and it hereby is, vested
with all the power and authority as Transfer Agent and Registrar with respect to
the Shares as it has heretofore been vested with for the shares of NationsBank
Common Stock currently issued and outstanding; and that, if determined to be
necessary or advisable by the appropriate officers of the Corporation, Chemical
Bank may be appointed Exchange Agent for the Acquisition; and
RESOLVED, that the Board of Directors of the Corporation hereby adopts, as
if expressly set forth herein, the form of any resolution required by any
authority to be filed in connection with any applications, consents to service,
issuer's covenants or other documents, applications, reports or filings relating
to the foregoing resolutions if (i) in the opinion of the officers of the
Corporation executing same, the adoption of such resolutions is necessary or
desirable and (ii) the Secretary or an Assistant Secretary of the Corporation
evidences such adoption by inserting in the minutes of this meeting copies of
such resolutions, which will thereupon be deemed to be adopted by the Board of
Directors of the Corporation with the same force and effect as if presented at
this meeting; and
RESOLVED, that Frank L. Gentry, Executive Vice President of the
Corporation, and John E. Mack, Senior Vice President of the Corporation, be, and
each of them hereby is, authorized to finally fix the exchange ratio and other
terms of issuance of NationsBank Common Stock up to the issuance of not more
than 4,500,000 shares, and to approve any changes, if any, to the Acquisition
Agreement and the terms of the Acquisition, such officer's execution of the
Acquisition Agreement or any amendment thereto to constitute conclusive evidence
of such approval.
REPURCHASE OF SHARES
WHEREAS, it is deemed to be in the best interests of the Corporation and
its shareholders to repurchase shares of NationsBank Common Stock in open market
transactions or in negotiated unsolicited private sales up to an amount equal to
the number of shares to be issued in the Acquisition; and
WHEREAS, the Board of Directors of the Corporation has been advised by
management that the Corporation satisfies its state law requirements applicable
to repurchasing its shares, including its ability to declare and pay
distributions;
NOW, THEREFORE, BE IT:
RESOLVED, that the Corporation may repurchase, from time to time and in one
or more transactions, up to an aggregate of 4,500,000 shares of NationsBank
Common Stock in open market transactions or in negotiated unsolicited private
sales at an aggregate cost of up to $270,000,000 in order to offset the
Corporation's obligations under the Acquisition Agreement; and
RESOLVED, that Hugh L. McColl, Jr., Chairman and Chief Executive Officer,
James H. Hance, Jr., Vice Chairman and Chief Financial Officer, and John E.
Mack, Senior Vice President and Treasurer are, and any one of them hereby is,
directed and authorized to determine whether to repurchase any shares of
NationsBank Common Stock related to the Acquisition and the timing relating to
such repurchases, and to do or cause to be done any and all such acts and
things, including the execution and delivery of all documents, agreements,
certificates, and other instruments, which they may deem necessary or advisable
in order to carry out the intent of the preceding resolutions.
6
<PAGE>
FURTHER AUTHORITY AND RATIFICATION
NOW, THEREFORE, BE IT:
RESOLVED, that the appropriate officers of the Corporation hereby are
authorized, empowered and directed to do any and all things necessary,
appropriate or convenient to carry into effect the foregoing resolutions,
including the execution and delivery of all such instruments, agreements,
certificates, reports, applications, notices, letters and other documents; and
RESOLVED, that any and all actions heretofore taken by any of the
directors, officers, representatives or agents of the Corporation or any of its
affiliates in connection with the transactions contemplated by the Acquisition
Agreement or otherwise referred to in the foregoing resolutions hereby are
ratified, confirmed and approved in all respects as the acts and deeds of the
Corporation.
7
<PAGE>
CERTIFICATE OF SECRETARY
I, ALLISON L. GILLIAM, Assistant Secretary of NationsBank Corporation, a
corporation duly organized and existing under the laws of the State of North
Carolina, do hereby certify that the foregoing is a true and correct copy of a
resolution duly adopted by a majority of the entire Board of Directors of said
Corporation at a meeting of said board of Directors held on June 28, 1995, at
which meeting a quorum was present and acted throughout and that said resolution
is in full force and effect and has not been amended or rescinded as of the date
hereof.
IN WITNESS WHEREOF, I have hereupon set my hand and affixed the seal of
said corporation this 15th day of August, 1995.
(SEAL)
/s/ ALLISON L. GILLIAM
ASSISTANT SECRETARY
8
<PAGE>
EXHIBIT 99.1
NOTICE OF SPECIAL MEETING OF
THE SHAREHOLDERS OF INTERCONTINENTAL BANK
TO BE HELD OCTOBER 30, 1995
To the Shareholders of Intercontinental Bank:
Notice is hereby given that a Special Meeting of the Shareholders of
Intercontinental Bank ("ICBK") will be held at on Monday,
October 30, 1995, at a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, between NationsBank Corporation ("NationsBank") and ICBK (the
"Agreement"), pursuant to which NationsBank will acquire ICBK through the merger
(the "Merger") of ICBK with and into a wholly owned national banking association
subsidiary of NationsBank (the "New Bank"). Pursuant to the Merger, each issued
and outstanding share of common stock of ICBK ("ICBK Common Stock") will be
converted into (i) the right to receive whole shares of common stock of
NationsBank (the "NationsBank Common Stock") at a per share exchange ratio equal
to $30 divided by the average closing price of one share of NationsBank Common
Stock computed on the New York Stock Exchange Composite Transactions List for
the ten-trading-day period ending five business days prior to the closing of the
Merger, and (ii) cash in lieu of any fractional shares, all as more fully
described in the accompanying Proxy Statement-Prospectus. The Agreement also
requires the redemption of each outstanding share of ICBK Series A preferred
stock (the "ICBK Series A Preferred Stock"), no par value, at $1.00 per share
(the "Redemption"), immediately prior to the effective time of the Merger.
2. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Only shareholders of record of ICBK Common Stock and ICBK Series A
Preferred Stock at the close of business on September 22, 1995 are entitled to
notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. Approval of the Agreement requires the affirmative vote
of the holders of two-thirds of the outstanding shares of ICBK Common Stock and
ICBK Series A Preferred Stock, each voting separately as a class. Holders of
ICBK Common Stock are entitled to dissent from the Merger and to receive the
value of their shares, as more fully explained in the accompanying Proxy
Statement-Prospectus.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND, IF YOU ARE A HOLDER OF SHARES OF ICBK COMMON STOCK, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD TO ASSURE THAT YOUR
SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING. A PREPAID RETURN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE
YOUR SHARES IN PERSON WHETHER OR NOT YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
By order of the Board of Directors,
William H. Allen, Jr., Chairman of the
Board
William L. Morrison, President
, 1995
<PAGE>
EXHIBIT 99.2
THIS PROXY IS SOLICITED BY
REVOCABLE
THE BOARD OF DIRECTORS OF INTERCONTINENTAL BANK
PROXY
The undersigned hereby appoint William H. Allen, Jr., William L. Morrison
and Thomas E. Beier, and each or either of them, severally as proxies for the
undersigned, with full power of substitution, to vote all the shares of common
stock of Intercontinental Bank ("ICBK") that the undersigned will be entitled to
vote at the special meeting of shareholders to be held at on
Monday, October 30, 1995, a.m. (local time) or at any adjournments or
postponements thereof. Said proxies are directed to vote as instructed on the
matter set forth on the reverse side of this card and otherwise at their
discretion. Receipt of a copy of the Notice of Meeting and Proxy
Statement-Prospectus are hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL ON THE REVERSE SIDE OF THIS CARD.
(PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS CARD AND MAIL IT IN
THE ENCLOSED RETURN ENVELOPE.)
<PAGE>
Proposal to approve the Agreement and Plan of Merger dated as of June 26,
1995 between NationsBank Corporation ("NationsBank") and ICBK, and the
transactions contemplated thereby, as more fully described in the accompanying
Proxy Statement-Prospectus.
FOR AGAINST ABSTAIN
Please sign exactly as your name appears on your stock certificate and
fill in the date. If your shares are held jointly, all joint owners must sign.
If you are signing as an executor, administrator, trustee, guardian, custodian
or corporate officer, please give your full title as such.
Signature of Shareholder
Signature of Shareholder
(If held jointly)
Dated:
<PAGE>
EXHIBIT 99.3
INTERCONTINENTAL BANK
200 SOUTHEAST FIRST STREET
MIAMI, FLORIDA 33131
(305) 377-6900
, 1995
Dear Fellow Shareholder:
You are cordially invited to attend a special meeting of shareholders (the
"Special Meeting") of Intercontinental Bank ("ICBK") to be held on Monday,
October 30, , 1995, at at a.m. (local
time). The matters to be considered and voted upon at this Special Meeting are
of great importance to the future of your investment in ICBK.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated June 26, 1995,
between NationsBank Corporation ("NationsBank") and ICBK (the "Agreement"),
pursuant to which NationsBank will acquire ICBK through a merger (the "Merger")
of ICBK with a wholly owned national banking association subsidiary of
NationsBank. Pursuant to the Merger, each issued and outstanding share of common
stock of ICBK ("ICBK Common Stock") will be converted into: (i) the right to
receive whole shares of common stock of NationsBank (the "NationsBank Common
Stock"), at a per share exchange ratio equal to $30 divided by the average
closing price of one share of NationsBank Common Stock on the New York Stock
Exchange Composite Transactions List during the ten-trading-day period ending
five business days prior to the closing of the Merger; and (ii) cash in lieu of
any fractional shares. The Agreement also requires the redemption of each
outstanding share of ICBK Series A preferred stock, no par value, at $1.00 per
share, immediately prior to the effective time of the Merger.
Details of the proposed Merger and other important information are set
forth in the accompanying Proxy Statement-Prospectus, which we urge you to read
carefully.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU
VOTE FOR THE APPROVAL OF THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
Whether or not you plan to attend the Special Meeting in person, and
regardless of the number of shares you own, we urge you to complete, sign, date
and return the enclosed Proxy Card promptly in the accompanying postage-paid
envelope. You may, of course, attend the Special Meeting and vote in person,
even if you have previously returned the proxy card.
Sincerely yours,
William H. Allen, Jr., Chairman of the
Board
William L. Morrison, President
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-2
ANNUAL REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
FLORIDA 59-0725606
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
200 SOUTHEAST FIRST STREET, MIAMI, FL 33131
(Address of principal office) (Zip code)
Bank's telephone number, including area code (305) 377-6900
Securities registered under section 12(b) of the Act: None
Securities registered under section 12(g) of the Act:
Common Stock (par value $2.00 per share)
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 10 is not contained herein, and will not be contained, to the best
of the bank's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form F-2 or any amendment
to this Form F-2
Indicate by check mark whether the bank (1) has filed all reports
required to be filed by section 13 of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
bank was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The aggregate market value of the voting stock of the bank held by
non-affiliates as of February 28, 1995 was approximately $91 million
based on its closing price of $23 per share on that date. This
calculation is based on the assumption, made solely for the purposes of
this calculation, that all of the bank's Directors, officers and
beneficial owners of more than ten percent of the bank's common stock
are affiliates. The number of shares of common stock of the bank
outstanding as of February 28, 1995 was 6,919,975 shares.
<PAGE>
Documents Incorporated by Reference
Parts I, II and IV: Portions of Intercontinental Bank's Annual
Report to Shareholders for the year ended
December 31, 1994 (the "Annual Report").
Parts I and III: Portions of Intercontinental Bank's Proxy
Statement dated March 30, 1995 (the "Proxy
Statement").
Any statement contained in a document incorporated by reference into
this report shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein modifies or
supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
<PAGE>
INTERCONTINENTAL BANK
1994 FORM F-2 ANNUAL REPORT
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4. Security Ownership of Certain Beneficial Owners and Management . . . 8
PART II
Item 5. Market for the Bank's Common Equity and Related Security Holder Matters . 9
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . 9
PART III
Item 9. Directors and Principal Officers of the Bank . . . . . . . . . . . . . 10
Item 10. Management Compensation and Transactions . . . . . . . . . . . . . . . 11
PART IV
Item 11. Exhibits, Financial Statement Schedules and Reports on Form F-3 . . . . 11
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
General
Intercontinental Bank ("Intercontinental" or the "Bank"), a Florida
state-chartered commercial bank whose principal office is located in
Miami, Florida, operated 26 branch offices at December 31, 1994 - 17 in
Dade County, 7 in Broward County and 2 in Palm Beach County.
Intercontinental's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank is primarily engaged in
attracting deposits from the general public and using such deposits,
together with other funds, to make loans and investments.
Substantially all of the Bank's revenues and operating profits are
generated in and its assets are located within the state of Florida.
Intercontinental's principal executive offices are located at 200
Southeast First Street, Miami, Florida 33131 and its telephone number
is (305) 377-6900. As of December 31, 1994, the Bank had total assets
of approximately $1.2 billion and total deposits of approximately $956
million. As of December 31, 1993, total assets and deposits were
approximately $1.1 billion and $947 million, respectively. As of
December 31, 1994, Intercontinental had 548 employees.
In addition to its primary business as a commercial bank,
Intercontinental owns all of the outstanding capital stock of Pan
American Mortgage Corp. ("PAMCO"), a mortgage banking company which
services residential and commercial loans. PAMCO's total assets
aggregated $13 million in 1994 and $17 million in 1993. As of both
December 31, 1994 and 1993, PAMCO's mortgage servicing portfolio
amounted to approximately $1.1 billion.
Operations of Intercontinental are affected by numerous factors which
in whole or in part are beyond management's control. These include,
but are not limited to, fluctuations in interest rates in the national
money markets, general availability of funds, national and local
economic conditions, housing demand, lending risks, federal, state and
local taxation of the banking industry, regulation (or deregulation) of
interest rates payable upon deposits and other regulations affecting the
banking industry.
Information related to recent acquisitions is incorporated by
reference to Note 2 on page 27 of the Annual Report and other
information with respect to the Bank's business is incorporated by
reference to the information under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on
pages 5 to 18 of the Annual Report. Information related to the pending
sale of two of Intercontinental's banking offices is incorporated by
reference to Note 18 on page 38 of the Annual Report.
Competition
The banking business in Florida is highly competitive. Banks in
Florida face strong competition in attracting deposits and in making
loans. Intercontinental competes for financial services business with,
among others, commercial banks, savings and loan associations,
mortgage bankers, other financial institutions, money market funds,
mutual funds and others. Intercontinental does not rely on any
individual group or entity for a material portion of its deposits. In
addition, while the Bank's market area has experienced significant
growth in recent years in population, deposits and housing units,
neither the rate of growth in future periods nor the extent to which
Intercontinental may participate in any such growth can be assured.
According to the latest available Branch Deposit Report of Florida Bank
& Thrift Institutions prepared by the Financial Data Committee of the
Florida Bankers Association and the Florida League of Financial
Institutions, Intercontinental's deposits represented approximately 1.4
percent of the total deposits in Dade, Broward and Palm Beach counties
at December 31, 1994.
1
<PAGE>
Intercontinental considers its primary competition to be other
depository institutions located in Dade, Broward and Palm Beach
counties. Some of these institutions have been in existence for a
longer period of time than Intercontinental and are better
established, have greater financial resources and have more extensive
facilities than Intercontinental. Recent regulatory developments,
including the increasing degree of geographic and other
deregulation, have increased the level of competition facing the
Bank. These developments have permitted a number of national and
regional banking institutions and other companies providing
traditional banking services to penetrate the South Florida market and
have relaxed restrictions against establishment of branch offices. In
1989, Florida law was changed to permit statewide branch banking.
Additionally, recently enacted and future legislation and regulatory
changes affecting financial institutions may alter the competitive
environment. See "Regulation" below. The Bank's management believes
that despite the competition it faces it is well situated to compete
successfully in the South Florida marketplace.
Intercontinental's assets include a substantial portfolio of loans
secured by real estate. As of December 31, 1994 and 1993, these
loans totaled $484 million and $351 million, respectively,
representing 73 percent and 69 percent, respectively, of its total
loan portfolio. A significant portion of the real estate portfolio
consisted of residential loans and loans made to owner-occupied
businesses. Most of these loans are concentrated in South Florida
which makes Intercontinental particularly susceptible to adverse changes
in the real estate market in this area.
Regulation
Intercontinental is a Florida state-chartered commercial bank which
is not a member of the Federal Reserve System. It is regulated
primarily by the Florida Department of Banking and Finance (the
"Department") and the FDIC.
Florida Regulation. As a state-chartered commercial bank,
Intercontinental is subject to the applicable provisions of Florida
law and the regulations adopted thereunder by the Department. The Bank
must file various reports with, and is subject to periodic
examination by, the Department. Florida law and the Department
regulate, among other things, Intercontinental's capital, permissible
activities, reserves, investments, lending authority, branching,
issuance of securities, payment of dividends, transactions with
affiliated parties and borrowings. Florida has permitted statewide
branch banking since 1989.
In 1993, Intercontinental amended its bylaws to make inapplicable
Section 607.0902, Florida Statutes, which subjects the voting rights
of holders of shares acquired in certain "control share
acquisitions" to approval by other shareholders.
Interstate Acquisitions and Branching. Generally, except as described
below, under Florida law, no out-of-state bank, trust company or bank
holding company may acquire control or substantially all of the assets
of a Florida bank. In addition, under the U.S. Bank Holding Company
Act of 1956, as amended, a bank holding company may not acquire
any bank located outside the state in which the operations of its
principal banking subsidiaries are conducted unless the acquisition is
specifically authorized by statute in the state where the bank
is located. Florida has enacted a regional reciprocal interstate
banking law which generally allows bank holding companies located
within the southeastern region of the United States to acquire
banks and bank holding companies located in Florida if the state where
the out-of-state acquiror is located grants reciprocal privileges to
bank holding companies in Florida. Such reciprocal rights are
subject to all restrictions imposed on acquisitions in the acquiror's
state. Under Florida law the southeastern region is defined to
include the states of Alabama, Arkansas, Florida, Georgia, Louisiana,
Maryland, Mississippi, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia as well as the District of Columbia. Each of
these jurisdictions has enacted reciprocal legislation permitting
Florida bank holding companies to acquire banks and bank holding
companies located there. Florida
2
<PAGE>
has amended this legislation, effective May 1, 1995, to permit banks
and bank holding companies located anywhere in the United States to
acquire Florida banks and bank holding companies on a reciprocal basis.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Act") became law in 1994. The Act authorizes any bank
holding company which meets capital and management requirements to
acquire a bank located anywhere in the United States, regardless of
state law, effective September 29, 1995, as long as such interstate
acquisitions will not result in a given banking organization controlling
more than 30 percent of any one state's deposits (this limit may be
modified or waived by a state) or 10 percent of all deposits
nationwide or acquiring a bank in existence for fewer years than any
limit (as long as five years or less) specified under applicable state
law. A provision of the Act will also permit, effective September 29,
1995, a bank to act as the agent of an affiliated depository
institution for specified activities, such as accepting deposits,
closing and servicing loans, and accepting loan payments, without
being considered a branch of that institution. The Act also provides
that national banks will be able to branch nationwide by acquisition or
consolidation on June 1, 1997 and thereafter except in those states
which elect to "opt out" prior to then. In addition, the Act permits
states to "opt in" early on interstate branching for both state and
national banks. It is not possible to determine at this time
what effect, if any, of this legislation will have on Intercontinental.
FDIC Regulation. The FDIC is the primary federal banking
supervisor and regulator of Intercontinental. The FDIC insures
deposit accounts in Intercontinental (up to applicable limits) through
the Bank Insurance Fund ("BIF"). Intercontinental is subject to
examination and regulation by the FDIC. Such examination and
regulation is intended primarily for the protection of depositors. The
regulatory structure provides regulatory officials with extensive
discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect
to classification of assets and the establishment of adequate loss
reserves for regulatory purposes.
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") became law. FDICIA implemented a number of
regulatory requirements and restrictions on state-chartered banks and
gave the FDIC new supervisory powers over them. Better-capitalized
institutions are generally subject to less onerous regulation and
supervision under FDICIA than poorly-capitalized institutions.
The FDIC has adopted risk-based capital requirements for assessing
bank capital adequacy. These standards define capital and establish
minimum capital requirements in relation to assets and off-balance
sheet exposure as adjusted for credit risk. The risk-based capital
standards currently in effect are designed to make regulatory capital
requirements more sensitive to differences in risk profile among bank
holding companies and banks, to account for off-balance sheet exposure
and to minimize disincentives for holding liquid assets. The minimum
standard for the ratio of capital to risk-weighted assets (including
certain off-balance sheet obligations, such as standby letters of
credit) is 8.0 percent. At least half of the minimum standard
risk-based capital must consist of common equity, retained earnings
and qualifying perpetual preferred stock and minority interests in
consolidated subsidiaries, less deductions for goodwill and various
other intangibles, certain losses and investments in securities
subsidiaries ("Tier 1 capital"). The remainder ("Tier 2 capital") may
consist of a limited amount of subordinated debt, certain hybrid
capital instruments and other debt securities, preferred stock and a
limited amount of the general valuation allowance for loan losses. The
sum of Tier 1 capital and Tier 2 capital is "total risk-based
capital". At December 31, 1994, Intercontinental had Tier 1 and total
risk-based capital ratios of 12.09 percent and 13.40 percent,
respectively.
The FDIC has also adopted regulations which supplement the risk-based
guidelines to include a minimum leverage ratio of Tier 1 capital to
quarterly average assets ("leverage ratio") of 3 percent. At December
31, 1994, Intercontinental had a leverage ratio of 7.87 percent. The
FDIC has emphasized that the foregoing standards are
3
<PAGE>
supervisory minimums and that a banking organization will be permitted
to maintain such minimum levels of capital only if it receives the
highest rating under the regulatory rating system and the banking
organization is not experiencing or anticipating significant growth.
All other banking organizations are required to maintain a leverage
ratio of at least 4.0 percent to 5.0 percent. These rules further
provide that banking organizations experiencing internal growth or
making acquisitions will be expected to maintain capital positions
substantially above the minimum supervisory levels and comparable to
peer group averages, without significant reliance on intangible assets.
The FDIC has adopted regulations defining five categories of
capitalization and implementing a framework of supervisory actions
applicable to state nonmember banks in each category.
Intercontinental was included in the highest category of capitalization
at December 31, 1994.
Under FDIC regulations, Intercontinental is required to pay annual
insurance premiums based on its "assessment risk classification".
Under this risk-based system, banks are periodically categorized into
one of three capital categories (well capitalized, adequately
capitalized or undercapitalized) and into one of three subgroups
within each category based primarily on FDIC ratings. Assessments range
from .23 percent of deposits for well capitalized healthy banks
to .31 percent for undercapitalized banks posing a substantial
probability of loss to the BIF or the Savings Association Insurance
Fund ("SAIF") unless effective corrective action is taken. As a
result of its July 1990 merger with Atico Savings Bank ("ASB"),
Intercontinental must pay premiums to the SAIF, of which ASB was a
member, based on deposits attributable to ASB. Intercontinental credits
these payments against the premiums it would otherwise have to pay to
the BIF on such deposits. In 1994, Intercontinental paid $2 million
in deposit insurance to the FDIC. The FDIC has proposed: (i) an amended
assessment schedule for BIF members which ranges from 4 (for banks
posing the least risk to the BIF) to 31 basis points to apply in the
semiannual period in which the BIF's designated reserve ratio of 1.25
percent of total insured deposits is achieved and in semiannual
periods thereafter and (ii) a procedure for adjusting the rate
schedule semiannually as necessary to maintain the designated reserve
ratio of 1.25 percent. While it is not now possible to determine
whether and in what form the FDIC proposal may be adopted, its
adoption as proposed would significantly reduce the current rate for
deposit insurance premiums payable by Intercontinental to the BIF.
FDICIA directs the FDIC and other federal banking agencies to prescribe
standards relating to, among others, internal controls, information
systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation and
other matters. It contains a variety of provisions which also may
affect the operations of Intercontinental, including, among others, new
reporting requirements, regulatory standards for real estate lending,
"truth in savings" provisions and a 90-day prior notice requirement for
branch closings. Moreover, pursuant to FDICIA, the FDIC has adopted
regulations which generally limit the equity investments of state banks
to the type and amount permitted national banks. The rules contain
exceptions for, among other things, ownership of the voting stock of
majority-owned subsidiaries and listed equity shares and shares of
registered investment companies. Investments that are impermissible
either as to type or amount must be divested. In addition, the FDIC
has adopted regulations pursuant to FDICIA that prohibit insured
state-chartered banks from engaging as principal in any type of
activity that is not permissible for a national bank unless the FDIC
has determined that the activity would pose no significant risk to the
BIF or the SAIF and the state bank is in compliance with all
applicable capital standards. FDICIA and its implementing
regulations have increased the costs of regulatory compliance for
Intercontinental and the entire banking industry.
The Riegle Community Development and Regulatory Improvement Act of 1994
(the "Regulatory Improvement Act"), enacted in 1994, requires federal
banking agencies to consider the administrative burdens on banks of
new regulations that impose additional reporting, disclosure or other
requirements. It also mandates an adequate transition period for
new regulations, the elimination of duplicative filings and notices,
call report simplification
4
<PAGE>
and other administrative measures to reduce the regulatory burden on
banks. The Regulatory Improvement Act also directs the federal banking
agencies to conduct a review of federal banking regulations and
written policies in order to streamline and modify them to improve
efficiency, reduce unnecessary conditions and eliminate unwarranted
constraints on the availability of credit. It is not yet possible to
determine the effect of the Regulatory Improvement Act on
Intercontinental's regulatory burden.
Federal Reserve System. Under regulations of the Board of Governors
of the Federal Reserve System ("Federal Reserve Board"), the Bank
must maintain reserves, which for 1994 averaged $16 million, against
its transaction accounts (primarily checking accounts). Because
banks must generally maintain reserves in cash or non-interest bearing
accounts, the effect of this reserve requirement is to increase a
bank's cost of funds. The amount of these reserves are subject to
adjustment by the Federal Reserve Board.
Legislative and Regulatory Proposals. Legislative and regulatory
proposals regarding changes in banking and the regulation of banks
and other financial institutions are being considered at the federal
and state level. It cannot be predicted whether any of these proposals
will be adopted or, if adopted, what the effect on Intercontinental will
be.
ITEM 2. PROPERTIES
The information required in response to Item 2 is as follows:
<TABLE>
<CAPTION>
Owned Year Lease
or Lease Renewal
Location Leased Expires Option
<S> <C> <C> <C>
Banking Offices
Main Office Own building; 2055 None
200 Southeast First Street Lease land
Miami, FL
Brickell Branch Leased 1999 Two 5-year
1101 Brickell Avenue options
Miami, FL
Coral Gables Branch Owned
2701 Ponce de Leon Boulevard
Coral Gables, FL
Coral Springs Branch Leased 1997 Three 5-year
1401 University Drive options
Coral Springs, FL
Coral Ridge Branch Leased 1998 Three 5-year
2600 East Commercial Blvd. options
Fort Lauderdale, FL
Corporate Park Branch Owned
6260 Powerline Road
Fort Lauderdale, FL
5
<PAGE>
Downtown Fort Lauderdale Branch Leased 2000 Two 5-year
200 Northeast Third Avenue options
Fort Lauderdale, FL
Hialeah Branch Owned
1325 West 49 Street
Hialeah, FL
Key Biscayne Branch Leased 1997 Two 3-year
240 Crandon Blvd. options
Key Biscayne, FL
Medley Branch Leased 1995 One 5-year
7208 Northwest 72 Avenue option
Miami, FL
Mizner Park Branch Leased 2000 Two 10-year
302 Plaza Real options
Boca Raton, FL
North Miami Branch Own building; 2000 One 25-year
12700 Biscayne Blvd. Lease land option
North Miami, FL
North Miami Beach Branch Leased 1999
501 Northeast 167 Street
North Miami Beach, FL
Northwest Branch Own Building; 2010 Two 26-year
3899 Northwest Seventh Street Lease land options
Miami, FL
Oakland Park Branch Leased 1998 Two 5-year
5100 North Dixie Highway options
Oakland Park, FL
Palmetto Branch Owned
2100 West 76 Street
Hialeah, FL
Palmetto Park Branch Leased 1996 Four 10-year
7000 West Palmetto Park Road options
Boca Raton, FL
Plantation Branch Leased 1997 One 5-year
8211 West Broward Boulevard option
Plantation, FL
6
<PAGE>
Skylake Branch * Own building; 2001 One 10-year
1600 NE Miami Gardens Drive Lease land option
North Miami Beach, FL
South Miami Branch Leased 1997 Two 5-year
1533 Sunset Drive options
Coral Gables, FL
Southwest Branch Owned
3663 Southwest Eighth Street
Miami, FL
Surfside Branch Leased 1997 One 5-year
9544 Harding Avenue option
Surfside, FL
Tamarac Branch * Owned
6401 West Commercial Boulevard
Tamarac, FL
Washington Avenue Branch Leased 2000 Two 5-year
930 Washington Avenue options
Miami Beach, FL
West Airport Branch Leased 1996 Three 5-year
2500 Northwest 72 Avenue options
Miami, FL
Westchester Branch Owned
8717 Coral Way
Miami, FL
Other Properties
Main Office Garage Owned
226 Southeast First Street
Miami, FL
Operations Center Leased 1995
7801 Northwest 15 Street
Miami, FL
</TABLE>
* The sale of this branch is expected to be consummated in the second
quarter of 1995.
In addition, the Bank owns the following properties:
(1) Approximately 550 acres of undeveloped land in Brevard County,
Florida (fee simple).
(2) The land and the office building thereon located at 150 Southeast
Third Avenue, Miami, Florida 33131, which is occupied by
unaffiliated third parties (fee simple). The lease on the office
building,
7
<PAGE>
which has a ten-year term, is due to expire on December 31,
1995. The current tenant has notified Intercontinental that it
is not renewing its lease. Intercontinental is presently
evaluating its alternatives including leasing the building to
new tenants and/or using the building for its own expansion
purposes. The effect of the non-renewal of this lease cannot be
fully measured at the present time and may have a material
impact on Intercontinental's future occupancy expenses and net
income.
(3) Intercontinental's principal executive offices are located
at 200 Southeast First Street, Miami, Florida 33131, which
is 76 percent occupied by Intercontinental. This building and
the adjacent parking garage are owned by Intercontinental.
The land underlying this office building is leased from a third
party.
Total lease expense for 1993 aggregated $2.3 million. The terms of the
leases pursuant to which such rentals were paid range from one to 61
years.
ITEM 3. LEGAL PROCEEDINGS
The lending and related activities of the Bank sometimes result
in lawsuits and claims. In connection with enforcement of loans after
default, Intercontinental has been and may continue to be involved in
counterclaims and other lawsuits, including claims based on theories of
lender liability and otherwise that could involve claims for
unspecified damages which could be substantial in amount.
Intercontinental's management believes that its operating
practices and procedures should be adequate to obviate or minimize the
exposure of Intercontinental to lender liability claims that may be
asserted in the future. However, there can be no assurance that the
Bank will be successful in preventing, minimizing or prevailing in any
pending or future lawsuits. An adverse determination in a substantial
lawsuit could have a material adverse effect on Intercontinental.
The nature of the Bank's business generates a certain amount of
litigation against it involving matters arising in the ordinary course
of business. In the opinion of management, based on a review of such
litigation with legal counsel, any losses from these contingencies,
including the lawsuit d e scribed below, is not expected to have
a material adverse effect on Intercontinental. Intercontinental
may receive reimbursement under its insurance policies for all or
part of these potential losses.
During 1994, suit was commenced against Intercontinental and Sun
States Management in the Circuit Court of Jackson County,
Mississippi by Natascia Potter, the plaintiff, who alleges that she was
assaulted while a tenant at an apartment building which the Bank had
acquired through foreclosure of a mortgage. The plaintiff alleges
that the Bank and other defendants were negligent in failing to provide
security, and plaintiff seeks compensatory and punitive damages
aggregating $25.2 million plus attorneys' fees and costs. Counsel
representing the Bank and its insurer in this matter advises that, in
its opinion, plaintiff's claim is without merit and is not likely to
result in a damage award in an amount which the Bank would regard as
material. The Bank plans to vigorously defend this case and, in the
event of an adverse judgment, does not believe it will have a material
adverse effect on Intercontinental.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to Item 4 is incorporated by
reference to the information under the captions "OWNERSHIP OF EQUITY
SECURITIES - Security Ownership by Principal Holders of Common Stock
and Preferred Stock" and "OWNERSHIP OF EQUITY SECURITIES - Security
Ownership by Management" in the Proxy Statement.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE BANK'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
Certain information required in response to Item 5 is incorporated by
reference to the information under the captions "Shareholders' Equity"
on page 14 and "Selected Quarterly Financial Information" on page 37
of the Annual Report. As of December 31, 1994, the number of
holders of record of Intercontinental's common stock was approximately
1,900. Intercontinental's common stock trades on The Nasdaq Stock
Market under the symbol "ICBK."
The payment of dividends is subject to the discretion of the
Intercontinental Board of Directors and depends upon a number of
factors, including the Bank's operating results, financial condition and
regulatory limitations. Pursuant to Section 658.37, Florida
Statutes, a Florida state-chartered commercial bank like
Intercontinental generally may not pay out in dividends in any calendar
year an amount that exceeds the total of its net profits of that year
combined with its retained profits of the preceding two years. With
the approval of the Department, a bank may declare a dividend from
retained net profits which accrued prior to the preceding two years
provided that, before declaring such a dividend on its common stock, it
allocates 20 percent of its net profits for such period as is covered
by the dividend to its surplus fund until the surplus fund at least
equals the stated capital of its common and preferred stock then issued
and outstanding. Section 658.37 also prohibits a bank from declaring
a dividend (i) at any time which its net income from the current year
combined with its retained net income from the preceding two years is a
loss or (ii) which would cause the capital accounts of the bank to
fall below the minimum amount required by law, regulation, order, or any
written agreement with the Department or a federal regulatory
agency. The Bank may also, under certain circumstances, be or
become subject to federal regulatory restrictions on the payment of
dividends.
ITEM 6. SELECTED FINANCIAL DATA
The information required in response to Item 6 is incorporated by
reference to the information under the captions "Selected Financial
Highlights" on page 4 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required in response to Item 7 is incorporated by
reference to the information under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 5 to 18 of the Annual Report. See also the
supplementary data provided in the following table:
1994 1993 1992
Return on average assets 1.15% 1.11% .84%
Return on average shareholders' equity 15.06 14.33 11.04
Average shareholders' equity to average assets 7.66 7.72 7.60
Dividend payout ratio 19 16 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in response to Item 8 is incorporated by
reference to the information under the caption "Selected Quarterly
Financial Information" on page 37 of the Annual Report and the
captions "Consolidated Balance Sheet", "Consolidated Statement of
Income", "Consolidated Statement of Cash Flows", "Consolidated
Statement of Changes In Shareholders' Equity" and "Notes to Consolidated
Financial Statements" on pages 20 to 23 of the Annual Report.
9
<PAGE>
PART III
ITEM 9. DIRECTORS AND PRINCIPAL OFFICERS OF THE BANK
The information required in response to Item 9 with respect to
Directors is incorporated by reference to the information under the
caption "ELECTION OF DIRECTORS - Description of Directors and Nominees
for Director" in the Proxy Statement. The information required in
response to Item 9 with respect to principal officers follows except
for information with respect to Messrs. Allen, Corrigan and Morrison
which is incorporated by reference to the information under the
caption "ELECTION OF DIRECTORS - Description of Directors and Nominees
for Director" in the Proxy Statement.
Charles A. Arnett (47): Mr. Arnett has been employed by
Intercontinental since December 1992 and was elected Executive Vice
President of Intercontinental in February 1993. From September 1990
to December 1992, he served as President and Chief Executive Officer of
North Ridge Bank. The FDIC was appointed receiver of North Ridge Bank
on December 20, 1992. On such date, Intercontinental acquired certain
assets and assumed substantially all customer deposit liabilities of
North Ridge Bank. From September 1989 to September 1990, Mr. Arnett
was a consultant with Fairfax Group, Inc. which is in the property tax
consulting business.
John A. Baron (56): Mr. Baron was elected Executive Vice President -
Operations of the Bank in 1987.
Thomas E. Beier (49): Mr. Beier was elected Executive Vice President
of Intercontinental in January 1990 and has served as Treasurer of
Intercontinental since September 1987. Mr. Beier served as Senior Vice
President of Intercontinental from September 1987 to January 1990.
Thomas B. Brady (45): Mr. Brady has served as Executive Vice
President of the Bank since September 1987.
Hugo A. Castro (51): Mr. Castro has been employed by
Intercontinental since December 31, 1993 and was elected Executive Vice
President of Intercontinental in February 1994. He served as President
of Commercial Trust Bank from December 1988 until its acquisition by
Intercontinental on December 31, 1993. Mr. Castro previously served as
Executive Vice President of Commercial Bank and Trust Company, a
predecessor of First Union Corporation of Florida, for approximately 20
years.
Winthrop F. Davis (52): Mr. Davis has served as Executive Vice
President - Real Estate Lending of Intercontinental since July 1987. In
November 1987, he was elected President of PAMCO.
Walter E. Howard (56): Mr. Howard was elected Executive Vice President
of the Bank in October 1992. From August 1988 to October 1992, Mr.
Howard served as President of Interbanc. Interbanc was merged into
Intercontinental on October 1, 1992.
John H. Lubera (51): Mr. Lubera has been employed by Intercontinental
since the July 1, 1994 merger of Interstate Bank Holding Company
("Interstate") into Intercontinental. He was elected Executive Vice
President of the Bank in August 1994. From 1986, until the merger
with Intercontinental, Mr. Lubera was President of Interstate and
President and Chief Executive Officer of Interstate's subsidiary, The
Bank of Coral Gables.
Phillip W. Py (55): Mr. Py has been employed by Intercontinental
since December 30, 1994 and was elected Executive Vice President of
Intercontinental in February 1995. He served as President, Chief
Executive Officer and Director of Boca Bank from June 1991 (and
Chairman of the Board from May 1992) until its acquisition by
Intercontinental on December 30, 1994. From 1987 until his association
wih Boca Bank, he was Chief Executive
10
<PAGE>
Officer of Mid-America Federal Savings and Loan Association in Columbus,
Ohio.
Bruce P. Steinberger (41): Mr. Steinberger was elected
Executive Vice President - Lending of Intercontinental in 1987.
John C. Waldron (61): Mr. Waldron was elected Executive Vice
President - Credit Policy and Administration of the Bank in September
1987.
ITEM 10. MANAGEMENT COMPENSATION AND TRANSACTIONS
The information required in response to Item 10 is incorporated by
reference to the information under the captions "OWNERSHIP OF EQUITY
SECURITIES - Security Ownership by Management", "ELECTION OF DIRECTORS
- Compensation to Principal Officers", "ELECTION OF DIRECTORS -
Compensation Pursuant to Plans" and "ELECTION OF DIRECTORS - Certain
Business Relationships" in the Proxy Statement.
PART IV
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM F-3
(a) 1. Financial statements - The following
consolidated financial statements of
Intercontinental and related notes are hereby
incorporated into this report by reference to pages
20 to 38 of the Annual Report:
a. Consolidated Balance Sheet for the Years Ended
December 31, 1994 and 1993;
b. Consolidated Statement of Income for the
Years Ended December 31, 1994, 1993 and 1992;
c. Consolidated Statement of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992;
d. Consolidated Statement of Changes in
Shareholders' Equity for the Years Ended December
31, 1994, 1993 and 1992; and
e. Notes to Consolidated Financial Statements.
2. Financial statement schedules - The following
financial statement schedules are hereby
incorporated into this report by reference to
Exhibit 10:
a. Schedule I - Securities;
b. Schedule II - Loans to officers, directors,
principal security holders, and any associates
of the foregoing persons;
c. Schedule III - Loans and lease financing
receivables;
d. Schedule IV - Bank premises and equipment;
e. Schedule V - Investments in, income from
dividends and equity in earnings or losses of
subsidiaries; and
f. Schedule VI - Allowance for possible credit
losses.
(b) Intercontinental filed the following reports on Form F-3 during
the last quarter of the period covered by this report:
1. November 1994 Form F-3 filed on November 22, 1994
regarding the voting results of the November 16,
1994 Special Meeting of Shareholders related to
the acquisition of Boca
11
<PAGE>
Bancorp, Inc. and its wholly-owned subsidiary, Boca
Bank.
3. December 1994 Form F-3 filed on January 9,
1995 which described the Bank's acquisition of Boca
Bancorp, Inc. and its wholly-owned subsidiary, Boca
Bank.
(c) Exhibit:
12
<PAGE>
Exhibit Index
Exhibit
Number Description of Exhibits
1(a)** Articles of Incorporation of Intercontinental Bank
1(b)*** Bylaws of Intercontinental Bank
3(a)* Intercontinental Bank Retirement Plan
3(b)* Executive Retention Plan
3(c)* Intercontinental Bank Incentive Stock Option Plan
3(d) Intercontinental Bank Non-qualified Stock Option Plan
3(e) Intercontinental Bank 1992 Incentive Stock Option Plan
3(f)* Intercontinental Bank Performance Bonus Plan
3(g)*** Employment Agreement dated January 1, 1994 between
Intercontinental Bank and Mr. William H. Allen, Jr.
3(h)*** Employment Agreement dated January 1, 1994 between
Intercontinental Bank and Mr. William L. Morrison
3(i)*** Employment Agreement dated January 1, 1994 between
Intercontinental Bank and Mr. Walter E. Howard
3(j)* Agreement of Lease dated December 6, 1985 between Pan
American Mortgage Corp. and Pan American Banks, Inc. with
respect to the building located at 250 S.E. First Street, Miami,
Florida
3(k)* Assignment dated as of August 31, 1987 between Pan American
Mortgage Corp. and the Company of Agreement of Lease dated
December 6, 1985 between Pan American Mortgage Corp. and Pan
American Banks, Inc. with respect to the building located at
250 S.E. First Street, Miami, Florida
6 Intercontinental Bank Annual Report to Shareholders for the year
ended December 31, 1994
8 Proxy Statement of Intercontinental Bank dated March 30, 1995
9 List of Subsidiaries of Intercontinental Bank
10 Financial Statement Schedules
13
<PAGE>
* Incorporated by reference to Intercontinental's
Registration Statement on Form F-1 filed with the FDIC on March
13, 1991.
** Incorporated by reference to Intercontinental's Annual Report on
Form F-2 filed with the FDIC on March 27, 1992.
*** Incorporated by reference to Intercontinental's Annual Report on
Form F-2 filed with the FDIC on March 30, 1994.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the bank has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INTERCONTINENTAL BANK
By: William H. Allen, Jr. Thomas E. Beier
William H. Allen, Jr. Thomas e. Beier
Chairman of the Board Executive Vice President
(Principal Executive Officer) & Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the bank
and in the capacities and on the dates indicated.
Signature Title Date
Kathleen A. Assaf Director March 27, 1995
Kathleen A. Assaf
Teo A. Babun, Jr. Director March 27, 1995
Teo A. Babun, Jr.
Walter L. Banks Director March 27, 1995
Walter L. Banks
Joe Ann Batcheller Director March 27, 1995
Joe Ann Batcheller
Patrick J. Cesarano Director March 27, 1995
Patrick J. Cesarano
George M. Corrigan Vice Chairman March 27, 1995
George M. Corrigan
15
<PAGE>
Edward W. Easton Director March 27, 1995
Edward W. Easton
Phillip Frost, M.D. Director March 27, 1995
Phillip Frost, M.D.
Gerald N. Gaston Director March 27, 1995
Gerald N. Gaston
B.B. Goldstein Director March 27, 1995
B.B. Goldstein
Director
Arthur J. Hill
Jack Langer Director March 27, 1995
Jack Langer
Charles E. Largay Director March 27, 1995
Charles E. Largay
Neil E. Leach Director March 27, 1995
Neil E. Leach
Director
Michael Maroone
W. Sloan McCrea Director March 27, 1995
W. Sloan Mccrea
Ellen Whiteside McDonnell Director March 27, 1995
Ellen Whiteside McDonnell
William L. Morrison Director March 27, 1995
William L. Morrison President
16
<PAGE>
Marshal E. Rosenberg, Ph.D. Director March 27, 1995
Marshal E. Rosenberg, Ph.D.
Jacqueline Simkin Director March 27, 1995
Jacqueline Simkin
Stanley G. Tate Director March 27, 1995
Stanley G. Tate
J. Frost Walker, III Director March 27, 1995
J. Frost Walker, III
Director
Herbert A. Wertheim
17
<PAGE>
EXHIBIT 6
<PAGE>
1994 ANNUAL REPORT
INTERCONTINENTAL BANK
<PAGE>
INTERCONTINENTAL BANK is a Florida state-charteredcommercial bank offering a
wide range of banking servicesthrough 26 branch offices located in Dade, Broward
and Palm Beach counties, Florida. Intercontinental Bank's wholly-owned
subsidiary, Pan American Mortgage Corp.,offers mortgage services and mortgage
banking products through its headquarters office in Miami, Florida.
<PAGE>
Financial
Highlights
(3 BAR GRAPHS APPEAR HERE WITH THE FOLLOWING PLOT POINTS)
NET INCOME ($ MILLIONS)
1992 1993 1994
7.6 11.1 12.8
LOANS ($ MILLIONS)
1992 1993 1994
437 510 664
DEPOSITS ($ MILLIONS)
1992 1993 1994
862 947 956
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS EXCEPT PER COMMON SHARE) 1994 1993
<S> <C> <C>
Income Highlights
Net income..................................... $ 12,811 $ 11,092
Return on average assets....................... 1.15% 1.11%
Return on average shareholders'equity......... 15.06 14.33
Common Stock Highlights
Primary earnings per common share.............. $ 1.82 $ 1.60
Cash dividends declared........................ .34 .26
Book value at December 31...................... 12.98 11.96
Market value at December 31.................... 18.25 20.00
Balance Sheet Highlights - Year End
Total assets.................................... $1,156,110 $1,136,577
Loans, net of unearned income................... 664,321 510,046
Deposits........................................ 955,641 947,302
Shareholders' equity............................ 89,828 81,201
Financial Ratio Highlights
Risk-based capital:
Tier 1....................................... 12.09% 12.85%
Total........................................ 13.40 14.16
Non-accruing loans/Total loans................. .53 .48
</TABLE>
See Note 2 for information on recent acquisitions and their effect on 1993
balances.
(Photo of city skyline with Intercontinental Bank appears here)
INTERCONTINENTAL BANK AND SUBSIDIARIES 1
<PAGE>
Message to
Shareholders
WE ARE VERY PLEASED to report that Intercontinental Bank achieved record
earnings again in 1994. Net income was $12,811,000, or $1.82 per share,
compared with net income of $11,092,000, or $1.60 per share, reported in 1993.
The 1994 earnings represent a 15 percent increase over the 1993 results. This
earnings improvement is reflective of the continued successful implementation
of our business strategy, which focuses on small to middle-sized businesses and
high net worth individuals in South Florida, coupled with the balance sheet
growth and economies of scale which are the bi-products of our recent
acquisitions. Also during fiscal 1994, we benefited from a meaningful economic
recovery which began to take shape in South Florida.
We were most fortunate last year to be able to merge two well located
independent banks into Intercontinental Bank and thereby gain a meaningful
presence in two previously unserved markets: Coral Gables and Boca Raton. The
Bank of Coral Gables merger in July of 1994 gave us two extremely attractive
branch office locations in Dade County which together contained $86 million in
deposits. As a result of that acquisition, George M. Corrigan, who had
previously been Chairman of the Board of The Bank of Coral Gables, joined our
Board as Vice Chairman. Also, Charles E. Largay, a prominent Coral Gables
businessman and Director of the merged bank, became a member of our Board.
(Photo of William H. Allen, Jr. and William L. Morrison appears here)
William H. Allen, Jr. William L. Morrison
Boca Bank, which we acquired on December 30, 1994, conducted business
through two excellent banking facilities in southern Palm Beach County which
together contained deposits totaling $68 million. Kathleen A. Assaf, the former
Chairman of Boca Bank's parent company, has subsequently been elected to
Intercontinental Bank's Board. In addition, Phillip W. Py, former Chairman of
Boca Bank, has joined Intercontinental Bank in an executive management position
with responsibilities for Palm Beach County. The acquisition of Boca Bank and
the merger of that bank into Intercontinental Bank represent our first entry
into the potentially lucrative south Palm Beach County market. We are optimistic
about our prospects in Palm Beach County and hope to be able to grow our
franchise meaningfully within that attractive marketplace in the future.
At year end, Intercontinental Bank operated 26 branch locations in South
Florida. Of that number, 17 locations were in Dade County, 7 locations were in
Broward County and 2 locations were in Palm Beach County. We continue to explore
opportunities to expand our franchise through acquisitions and otherwise.
During late 1994, Intercontinental Bank executed a contract to sell two
branch locations to another financial institution. The two branch locations
covered by the contract are former savings and loan offices which contain
approximately $32 million in deposits. The decision to sell these two branch
locations was driven by the fact that each branch is located in an area which
generally is devoid of the small to middle-sized businesses which are the core
of our commercial banking strategy. Intercontinental Bank will realize a gain on
the sale of these offices.
INTERCONTINENTAL BANK AND SUBSIDIARIES 2
<PAGE>
Partially as a result of a gradually improving economy in South Florida,
Intercontinental Bank was able to substantially increase its funded loans during
1994. At year end, gross loans were $666 million, up $155 million, or 30
percent, over the prior year-end level. The Boca Bank acquisition provided
approximately $39 million of this growth while the balance was generated
internally. Notwithstanding the rapid loan growth realized in 1994, we believe
that asset quality has remained very strong as non-performing assets totaled
approximately $11 million, or less than one percent of total assets, at year
end. Also indicative of strong credit quality is the fact that we generated net
recoveries of approximately $250,000 from our loan portfolio in 1994.
During 1994 we experienced one of the most rapidly rising rate environments
in recent history as interest rates increased two to three points along the
yield curve. Because non-bank money market alternatives repriced during this
rising rate environment more quickly than interest bearing bank deposits,
Intercontinental Bank, like most banks, did record some measurable deposit
outflow from its money market accounts and its certificate of deposit accounts
during 1994. We are pleased to report, however, that we continued to experience
growth in our lower-cost deposit categories during the year. For instance, non-
interest bearing deposits grew 5.1 percent to $278 million in 1994 and now
represent 29 percent of our total deposits. Similarly, NOW accounts grew 11
percent during the year to $145 million. As in the past, our ability to fund our
loans and investments using lower-cost sources of funds contributed measurably
to our earnings improvement during the recently concluded fiscal year.
Continuing attention to operating expenses, coupled with the realization of
economies of scale resulting from our recent acquisitions, also contributed to
earnings increases during 1994. As an example, our efficiency ratio (operating
expenses as a percent of total revenues) improved significantly in 1994 as it
was reduced to 61.37 percent from 71.24 percent in the prior year.
In recognition of the continuing earnings improvement of Intercontinental
Bank, the Board of Directors on June 22, 1994 increased the annual dividend rate
on its common stock to $.36 per share from $.32 per share. The Board will
continue to review the appropriateness of our dividend payout ratio in 1995
based on our earnings and based on our need to retain capital in order to
support future growth.
As we begin 1995 we remain enthusiastic about Intercontinental Bank's
prospects. Each year Intercontinental Bank becomes better known in South Florida
as a premier provider of financial services to small and middle-sized businesses
located within our trade area as well as to individuals within our target
markets. Notwithstanding the fact that many of our large regional bank
competitors claim to also target small to middle-sized businesses, we believe
that there continues to exist a niche for locally managed banks which can better
serve these customers through longstanding knowledge of their businesses and
with the benefit of local decision-making. Additionally, southern Florida seems
now to be enjoying a period of steady, if unspectacular, economic growth. This
economic growth should continue to benefit existing small and middle-sized
businesses within our trade area and should cause the creation of new ones.
Given these circumstances, notwithstanding the more competitive banking field in
which we are operating today, we believe 1995 should be a good year for
Intercontinental Bank.
We would like to thank all of our officers and employees, as well as our
directors, for their hard work and for their contributions during 1994. We would
also like to thank our shareholders for their continuing support.
(Signature of William H. Allen, Jr.) (Signature of William L. Morrison)
William H. Allen, Jr. William L. Morrison
Chairman of the Board President
INTERCONTINENTAL BANK AND SUBSIDIARIES 3
<PAGE>
Selected Financial Highlights and Quarterly Financial Information
Selected Financial Highlights
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER COMMON SHARE) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Income Highlights
Net interest income......................................... $ 46,790 $ 39,914 $ 35,183 $ 26,441 $ 25,084
Provision for credit losses................................. 678 951 2,286 4,638 3,229
Other income................................................ 12,968 14,641 12,605 12,939 11,531
Other expenses.............................................. 38,808 37,961 35,815 29,444 30,109
Provision for income taxes.................................. 7,461 5,663 2,099 713 1,263
Income before cumulative effect of change in
accounting principle and extraordinary item............... 12,811 9,980 7,588 4,585 2,014
Cumulative effect of change in accounting principle......... 1,112
Extraordinary item - tax benefit from the utilization
of a net operating loss carryforward...................... 622
Net income.................................................. 12,811 11,092 7,588 4,585 2,636
Common Stock Highlights
Income before cumulative effect of change in
accounting principle and extraordinary item............... $ 1.82 $ 1.44 $ 1.11 $ .69 $ .30
Cumulative effect of change in accounting principle......... .16
Extraordinary item.......................................... .09
Net income.................................................. 1.82 1.60 1.11 .69 .39
Cash dividends declared..................................... .34 .26 .20 .20 .20
Balance Sheet Highlights - Year End
Total assets................................................ $1,156,110 $1,136,577 $964,165 $824,728 $728,362
Loans, net of unearned income............................... 664,321 510,046 436,513 447,078 459,539
Deposits.................................................... 955,641 947,302 861,782 731,816 631,542
Short-term borrowings....................................... 96,660 94,663 20,251 16,591 22,681
Long-term debt.............................................. 750 1,903 2,035 2,165
Shareholders' equity........................................ 89,828 81,201 71,128 64,602 61,184
Book value per common share at December 31.................. 12.98 11.96 10.59 9.64 9.13
Market value per common share at December 31................ 18.25 20.00 14.50 8.25 6.00
</TABLE>
Selected Quarterly Financial Information
<TABLE>
<CAPTION>
1994 1993
(IN THOUSANDS EXCEPT PER COMMON SHARE) Fourth Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Highlights
Net interest income........................... $12,490 $11,920 $11,440 $10,940 $10,471 $10,068 $9,872 $9,503
Provision for credit losses................... 300 175 51 152 151 287 256 257
Other income.................................. 3,317 3,862 2,219 3,570 3,921 4,984 3,050 2,686
Other expenses................................ 9,609 9,726 9,890 9,583 9,963 10,498 8,734 8,766
Provision for income taxes.................... 2,206 2,242 1,236 1,777 1,573 1,542 1,314 1,234
Income before cumulative effect of change
in accounting principle..................... 3,692 3,639 2,482 2,998 2,705 2,725 2,618 1,932
Cumulative effect of change in accounting
principle................................... 1,112
Net income.................................... 3,692 3,639 2,482 2,998 2,705 2,725 2,618 3,044
Common Stock Highlights
Income before cumulative effect of change
in accounting principle..................... $ .52 $ .52 $ .35 $ .43 $ .39 $ .39 $ .38 $ .28
Cumulative effect of change in accounting
principle................................... .16
Net income.................................... .52 .52 .35 .43 .39 .39 .38 .44
Cash dividends declared....................... .09 .09 .08 .08 .08 .08 .05 .05
Common stock closing prices:
High........................................ 20.00 22.25 22.50 20.00 20.00 18.50 18.00 18.00
Low......................................... 18.25 19.50 18.50 18.25 18.25 15.63 15.00 14.25
End of period............................... 18.25 19.75 22.25 18.50 20.00 18.50 16.00 18.00
</TABLE>
See Note 2 for information on recent acquisitions and their effect on prior
year balances.
INTERCONTINENTAL BANK AND SUBSIDIARIES 4
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Intercontinental Bank is a Florida state-chartered commercial bank based in
Miami, Florida which operated 26 commercial banking offices in Dade, Broward and
Palm Beach counties on December 31, 1994. Intercontinental also owns Pan
American Mortgage Corp. ("PAMCO"), a mortgage banking company which serviced
approximately $1.1 billion residential and commercial loans at December 31,
1994. Intercontinental Bank and its subsidiaries are collectively referred to
herein as "Intercontinental" or the "Bank".
In 1994, Intercontinental reported record earnings and continued its
expansion in South Florida. Loans and deposits also reached record levels and
the Bank's year-end ratio of non-performing assets to total assets continued to
be less than one percent. The record earnings were fueled by strong loan growth,
higher fee income and significant improvements in the Bank's efficiency and
operating expense ratios.
Three important acquisitions had a positive impact on the Bank in 1994.
FIRST, Commercial Trust Bancorp, Inc. and its subsidiary, Commercial Trust Bank
("Commercial Trust"), were merged into Intercontinental on December 31, 1993.
The former Commercial Trust had three banking offices in Dade County with $109
million in assets. SECOND, on July 1, 1994, the Bank acquired Interstate Bank
Holding Company and its subsidiary, The Bank of Coral Gables. The former Bank of
Coral Gables had two banking offices in Dade County with $97 million in assets.
This transaction, which was accounted for as a pooling of interests, resulted in
the restatement of Intercontinental's historical financial statements for all
periods presented. These two acquisitions enhanced Intercontinental's presence
in key Dade County areas and had a positive impact on the Bank's 1994 earnings
and asset levels. THIRD, on December 30, 1994, Boca Bancorp, Inc. and its
subsidiary, Boca Bank, were merged into Intercontinental. The former Boca Bank
had two banking offices in Palm Beach County with assets totaling $71 million.
This acquisition provided Intercontinental with an opportunity to expand its
South Florida franchise into a new market and is expected to have a positive
impact on the Bank's future earnings. Since this transaction did not occur until
the end of 1994, it had no impact on the Bank's 1994 results of operations or
average balances. These acquisitions are more fully described in Note 2.
Intercontinental's management intends to continue pursuing other acquisition
opportunities in order to expand its banking franchise.
Financial Highlights
The Bank earned $13 million, or $1.82 per common share, in 1994 compared
with $11 million, or $1.60 per common share, in 1993. This increase in earnings
reflected a 17 percent increase in net interest income resulting from strong
growth in both loans and lower-cost deposits and a 26 percent increase in fee
income. The 1994 earnings included a $2.2 million net loss on investment
securities transactions compared with a $1.7 million net gain in 1993. Included
in 1993's results were a $650,000 gain on the sale of a banking office and a
$1.1 million cumulative benefit for the implementation of a new accounting
pronouncement which were offset by a $1.8 million additional provision for
amortization of purchased mortgage servicing rights.
The following highlights should be noted when comparing the 1994 results
with the prior year:
(Bullet) The returns on average assets and average shareholders' equity
increased to 1.15 percent and 15.06 percent from 1.11 percent and 14.33
percent, respectively.
(Bullet) The net interest margin increased to 4.86 percent from 4.60
percent.
(Bullet) Gross loans of $666 million were up $155 million,or 30 percent,
as a result of both internal growth and acquisitions.
(Bullet) Non-performing assets, which consist of non-accruing loans,
restructured loans and real estate acquired through foreclosure, totaled $11
million, which was less than one percent of total assets.
(Bullet) Average non-interest bearing deposits and other transaction
accounts (defined to include NOW, savings and money market accounts) together
increased $70 million, or 11 percent.
(Bullet) The provision for credit losses declined to $678,000 from $951,000
while net loan recoveries of $243,000 were a significant improvement over net
loan charge-offs of $782,000.
(Bullet) Service charges on deposit accounts increased $2.4 million, or 38
percent, to $8.7 million.
(Bullet) The efficiency ratio improved significantly as it was reduced to
61.37 percent from 71.24 percent.
(Bullet) The operating expense ratio of 3.49 percent was an improvement
over the 3.79 percent in the prior year.
Earnings Analysis
NET INTEREST INCOME
Net interest income totaled $47 million in 1994,
representing a $6.9 million increase over 1993. This positive variance resulted
from a significant increase in interest income which was partially
INTERCONTINENTAL BANK AND SUBSIDIARIES 5
<PAGE>
offset by an increase in interest expense. Table 1 reflects the average
balances of interest earning assets and interest bearing liabilities, interest
income and interest expense and the weighted average yields/rates of such
assets and liabilities for 1994, 1993 and 1992. Table 2 illustrates the
components of the net interest income variance.
<TABLE>
<CAPTION>
Table 1 1994 1993 1992
Average Average Average Average Average Average
(DOLLARS IN THOUSANDS) Balance Interest Yield/Rate Balance Interest Yield/Rate Balance Interest Yield/Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Loans, net of unearned income............ $ 560,189 $44,610 7.96% $ 451,616 $33,769 7.48% $435,216 $35,720 8.21%
Investment securities.................... 354,562 19,906 5.61 381,771 21,832 5.72 289,441 18,565 6.41
Federal funds sold and securities
purchased under agreements
to resell............................... 44,091 1,793 4.07 44,619 1,339 3.00 48,078 1,661 3.45
Interest earning deposits in
other banks............................. 19,437 825 4.24 3,362 95 2.83 17,306 609 3.52
Other short-term assets.................. 3,142 110 3.50
Total earning assets.................... 978,279 67,134 6.86 881,368 57,035 6.47 793,183 56,665 7.14
Allowance for possible credit losses....... (9,700) (9,076) (8,905)
Cash and due from banks.................... 61,581 50,913 39,289
Other real estate, net..................... 3,728 6,100 10,698
Premises and equipment, net................ 49,401 49,527 50,781
Other assets, net.......................... 27,550 24,043 19,449
$1,110,839 $1,002,875 $904,495
Liabilities and Shareholders' Equity
Deposits:
NOW accounts............................. $ 125,754 2,140 1.70 $ 113,052 1,817 1.61 $ 91,283 1,830 2.00
Savings accounts......................... 58,135 1,205 2.07 57,011 1,257 2.20 48,234 1,386 2.87
Money market accounts.................... 247,803 6,209 2.51 233,945 5,606 2.40 189,009 5,624 2.98
Time deposits........................... 232,428 8,119 3.49 233,704 7,338 3.14 272,894 11,592 4.25
Total interest bearing deposits........ 664,120 17,673 2.66 637,712 16,018 2.51 601,420 20,432 3.40
Short-term borrowings...................... 75,993 2,650 3.49 45,059 1,028 2.28 34,165 929 2.72
Long-term debt............................ 248 21 8.47 996 75 7.53 1,918 121 6.31
Total interest bearing liabilities...... 740,361 20,344 2.75 683,767 17,121 2.50 637,503 21,482 3.37
Non-interest bearing deposits.............. 275,203 232,866 189,095
Other liabilities.......................... 10,230 8,855 9,185
Total liabilities....................... 1,025,794 925,488 835,783
Shareholders' equity....................... 85,045 77,387 68,712
$1,110,839 $1,002,875 $904,495
Net interest income/spread................. $46,790 4.11 $39,914 3.97 $35,183 3.77
Net interest margin........................ 4.86 4.60 4.54
Net interest yield......................... 4.78 4.53 4.44
Cost of funds supporting earning assets.... 2.08 1.94 2.70
</TABLE>
Loan fees, which are included in interest income and in the calculation of
average yields, were $747,000, $585,000 and $408,000 in 1994, 1993 and 1992,
respectively.
Non-accruing loans are included in the average loan balance and are
considered in the calculation of the average yields.
The average yields on investment securities available-for-sale are based on
historical amortized cost balances.
INTERCONTINENTAL BANK AND SUBSIDIARIES 6
<PAGE>
Interest income of $67 million in 1994 was $10 million, or 18 percent,
higher than the amount reported in 1993. This positive variance was primarily
the result of the impact of increases in both the volume and rates earned on
average loans. The acquisition of Commercial Trust as well as a 22 percent
internal growth in loans contributed significantly to the higher level of
average loans. A decrease in the average volume of investment securities caused
by the funding requirements for new loans partially offset the positive variance
created by higher loan volume.
Interest expense was $20 million in 1994 compared with $17 million in 1993.
This $3.2 million, or 19 percent, increase resulted from the impact of the
higher volume of average interest bearing deposits, principally the result of
the Commercial Trust acquisition, as well as an increase in borrowings to fund
loans. In addition, the higher interest rate environment during 1994, as
reflected in a 250 basis point increase in the federal funds rate, contributed
to the higher rates paid on the majority of the interest bearing liabilities.
The net interest margin increased to 4.86 percent in 1994 compared with 4.60
percent in 1993 primarily due to the impact of an increase in the average
yields earned on earning assets which was partially offset by the overall
increased cost of funds. The increase in the average yields earned on earning
assets was due to a higher ratio of average loans to average earning assets in
1994 (57 percent) compared with 1993 (51 percent) as well as an overall
increase in interest rates. Average loans, which have a relatively higher yield
than other earning asset categories, increased $109 million, or 24 percent,
when comparing 1994 with 1993.
PROVISION FOR CREDIT LOSSES
The provision for credit losses is the expense
recorded to maintain the allowance for possible credit losses at an appropriate
level. For 1994, the provision for credit losses was $678,000 compared with
$951,000 in 1993. The decline in the provision is a reflection of the overall
credit quality of the Bank's loan portfolio and management's assessment as to
the adequacy of the existing allowance for credit losses. The discussion in the
Allowance for Possible Credit Losses section on page 11 describes the
relationship between the provision and the allowance.
<TABLE>
<CAPTION>
1994/1993 1993/1992
Table 2 Changes in Interest Due to: Changes in Interest Due to:
Average Average
(IN THOUSANDS) Rate Balance Total Rate Balance Total
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, net of unearned income................ $2,168 $ 8,673 $10,841 $ (3,177) $ 1,226 $ (1,951)
Investment securities........................ (420) (1,506) (1,926) (1,997) 5,264 3,267
Federal funds sold and securities
purchased under agreements to resell....... 477 (23) 454 (216) (106) (322)
Interest earning deposits in other banks..... 47 683 730 (119) (395) (514)
Other short-term assets...................... (110) (110)
Total interest income...................... 2,272 7,827 10,099 (5,509) 5,879 370
Interest Expense
Deposits:
NOW accounts............................... 102 221 323 (356) 343 (13)
Savings accounts........................... (74) 22 (52) (323) 194 (129)
Money market accounts...................... 257 346 603 (1,096) 1,078 (18)
Time deposits.............................. 818 (37) 781 (3,029) (1,225) (4,254)
Short-term borrowings........................ 545 1,077 1,622 (150) 249 99
Long-term debt............................... 9 (63) (54) 23 (69) (46)
Total interest expense..................... 1,657 1,566 3,223 (4,931) 570 (4,361)
Net interest income........................ $ 615 $ 6,261 $ 6,876 $ (578) $ 5,309 $ 4,731
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 7
<PAGE>
OTHER INCOME Other income for 1994 was $13 million compared with $15 million
in 1993. Excluding investment security transactions and the $650,000 gain on the
1993 sale of a banking office, other income would have been $15 million in 1994
compared with $12 million in 1993, representing an increase of $2.9 million, or
24 percent. The components of other income for the years ended December 31 are
summarized in Table 3.
Table 3
Increase
(IN THOUSANDS) 1994 1993 (Decrease)
Service charges on
deposit accounts.............. $ 8,660 $ 6,264 $ 2,396
Loan administration fees........ 4,165 3,922 243
Other customer fees............ 1,587 1,245 342
Gain (loss) on investment
securities.................... (2,243) 1,684 (3,927)
Gain on sale of banking office.. 650 (650)
Other........................... 799 876 (77)
$12,968 $14,641 $ (1,673)
The following explains certain of the fluctuations illustrated in Table 3:
(Bullet) Service charges on deposit accounts increased $2.4 million, or 38
percent, to $8.7 million in 1994. The implementation of a new service fee
schedule in February 1994 and an increase in the level of transaction accounts
primarily resulting from the December 31, 1993 acquisition of Commercial Trust
were the primary reasons for the increase in this income category.
(Bullet) Loan administration fees increased $243,000, or 6.2 percent, to
$4.2 million in 1994. This positive variance was primarily due to purchases of
mortgage servicing rights in 1993 which generated a higher level of fees in
1994.
(Bullet) Other customer fees totaled $1.6 million in 1994 compared with
$1.2 million in the prior year. This $342,000, or 27 percent, increase
primarily resulted from a higher volume of fees collected for electronic funds
transfers.
(Bullet) The Bank recorded a net loss on investment securities of $2.2
million in 1994 and a net gain on investment securities of $1.7 million in
1993. The Investment Securities section on page 9 more fully describes these
investment transactions.
(Bullet) In 1993, the Bank sold its banking office in Orlando, Florida for
a gain of $650,000.
OTHER EXPENSES Other expenses for 1994 totaled $39 million compared with $38
million in 1993, an increase of $847,000, or 2.2 percent. While other expenses
increased in 1994, the Bank's operating expense ratio improved from 3.79 percent
in 1993 to 3.49 percent in 1994. The efficiency ratio also improved
significantly from 71.24 percent in 1993 to 61.37 percent in 1994.
Included in 1993's results was $1.8 million of additional provision for
amortization of purchased mortgage servicing rights caused by higher than
expected prepayment experience in PAMCO's mortgage servicing portfolio.
Amortization expense in 1994 included a credit adjustment of $500,000 resulting
from an improvement in the prepayment performance of PAMCO's mortgage servicing
portfolio due to a general increase in long-term interest rates. The components
of other expenses for the years ended December 31 are summarized in Table 4.
Table 4
Increase
(IN THOUSANDS) 1994 1993 (Decrease)
Personnel..................... $19,979 $18,320 $ 1,659
Occupancy and
equipment, net............... 5,333 4,640 693
Amortization of purchased
mortgage servicing rights.... 2,517 4,014 (1,497)
Amortization of other
intangible assets............ 747 373 374
FDIC insurance premiums........ 2,055 2,113 (58)
Professional fees.............. 900 1,249 (349)
Other real estate.............. 930 761 169
Stationery and supplies........ 747 595 152
Postage and courier............ 695 650 45
Data processing................ 691 892 (201)
Other.......................... 4,214 4,354 (140)
$38,808 $37,961 $ 847
The following explains certain of the fluctuations illustrated in Table 4:
(Bullet) In 1994, personnel expenses totaled $20 million. The $1.7 million,
or 9.1 percent, increase was due to the increased staff level primarily
resulting from the acquisition of Commercial Trust.
(Bullet) Net occupancy and equipment expenses in 1994 totaled $5.3 million
which was $693,000, or 15 percent, higher than 1993 due to the expenses
associated with the addition of three former Commercial Trust banking offices
as well as lower tenant rental income.
INTERCONTINENTAL BANK AND SUBSIDIARIES 8
<PAGE>
(Bullet) Amortization of other intangible assets totaled $747,000 in 1994,
double the $373,000 reported in 1993 as a result of the amortization of
goodwill and core deposit premiums associated with Commercial Trust.
(Bullet) FDIC insurance premiums of $2.1 million in 1994 were down slightly
from 1993 as the impact of the increase in deposits was more than offset by a
decrease in the assessment rate.
(Bullet) Professional fees, which include accounting and legal fees,
decreased $349,000, or 28 percent, to $900,000 in 1994.
The favorable resolution of two major lawsuits during 1993 caused a sharp
decline in legal expenses in 1994.
(Bullet) Other real estate expenses of $930,000 were $169,000, or 22
percent, higher than the $761,000 reported in 1993 due to the recording of a
higher provision for possible losses in 1994.
(Bullet) Expenses for stationery and supplies and postage and courier in
1994 increased over the 1993 levels due to the recent acquisitions.
(Bullet) Data processing expenses of $691,000 in 1994 were $201,000, or 23
percent, lower than the $892,000 in 1993 because of the cancellation of certain
contracts related to the former Bank of Coral Gables.
Included in net occupancy and equipment expenses in each of 1994, 1993 and
1992 was approximately $1.5 million in net tenant rental income related to a
single tenant lease on an office building owned by Intercontinental. The lease,
which has a ten-year term, is due to expire in December 1995. The current tenant
has notified Intercontinental that it is not renewing its lease.
Intercontinental is presently evaluating its alternatives including leasing the
building to new tenants and/or using the building for its own expansion
purposes. The effect of the non-renewal of this lease cannot be fully measured
at the present time and may have a material impact on the Bank's future
occupancy expenses and net income.
INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE
The provision for income taxes for 1994 and 1993 was $7.5 million and $5.7
million, respectively. The $1.8 million increase in the provision was related
to an increase in income before income taxes over the prior year.
The Bank adopted, on a prospective basis, Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), in 1993. SFAS
No. 109 requires companies to compute deferred income taxes under the liability
method and permits the recognition of deferred tax assets for the tax effect of
future deductions. The cumulative benefit of adopting SFAS No. 109 in
Intercontinental's 1993 results of operations was $1.1 million, or $.16 per
common share.
Summary of Changes in Financial Position
The following is a summary of the changes in the financial position of the
Bank from December 31, 1993 through year-end 1994. Following this summary are
more detailed explanations of some of the major balance sheet accounts as well
as a discussion of interest sensitivity, liquidity and capital resources.
Total assets aggregated $1.2 billion at year-end 1994, a $20 million
increase over year-end 1993 as gross loans increased $155 million while
investment securities declined $138 million. The reasons for these changes are
discussed below.
Net other real estate decreased $985,000, or 22 percent, to $3.4 million at
December 31, 1994 primarily due to the low volume of new foreclosures. In
addition, $1.4 million of property was sold during 1994.
Intangible assets, which are included in Other assets, net on the
Consolidated Balance Sheet, remained unchanged at $19 million at the end of
1994. The $1.7 million addition to intangible assets resulting from acquisitions
plus the $1.6 million addition to purchased mortgage servicing rights were
offset by $3.3 million of amortization during the year.
Balance Sheet Review
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires all entities to disclose the fair value of their financial instrument
assets and liabilities. Fair value as defined by SFAS No. 107 is the amount at
which an instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Estimated fair values have
been determined by the Bank using the best available data and an estimation
methodology suitable for each category of financial instruments. Changes in
assumptions or estimation methodologies may have a material effect on these
estimated fair values. Since it is the Bank's general practice and intent to
hold most of its financial instruments to maturity and not to engage in trading
or sales activities, the value eventually received for these instruments may
vary significantly from the estimated fair value at December 31, 1994. Fair
value disclosures for investment securities, loans and deposits are discussed
under their respective captions below. Note 15 describes the methodologies used
to compute these fair value estimates.
INVESTMENT SECURITIES
The Financial Accounting Standards Board has mandated fundamental changes
in the accounting for investment securities including the shift from historical
cost accounting to market value accounting for certain securities. The Bank
implemented these new rules on January 1, 1994 resulting in the establishment
INTERCONTINENTAL BANK AND SUBSIDIARIES 9
<PAGE>
of two separate classifications of investment securities - held-to-maturity
and available-for-sale. Additional disclosures related to these new rules are
included in Note 3. Table 5 illustrates the components of the investment
securities portfolio at December 31.
During 1994, interest rates rose approximately 200 to 300 basis points
across the maturity spectrum. The Federal Reserve increased the federal funds
rate six times in 1994 for a total of 250 basis points. This higher interest
rate environment was directly reflected in the market value of the Bank's
investment portfolio. As of December 31, 1994, the available-for-sale portfolio,
which is recorded at market value, was valued at $206 million resulting in an
unrealized loss of $7.5 million. This unrealized loss was reflected, net of its
related tax effect, as a $4.7 million reduction in shareholders' equity.
At December 31, 1994,the fair value of Intercontinental's held-to-maturity
portfolio totaled $110 million compared with a book value of $117 million,
representing an unrealized loss of $7.8 million. This unrealized loss, which was
primarily attributable to the higher interest rate environment at year-end 1994
in comparison with the Bank's investment portfolio yield, was in addition to the
$7.5 million mark-to-market adjustment in the available-for-sale portfolio
discussed above. The available-for-sale portfolio is moderately immunized
against interest rate fluctuations due to its short duration.
The Bank realized $2.2 million of investment security losses in 1994 and
$1.7 million of investment security gains in 1993. Of the $2.2 million in
investment security losses in 1994, a net amount of $1.3 million was realized in
the 1994 second and third quarters combined when the Bank sold $118 million of
mostly lower-yielding securities from its available-for-sale portfolio as a
defensive measure against further interest rate increases. During the third
quarter, the Bank reinvested a portion of these proceeds in shorter-term
treasury securities because of the uncertainty in the interest rate environment.
These purchases resulted in a higher yield and a shorter average maturity in the
Bank's available-for-sale investment portfolio. Of the $1.7 million of
investment security gains in 1993, $1.4 million was realized when, in
anticipation of the Bank's acquisition of Commercial Trust, Intercontinental
restructured
<TABLE>
<CAPTION>
Table 5 Held-to-Maturity - 1994 Available-for-Sale - 1994 Book Value
Amortized Market Average Amortized Market Average
(DOLLARS IN THOUSANDS) Cost Value Yield Cost Value Yield 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency Securities
Due within one year............................ $ 53,296 $ 52,869 5.54%
Due after one year through five years.......... 139,601 133,092 5.75
Due after five years through ten years......... 10,180 8,691 5.48
Total U.S. Government and
agency securities.......................... 203,077 194,652 5.68 $297,373 $287,140
Mortgage-backed Securities
Due after one year through five years.......... $ 48,706 $ 45,372 5.63%
Due after five years through ten years......... 16,889 15,546 5.97
Due after ten years............................ 51,201 48,183 6.49 2,096 2,141 9.16
Total mortgage-backed securities............. 116,796 109,101 6.06 2,096 2,141 9.16 140,438 61,632
Other Debt Securities
Due within one year............................ 290 288 4.68
Due after one year through five years.......... 6,969 6,708 5.64
Due after five years through ten years......... 100 100 8.13
Due after ten years............................ 357 287 6.37
Total other debt securities.................. 357 287 6.37 7,359 7,096 5.63 21,977 533
Equity Securities.............................. 231 231 0.00 1,114 2,256 8.97 1,346 1,346
$117,384 $109,619 6.04 $213,646 $206,145 5.73 $461,134 $350,651
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 10
<PAGE>
its investment securities portfolio resulting in the transfer and subsequent
sale of $50 million in U.S. treasury securities from the held-for-investment to
the held-for-sale portfolio.
LOANS
At December 31, 1994, gross loans totaled $666 million, representing a $155
million, or 30 percent, increase over the prior year's balance of $512 million.
The acquisition of Boca Bank accounted for $39 million of this increase and new
loan advances in excess of net loan repayments accounted for the remainder. The
Bank's significantly increased loan volume reflected its success in marketing
its services to small to mid-size customers as well as an improving economic
environment in South Florida and was reflected in its higher loan to deposit
ratio (70 percent in 1994 and 54 percent in 1993).
Management believes that the composition of the Bank's loan portfolio as
illustrated in Table 6 is well diversified. Approximately $100 million, or 31
percent, of the commercial real estate loans were due from small to mid-size
businesses with whom Intercontinental maintains a multi-faceted banking
relationship. Management believes that its knowledge of these customers and
their businesses enhances Intercontinental's ability to evaluate and monitor the
overall creditworthiness of its customers and, therefore, mitigates what
otherwise might be collateral-dependent exposure in adverse real estate markets.
The remaining commercial real estate loans were comprised of loans secured by
income properties of various types. No one property type comprised more than 20
percent of the commercial real estate loans.
The fair value of net loans at December 31, 1994 was $643 million compared
with a book value of $653 million. This unrealized loss in the loan portfolio
was a direct result of the year-end 1994 higher interest rate environment.
<TABLE>
<CAPTION>
Table 6 Percent Percent Percent Percent Percent
of Total of Total of Total of Total of Total
(DOLLARS IN THOUSANDS) 1994 Loans 1993 Loans 1992 Loans 1991 Loans 1990 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial real estate....... $326,652 49% $227,765 45% $180,127 42% $ 181,851 40% $186,287 41%
Commercial................... 168,969 25 145,177 28 121,302 28 110,697 25 104,083 23
Residential real estate...... 157,338 24 123,515 24 115,843 26 119,966 27 139,214 30
Consmer...................... 11,225 2 12,879 3 18,173 4 31,888 7 20,218 4
International................ 2,169 2,284 2,173 4,068 1 10,546 2
666,353 100% 511,620 100% 437,618 100% 448,470 100% 460,348 100%
Unearned income.............. (2,032) (1,574) (1,105) (1,392) (809)
$664,321 $510,046 $436,513 $ 447,078 $459,539
</TABLE>
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
At December 31, 1994, the allowance for possible credit losses was $12
million compared with $9.5 million reported at December 31, 1993. Of the $2.3
million increase in the allowance, $1.3 million is attributable to the December
30, 1994 acquisition of Boca Bank. As illustrated in Table 7, a $678,000
provision for credit losses was recorded and charge-offs of $426,000 were more
than offset by recoveries of $669,000.
The level of non-accruing loans, which represented .53 percent of total
loans, is an indication of the favorable credit quality of the Bank's loan
portfolio. The Bank's ratio of the allowance for possible credit losses to loans
was 1.77 percent at December 31, 1994 compared with a ratio of 1.87 percent at
year-end 1993. The ratio of the allowance to non-accruing loans was 331 percent
at year-end 1994 compared with 386 percent at December 31, 1993.
INTERCONTINENTAL BANK AND SUBSIDIARIES 11
<PAGE>
Table 7
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Balance at January 1........................... $ 9,521 $9,302 $9,303 $10,089 $12,764
Provision charged to expense................... 678 951 2,286 4,638 3,229
Charge-offs:
Commercial real estate....................... 309 618 608 2,704
Commercial................................... 310 651 1,369 2,596 1,191
Residential real estate...................... 43 167 596 363 252
Consumer..................................... 73 151 424 231 292
International................................ 200 3,198 2,014
426 1,278 3,207 6,996 6,453
Recoveries:
Commercial real estate....................... 282 63 91 101 51
Commercial................................... 218 305 325 285 331
Residential real estate...................... 25 3 3 20 16
Consumer..................................... 144 125 160 131 151
International................................ 341 35
669 496 920 572 549
Net charge-offs (recoveries).................. (243) 782 2,287 6,424 5,904
Allowance for possible credit losses of
banks acquired and banking office sold....... 1,337 50 1,000
Balance at December 31......................... $11,779 $9,521 $9,302 $ 9,303 $10,089
Net charge-offs (recoveries)/average loans..... (.04%) .17% .53% 1.49% 1.26%
</TABLE>
Management determines the adequacy of the allowance for possible credit
losses periodically by estimating the loss exposure allocable to credits deemed
to possess specifically identifiable loss characteristics. In addition,
management evaluates the general risk of loss within the portfolio attributable
to those credits which are not deemed to possess any specifically identifiable
loss characteristics. The latter portion of the allowance is considered
unallocated and available for any classification of credits where unforeseen
problems might develop. Table 8 summarizes the allocation of the allowance for
possible credit losses by loan category at December 31.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
Allowance Allowance Allowance Allowance Allowance
for Percent for Percent for Percent for Percent for Percent
Table 8 Possible of Loans Possible of Loans Possible of Loans Possible of Loans Possible of Loans
Credit to Total Credit to Total Credit to Total Credit to Total Credit to Total
(DOLLARS IN THOUSANDS) Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial
real estate............ $ 49% $ 239 45% $ 786 42% $ 366 40% $ 902 41%
Commercial............... 603 25 169 28 479 28 1,166 25 612 23
Residential real estate.. 154 24 76 24 198 26 194 27 201 30
Consumer................. 2 63 3 422 4 870 7 309 4
International............ 436 207 562 1,375 1 4,000 2
Unallocated.............. 10,586 8,767 6,855 5,332 4,065
11,779 100% $9,521 100% $9,302 100% $9,303 100% $ 10,089 100%
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 12
<PAGE>
CREDIT RISK ASSETS
Table 9 summarizes the composition of non-performing assets at December 31.
Non-performing assets, which consist of non-accruing loans, restructured loans
and real estate acquired through foreclosure (classified as Other real estate,
net on the Consolidated Balance Sheet), totaled $11 million at the end of 1994,
up $3.9 million over the prior year end. Included in the $11 million balance
was $3.6 million of non-performing assets related to banks acquired in the
previous 12 months. The ratio of non-performing assets to assets at December
31, 1994 was .93 percent.
Table 9
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
Domestic................. $ 3,554 $2,465 $11,860 $16,019 $12,938
International............ 1,554 6,311
3,554 2,465 11,860 17,573 19,249
Restructured loans......... 3,837
Other real estate, net..... 3,417 4,402 9,518 10,165 11,952
$10,808 $6,867 $21,378 $27,738 $31,201
</TABLE>
Information on non-accruing loans follows in Table 10. In total, non-
accruing loans increased $1.1 million from $2.5 million at December 31, 1993 to
$3.6 million at the end of 1994. Approximately $1.4 million, or 40 percent, of
the year-end 1994 non-accruing loan balance was attributable to recent
acquisitions.
Table 10
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Non-accruing loans at December 31:
Domestic.................................................. $3,554 $2,465 $11,860 $16,019 $12,938
International............................................. 1,554 6,311
Interest income which would have been recorded under
original terms:
Domestic.................................................. 153 81 587 691 1,251
International............................................. 93 223
Interest income inclded in net income:
Domestic.................................................. 77 139 88 308 107
International............................................. 141 382
Commitments to lend additional funds:
Domestic.................................................... 85
</TABLE>
Certain loans, although they are past due 90 days or more, are not
classified as non-accruing. These loans totaled:
(Bullet) $457,000 at December 31, 1994,
(Bullet) $601,000 at December 31, 1993,
(Bullet) $751,000 at December 31, 1992,
(Bullet) $770,000 at December 31, 1991 and
(Bullet) $2.5 million at December 31, 1990.
In addition to non-accruing, restructured and past due loans, the Bank has
identified loans totaling $2.2 million at December 31, 1994 for which management
has concerns about their continued performance and, in some cases, their
ultimate collectibility in full even though payments are current or less than 90
days past due, and the borrowers are complying with their loan agreements.
Management, in its evaluation of the adequacy of the allowance for possible
credit losses, takes into account the risks associated with these loans.
Approximately $1.5 million of these loans were residential real estate loans
which are substantially collateralized.
INTERCONTINENTAL BANK AND SUBSIDIARIES 13
<PAGE>
DEPOSITS
Intercontinental's primary funding source is customer deposits. Over the
past several years, the banking industry in general has experienced
disintermediation as many customers moved their deposit accounts to mutual
funds, money market funds and other higher-yielding investment alternatives.
This trend has served to slow the deposit growth of Intercontinental and the
entire banking industry. As shown in Table 11, total deposits at December 31,
1994 of $956 million were $8.3 million higher than the $947 million at year-
end 1993. Excluding the acquisition of Boca Bank, which contributed $68 million
in deposits, total deposits declined $60 million. This reduction included $20
million in public fund deposits and $10 million in deposits related to
Hurricane Andrew with the remainder resulting from various factors including
the disintermediation discussed above. In spite of this adverse trend, the Bank
continues to enjoy growth in its lowest-cost deposit categories. Year to year,
non-interest bearing deposits grew 5.1 percent to $278 million in 1994 while
NOW accounts grew 11 percent to $145 million in 1994.
The estimated fair value of time deposits at year-end 1994 was $241 million,
$716,000 lower than the book value. The unrealized appreciation is due to higher
current market deposit rates in comparison with the weighted average cost of the
Bank's time deposits at December 31, 1994.
<TABLE>
<CAPTION>
Table 11 Percent Percent Percent
of Total of Total of Total
(DOLLARS IN THOUSANDS) 1994 Deposits 1993 Deposits 1992 Deposits
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing accounts... $278,013 29% $264,612 28% $220,179 25%
NOW accounts.................... 145,060 15 130,292 14 108,255 13
Savings accounts................ 57,979 6 58,089 6 56,590 7
Money market accounts........... 232,561 25 252,884 27 225,964 26
Time deposits................... 242,028 25 241,425 25 250,794 29
$955,641 100% $947,302 100% $861,782 100%
</TABLE>
Shareholders' Equity
Shareholders' equity at December 31, 1994 of $90 million increased $8.6
million over year-end 1993. The Consolidated Statement of Changes in
Shareholders' Equity illustrates the activity in shareholders' equity for the
three years ended December 31, 1994.
Intercontinental's common stock, which trades on The Nasdaq Stock Market
under the symbol ICBK, closed at $18.25 per share on December 31, 1994. The 6.9
million shares of common stock outstanding at year-end 1994 were held by
approximately 1,900 holders of record. In addition to common stock outstanding,
Intercontinental had 350,000 shares of preferred stock outstanding at December
31, 1994 held by one shareholder.
Effective in the third quarter 1994, Intercontinental's Board of Directors
increased the Bank's annual dividend rate on its common stock to $.36 per share
from $.32 per share. The Board's decision to increase the dividend was based on
the Bank's continued improvement in its financial results as well as
expectations for future growth in earnings.
Dividends declared aggregated $2.3 million in 1994 and $1.6 million in 1993
reflecting this rate increase as well as the increase in the number of shares of
common stock outstanding resulting from the July 1, 1994 acquisition of The Bank
of Coral Gables. The payment of dividends is subject to the discretion of
Intercontinental's Board of Directors and depends upon a number of factors,
including Intercontinental's operating results, its financial condition and
regulatory limitations.
INTERCONTINENTAL BANK AND SUBSIDIARIES 14
<PAGE>
Interest Sensitivity
The Bank's management believes that its interest rate risk is best measured
by the amount of earnings at risk given specified changes in interest rates. The
Bank models interest rate sensitivity with an earnings simulation model. This
model captures all earning assets and interest bearing liabilities and combines
various factors affecting rate sensitivity into an earnings outlook which
incorporates management's view of the interest rate environment that is most
likely for the next 12 months. The Asset Liability Management Committee reviews
and updates the underlying assumptions included in the earnings simulation model
on a periodic basis.
The Bank's interest rate sensitivity analysis is based on multiple interest
rate scenarios and projected changes in balance sheet categories and other
relevant assumptions. Changes in management's outlook and other market factors
may cause actual results to differ from the current simulated outlook. The
sensitivity of earnings to changes in interest rates is determined by assessing
the impact on net interest income of rising and falling interest rate scenarios.
The model uses three scenarios - most likely, rising and declining - in
analyzing interest rate sensitivity and determines the interest sensitivity by
measuring the change in net interest income between rising and falling rate
scenarios (dispersion). The Bank manages its interest rate risk by targeting
to maintain this dispersion within certain policy limits.
The interest rate risk sensitivity model is supplemented with traditional
gap measurement. The gap tables have certain limitations in their ability to
accurately portray interest sensitivity; however, they do provide a static
reading of the Bank's interest rate risk exposure. The Bank's gap table at
December 31, 1994 is shown in Table 12. As of that date, Intercontinental
remained liability sensitive (interest sensitive liabilities subject to
repricing exceeded interest sensitive assets subject to repricing) on a 365-day
basis to the extent of $43 million. This "negative gap" at December 31, 1994 was
3.7 percent of total assets compared with 4.4 percent at year-end 1993. The
primary cause for this decrease in the gap was the sale of certain treasury
securities with greater than one year maturity. The Bank's targeted gap position
varies with management's outlook of the interest rate environment and generally
is in the range of negative 20 percent to positive 10 percent. The Bank measures
its gap position as a percentage of its total assets.
While the absolute level of gap is a measurement of interest rate risk, the
quality of the assets and liabilities in the balance sheet must be analyzed in
order to understand the degree of interest rate risk taken by the Bank. The
available-for-sale securities portfolio with a weighted average maturity of 2.3
years provides further protection against structural changes in the interest
rate environment which are longer term than one year. This reliance on highly
liquid treasury securities significantly mitigates the interest rate risk for
gap management purposes while simultaneously providing a positive income stream
for the Bank.
The Bank may, from time to time, utilize derivative products, such as
interest rate swaps, floors and caps, in its management of interest rate risk;
however, there were no derivative contracts outstanding at December 31, 1994 or
1993.
<TABLE>
<CAPTION>
Over One
Table 12 Total Year and
0-30 30-90 90-180 180-365 Interest Non-interest
(IN THOUSANDS) Days Days Days Days Sensitive Sensitive Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Sensitive Assets
Loans........................... $ 314,991 $ 30,603 $ 72,812 $ 128,198 $ 546,604 $ 119,749 $ 666,353
Investment securities........... 3,734 9,790 8,858 62,261 84,643 238,886 323,529
Federal funds sold.............. 27,000 27,000 27,000
Interest earning deposits
in other banks................ 381 381 381
346,106 40,393 81,670 190,459 $ 658,628 $ 358,635 $1,017,263
Interest Sensitive Liabilities
Deposits........................ 494,868 43,855 40,880 25,597 $ 605,200 $ 350,441 $ 955,641
Borrowings...................... 96,660 96,660 96,660
591,528 43,855 40,880 25,597 $ 701,860 $ 350,441 $1,052,301
Gap............................. $ (245,422) $ (3,462) $ 40,790 $ 164,862 $ (43,232)
Cumulative gap.................. $ (245,422) $ (248,884) $ (208,094) $ (43,232) $ (43,232)
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 15
<PAGE>
Liquidity and Capital Resources
Management believes that maintaining an exceptionally strong capital base
enhances the profitable growth opportunities of the Bank. Management carefully
monitors the level and distribution of capital relative to the size and mix of
its balance sheet in order to maximize shareholder returns. Earnings provide the
main source of equity capital to support asset growth.
Regulatory agencies have established a risk-based capital framework that
makes capital requirements more sensitive to the risk profiles of individual
banking companies. These guidelines define capital as either core (Tier 1)
capital or supplementary (Tier 2) capital. Tier 1 capital consists primarily of
shareholders' equity, while Tier 2 capital is comprised of certain debt
instruments and a portion of the allowance for possible credit losses. Leverage
capital is the ratio of Tier 1 capital to average total assets.
The Bank is required to have a minimum Tier 1 capital ratio of 4 percent and
a total risk-based capital ratio (Tier 1 plus Tier 2) of 8 percent. At December
31, 1994, the Bank's Tier 1 and total risk-based capital ratios were 12.09
percent and 13.40 percent, respectively. At that same time, the Bank's leverage
capital ratio was 7.87 percent. The Bank's capital ratios not only exceeded the
minimum standards, but substantially exceeded the ratios required to meet the
regulatory definition of a "well capitalized institution". Table 13 presents the
Bank's capital ratios at December 31. The 1994 risk-based capital ratios
decreased from the 1993 ratios primarily due to an increase in risk-based assets
during 1994.
Table 13
1994 1993
Leverage capital ratio..... 7.87% 7.08%
Risk-based capital:
Tier 1................... 12.09 12.85
Total.................... 13.40 14.16
Intercontinental's management intends to continue to expand by seeking
acquisition opportunities which will strengthen and enhance its existing
franchise. Such acquisitions may be for cash or may involve the issuance of
additional common stock or other securities of the Bank.
The Bank's liquidity policy requires that it maintain a 5 percent primary
liquidity ratio consisting of cash, due from bank deposits, overnight and short-
term investments maturing in less than 180 days and a secondary liquidity ratio
of 15 percent consisting of the components of primary liquidity and all other
unpledged investments. These ratios are calculated as a percent of the deposit
base excluding public fund deposits. The Bank's primary and secondary liquidity
ratios on December 31, 1994 were 10 percent and 32 percent, respectively.
A minimum liquidity level approximating $25 million, in addition to cash and
due from banks, is deemed prudent by Intercontinental for the effective
operation of the Bank under present circumstances. At year-end 1994,
Intercontinental had, in addition to cash and due from banks, a total of $32
million of short-term assets maturing in less than 90 days primarily consisting
of overnight investments and treasury securities. As a result of the Bank's
current liquidity position and its ability to borrow against its securities
portfolio, the Bank has sufficient liquidity to meet current funding
requirements in connection with its day-to-day operations.
Analysis of 1993 Versus 1992
INTRODUCTION
1993 was an extraordinarily successful year for the Bank. Intercontinental
reported record earnings of $11 million and surpassed the $1 billion asset
milestone. Loans and deposits also reached record levels and the Bank's year-
end asset quality ratios ranked among the best in the industry. The Bank's
earnings reflected a 13 percent increase in net interest income resulting from
strong growth in both loans and lower-cost deposits coupled with a 68 percent
reduction in non-performing assets from December 31, 1992 levels. Improved
asset quality resulted in a lower provision for credit losses and a decrease in
net loan charge-offs. In addition, Intercontinental maintained tight control
over its operating expenses despite an increase in the Bank's size. Such
expense control was reflected in the decrease in the Bank's operating expense
ratios year over year.
During 1993, the Bank continued the expansion of its market share in South
Florida with its December 31, 1993 acquisition of Commercial Trust. In addition
to the favorable financial performance reported during the year, 1993 also
included the successful resolution of certain litigation. The combination of the
Bank's continued growth, record earnings and positive asset quality trends
contributed to an excellent market performance by its common stock during the
year. The Bank's common stock closed at $20.00 per share on December 31, 1993,
representing a 38 percent increase over the prior year end.
SUMMARY OF FINANCIAL RESULTS
The Bank earned $11 million, or $1.60 per common share, in 1993 compared
with $7.6 million, or $1.11 per common share, in 1992, representing an increase
of 46 percent. This increase
INTERCONTINENTAL BANK AND SUBSIDIARIES 16
<PAGE>
in earnings resulted from higher net interest income and fee income, gains
on the sales of investment securities and a banking office as well as decreases
in both the provision for credit losses and certain expense categories. Also
included in 1993's results was $1.8 million of additional provision for
amortization of purchased mortgage servicing rights caused by higher than
expected prepayment experience in PAMCO's mortgage servicing portfolio.
The 1993 results also included the impact of a $1.1 million cumulative
accounting adjustment for the implementation of a new accounting pronouncement.
Without this adjustment, 1993's net income would have been $10 million, or $1.44
per common share, representing a 32 percent increase over 1992's comparable
period.
NET INTEREST INCOME
Net interest income is the main source of operating
income for the Bank. Table 1 reflects the average balances of interest earning
assets and interest bearing liabilities, interest income and interest expense
and the weighted average yields/rates of such assets and liabilities for 1993
and 1992.
Net interest income totaled $40 million in 1993, representing a $4.7 million
increase over 1992. This positive variance resulted from a higher balance of
earning assets coupled with the impact of the lower interest rate environment.
The components of this variance are illustrated in Table 2.
Interest income of $57 million in 1993 was $370,000 higher than the amount
reported in 1992. The decrease in the average yield earned on average earning
assets (primarily loans and investment securities) was more than offset by the
increase in the volume of these assets (primarily investment securities).
Specifically, a 73 basis point decrease in the average yield on loans and a 69
basis point decrease in the average yield on investment securities was more than
offset by a $92 million increase in average investment securities. The Bank's
high yielding fixed rate residential loan and mortgage-backed securities
portfolios and a reduction in the Bank's non-accruing loans cushioned the impact
of the declining interest rates on earning asset yields.
Interest expense was $17 million in 1993 compared with $21 million in 1992.
The $4.4 million decrease was primarily the result of lower average interest
rates paid on all deposit categories, especially time deposits which declined
111 basis points, and an increase in the percentage of lower-cost transaction
deposit account balances to total deposit account balances. In addition, the
average rate paid on short-term borrowings also decreased significantly during
the year.
The net interest margin increased to 4.60 percent in 1993 compared with 4.54
percent in 1992. The primary reasons for this favorable variance were the
decrease in non-performing assets and the increase in the percentage of lower-
cost transaction deposit account balances to total deposit account balances. The
declining interest rate environment which resulted in a steep yield curve by
historical standards also benefited the Bank's net interest margin. The
substantial decline in short-term interest rates reduced the total cost of
interest bearing deposits despite the substantial increase in the average
interest bearing deposit balances.
PROVISION FOR CREDIT LOSSES
For 1993, the provision for credit losses was $951,000 compared with $2.3
million in 1992. The decline in the provision was a reflection of the improved
credit quality of the Bank's loan portfolio and management's evaluation as to
the adequacy of the existing allowance for credit losses.
OTHER INCOME
Other income for 1993 was $15 million compared with $13 million in 1992,
representing an increase of $2 million, or 16 percent. The components of other
income for the years ended December 31 are summarized in Table 14.
<TABLE>
<CAPTION>
Table 14
(IN THOUSANDS) 1993 1992 Increase
<S> <C> <C> <C>
Service charges on
deposit accounts.................. $ 6,264 $ 5,765 $ 499
Loan administration fees............ 3,922 3,424 498
Other customer fees................. 1,245 1,010 235
Gain on investment securities....... 1,684 1,628 56
Gain on sale of banking office...... 650 650
Other............................... 876 778 98
$14,641 $12,605 $ 2,036
</TABLE>
The following explains certain of the fluctuations illustrated in Table 14:
(Bullet) Service charges on deposit accounts increased $499,000 to $6.3
million in 1993. An increase in the level of transaction accounts which
resulted from bank acquisitions as well as the implementation of a new service
fee schedule during 1993 had a positive impact on this income category.
(Bullet) Loan administration fees increased $498,000 to $3.9 million in
1993. At December 31, 1993, $1.1 billion of loans were serviced by PAMCO
compared with $801 million at year-end 1992.
INTERCONTINENTAL BANK AND SUBSIDIARIES 17
<PAGE>
(Bullet) Other customer fees totaled $1.2 million in 1993 compared with $1
million in the prior year. This $235,000 increase primarily resulted from a
higher volume of fees collected for customer services including letters of
credit, safe deposit boxes and electronic funds transfers.
(Bullet) The Bank recorded a net gain on the sale of investment securities
of $1.7 million in 1993, $56,000 higher than 1992. These gains were the result
of sales of held-for-sale securities. The Investment Securities section on page
9 more fully describes these security transactions.
(Bullet) In 1993, the Bank sold its banking office in Orlando, Florida
for a gain of $650,000.
OTHER EXPENSES
Other expenses for 1993 and 1992, excluding the amortization
of purchased mortgage servicing rights, totaled $34 million. Intercontinental
maintained tight control over its operating expenses despite the increase in the
Bank's size, which was reflected in the decrease in the Bank's operating expense
ratios year over year.
Included in 1993's results was $1.8 million of additional provision for
amortization of purchased mortgage servicing rights caused by higher than
expected prepayment experience in PAMCO's mortgage servicing portfolio. Included
in the 1992 results were approximately $1 million of expenses associated with
the integration of the banks acquired in 1992 and from certain non-recurring
acquisition expenses. Included in both 1993 and 1992 were expenses related to
two lawsuits which were settled at the end of 1993. The components of other
expenses for the years ended December 31 are summarized in Table 15.
Table 15
Increase
(IN THOUSANDS) 1993 1992 (Decrease)
Personnel....................... $18,320 $17,934 $ 386
Occupancy and
equipment, net................ 4,640 4,714 (74)
Amortization of purchased
mortgage servicing rights..... 4,014 1,511 2,503
Amortization of other
intangible assets............. 373 351 22
FDIC insurance premiums......... 2,113 1,661 452
Professional fees............... 1,249 1,246 3
Data processing................. 892 949 (57)
Other real estate............... 761 1,450 (689)
Other........................... 5,599 5,999 (400)
$37,961 $35,815 $2,146
The following explains certain of the fluctuations illustrated in Table 15:
(Bullet) In 1993, personnel expenses totaled $18 million. The $386,000
increase over 1992 resulted from merit increases which were partially offset by
the impact of staff reductions.
(Bullet) Net occupancy and equipment expenses in 1993 totaled $4.6 million
which was $74,000 lower than 1992 due to decreased rent expense and higher
tenant rental income.
(Bullet) FDIC insurance premiums increased to $2.1 million in 1993 from
$1.7 million in 1992 due to a higher deposit base used to calculate these
premiums.
(Bullet) Data processing fees of $892,000 in 1993 were $57,000 lower than
the $949,000 in 1992 because the 1992 amount included certain expenses directly
attributable to the acquisitions made in that year.
(Bullet) Other real estate expenses of $761,000 were $689,000 lower than
the $1.5 million reported in 1992. This decrease resulted from the significant
decline in the level of other real estate as wellas a lower level of write-
downs.
INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE
The provision for income taxes for 1993 and 1992 was $5.7 million and $2.1
million, respectively. The majority of the Bank's net operating loss
carryforwards were fully utilized by December 31, 1992 resulting in the Bank's
effective tax rate increasing from 22 percent in 1992 to 36 percent in 1993.
The substantial increase in the provision was also directly related to an
increase in income before income taxes over the prior year.
The Bank's adoption, on a prospective basis, of SFAS No. 109 had a
cumulative benefit of $1.1 million, or $.16 per common share, in 1993. SFAS No.
109 requires companies to compute deferred income taxes under the liability
method and permits the recognition of deferred tax assets for the tax effect of
future deductions.
INTERCONTINENTAL BANK AND SUBSIDIARIES 18
<PAGE>
Report of Management
To Our Shareholders:
The management of Intercontinental Bank (the "Bank") is responsible for the
preparation, integrity and fair presentation of the Bank's annual financial
statements and quarterly regulatory reports. The financial statements presented
on pages 20 to 38 have been prepared in accordance with generally accepted
accounting principles and, as such, include amounts based on judgments and
estimates made by management. Management has also prepared the other
information included in this annual report and is responsible for the accuracy
and consistency of the financial statements.
The financial statements have been audited by Arthur Andersen LLP who have
been given unrestricted access to all financial records and related data,
including minutes of all meetings of shareholders, the Board of Directors (the
"Board") and committees of the Board. Management believes that all
representations made to Arthur Andersen LLP during the audit were valid and
appropriate. Arthur Andersen LLP's audit report is presented on page 38.
The Bank maintains a system of internal control over financial reporting and
over the safeguarding of assets against unauthorized acquisition, use or
disposition which is designed to provide reasonable assurance to the Bank's
management and Board regarding the preparation of reliable published financial
statements and such asset safeguarding. The system includes a documented
organizational structure and division of responsibility; established policies
and procedures, including a code of conduct to foster a strong ethical climate,
which are communicated throughout the Bank; and the careful selection, training
and development of our personnel. Internal auditors monitor the operation of
the internal control system and report findings and recommendations to
management and the Board. Corrective actions are taken to address control
deficiencies and other opportunities for improving the system as they are
identified. The Board, operating through its Audit Committee, which is composed
entirely of directors who are not officers or employees of the Bank, provides
oversight to the financial reporting process.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the circumvention
or overriding of controls. Accordingly, even an effective internal control
system can provide only reasonable assurance with respect to financial statement
preparation and such asset safeguarding. Furthermore, the effectiveness of an
internal control system can change with circumstances.
The Bank assessed its internal control system as of December 31, 1994 in
relation to criteria for effective internal control over financial reporting
described in "INTERNAL CONTROL - INTEGRATED FRAMEWORK" issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on its
assessment, the Bank believes that its system of internal control over
financial reporting including the safeguarding of assets against unauthorized
acquisition, use or disposition met those criteria as of December 31, 1994.
(Signature of William H. Allen, Jr.) (Signature of Thomas E. Beier)
William H. Allen, Jr. Thomas E. Beier
Chief Executive Officer Chief Financial Officer
INTERCONTINENTAL BANK AND SUBSIDIARIES 19
<PAGE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31,
(DOLLARS IN THOUSANDS) 1994 1993
<S> <C> <C>
Assets
Cash and due from banks..................................... $ 65,072 $ 52,554
Interest earning deposits in other banks.................... 381 2,038
Federal funds sold.......................................... 27,000 34,700
Investment securities (market value of $315,764 and $467,159
in 1994 and 1993, respectively)........................... 323,529 461,134
Gross loans................................................. 666,353 511,620
Less: Unearned income...................................... (2,032) (1,574)
Allowance for possible credit losses.................... (11,779) (9,521)
Net loans................................................... 652,542 500,525
Other real estate, net...................................... 3,417 4,402
Premises and equipment, net................................. 49,053 50,039
Other assets, net........................................... 35,116 31,185
$1,156,110 $1,136,577
Liabilities
Deposits:
Non-interest bearing accounts............................. $ 278,013 $ 264,612
NOW accounts.............................................. 145,060 130,292
Savings accounts.......................................... 57,979 58,089
Money market accounts..................................... 232,561 252,884
Time deposits............................................. 242,028 241,425
955,641 947,302
Short-term borrowings....................................... 96,660 94,663
Long-term debt.............................................. 750
Other liabilities........................................... 13,981 12,661
Total liabilities....................................... 1,066,282 1,055,376
Shareholders' Equity
Preferred stock, no par value:
2,000,000 shares authorized; 350,000 shares issued........ 350 350
Common stock, $2 par value:
10,000,000 shares authorized; 6,895,575 and
6,759,780 shares
issued in 1994 and 1993, respectively..................... 13,791 13,519
Capital surplus............................................. 59,175 56,664
Retained earnings........................................... 21,200 10,668
Unrealized loss on investment securities.................... (4,688)
Total shareholders' equity.............................. 89,828 81,201
$1,156,110 $1,136,577
</TABLE>
See notes to consolidated financial statements.
INTERCONTINENTAL BANK AND SUBSIDIARIES 20
<PAGE>
Consolidated Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31,
(IN THOUSANDS EXCEPT PER COMMON SHARE) 1994 1993 1992
<S> <C> <C> <C>
Interest Income
Interest and fees on loans.................................. $44,610 $33,769 $35,720
Interest and dividends on investment securities............. 19,906 21,832 18,565
Other interest income....................................... 2,618 1,434 2,380
67,134 57,035 56,665
Interest Expense
Interest on deposits........................................ 17,673 16,018 20,432
Interest on short-term borrowings........................... 2,650 1,028 929
Interest on long-term debt.................................. 21 75 121
20,344 17,121 21,482
Net interest income......................................... 46,790 39,914 35,183
Provision for credit losses................................. 678 951 2,286
Net interest income after provision for credit
losses.................................................... 46,112 38,963 32,897
Other Income
Service charges on deposit accounts......................... 8,660 6,264 5,765
Loan administration fees.................................... 4,165 3,922 3,424
Other customer fees......................................... 1,587 1,245 1,010
Gain (loss) on investment securities........................ (2,243) 1,684 1,628
Other....................................................... 799 1,526 778
12,968 14,641 12,605
Other Expenses
Personnel................................................... 19,979 18,320 17,934
Occupancy and equipment, net................................ 5,333 4,640 4,714
Other....................................................... 13,496 15,001 13,167
38,808 37,961 35,815
Income before income taxes and cumative effect of change in
accounting principle...................................... 20,272 15,643 9,687
Provision for income taxes.................................. 7,461 5,663 2,099
Income before cumulative effect of change in
accounting principle....................................... 12,811 9,980 7,588
Cumulative effect of change in accounting principle......... 1,112
Net income.................................................. $12,811 $11,092 $ 7,588
Per Common Share - Primary
Income before cumulative effect of change in
accounting principle...................................... $ 1.82 $ 1.44 $ 1.11
Cumulative effect of change in accounting principle......... .16
Net income.................................................. $ 1.82 $ 1.60 $ 1.11
Average number of common shares and equivalents............. 7,025 6,941 6,816
Per Common Share - Fully Diluted
Income before cumulative effect of change in
accounting principle...................................... $ 1.82 $ 1.42 $ 1.10
Cumulative effect of change in accounting principle......... .16
Net income.................................................. $ 1.82 $ 1.58 $ 1.10
Average number of common shares and equivalents............. 7,032 6,996 6,854
</TABLE>
See notes to consolidated financial statements.
INTERCONTINENTAL BANK AND SUBSIDIARIES 21
<PAGE>
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Operating Activities
Net income.................................................. $ 12,811 $ 11,092 $ 7,588
Reconciliation of net income to net cash provided by
operating activities:
Provision for credit losses............................... 678 951 2,286
Provision for other real estate........................... 835 275 824
Depreciation and amortization............................. 3,251 2,999 3,076
Amortization of intangible assets......................... 3,264 4,387 1,862
Net amortization of premium (accretion of
discounts) on investment securities..................... (111) 1,054 394
Cumulative effect of change in accounting
principle................................................ (1,112)
Loss (gain) on sales of:
Investment securities.................................. 2,243 (393) (542)
Premises and equipment................................. (17) 7
Other real estate..................................... (15) (110) (32)
Banking office........................................ (650)
Decrease in investment securities held-for-sale....... 85,471 24,485
Decrease (increase) in loans held-for-sale............. 2,062 (2,129) (246)
Increase in interest receivable......................... (254) (369) (1,247)
Decrease (increase) in all other assets............... 2,100 1,101 (9)
Decrease in all other liabilities..................... (4,061) (336) (70)
Net cash provided by operating activities.............. 22,786 102,231 38,376
Investing Activities
Investment securities held-to-maturity:
Proceeds from sales...................................... 69,256
Proceeds from maturities and principal paydowns....... 19,889 58,715 64,170
Purchases................................................. (16,544) (207,705) (336,955)
Investment securities available-for-sale:
Proceeds from sales...................................... 262,716
Proceeds from maturities and principal paydowns........ 104,025
Purchases................................................. (242,014)
Net (increase) decrease in loans........................ (117,656) (50,890) 6,608
Premises and equipment:
Proceeds from sales....................................... 174 73 45
Capital expenditures...................................... (1,888) (1,929) (2,334)
Other real estate:
Proceeds from sales....................................... 1,444 6,555 3,912
Payments collected........................................ 166 308 118
Purchase of mortgage servicing rights....................... (1,590) (9,560) (2,836)
Net cash and cash equivalents received in the acquisition
of various entities....................................... 30,853 14,879 62,372
Net cash disbursed for the sale of a banking office......... (5,659)
Net cash provided by (used in) investing
activities.............................................. 39,575 (195,213) (135,644)
Financing Activities
Net increase (decrease) in deposits......................... (59,453) 6,436 62,688
Net increase in short-term borrowings....................... 1,997 72,832 3,660
Repayment of long-term debt................................. (750) (1,153) (132)
Common stock issued......................................... 501 558 104
Cash dividends paid......................................... (1,665) (1,585) (1,166)
Capital transactions by pooled bank:
Common stock issued....................................... 170 75
Cash dividends paid....................................... (125)
Net cash provided by (used in) financing
activities.............................................. (59,200) 77,038 65,154
Net increase (decrease) in cash and cash equivalents........ 3,161 (15,944) (32,114)
Cash and cash equivalents at January 1...................... 89,292 105,236 137,350
Cash and cash equivalents at December 31.................... $ 92,453 $ 89,292 $ 105,236
</TABLE>
Gross amounts of interest paid were $20 million, $17 million and $22 million in
1994, 1993 and 1992, respectively.
See notes to consolidated financial statements.
INTERCONTINENTAL BANK AND SUBSIDIARIES 22
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Retained Unrealized Total
Earnings Loss on Share-
Preferred Common Capital (Accumulated Investment holders'
(IN THOUSANDS) Stock Stock Surplus Deficit) Securities Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991
as previously reported........................ $350 $11,967 $52,667 $ (6,483) $ $58,501
Effect of Interstate Bank Holding Company
pooling (see Note 2).......................... 1,362 3,392 1,347 6,101
Balance at December 31, 1991.................... 350 13,329 56,059 (5,136) 64,602
Net income...................................... 7,588 7,588
Cash dividends declared:
Common........................................ (1,150) (1,150)
Preferred..................................... (16) (16)
Issuance of common stock for the
exercise of stock options..................... 37 67 104
Balance at December 31, 1992.................... 350 13,366 56,126 1,286 71,128
Net income...................................... 11,092 11,092
Cash dividends declared:
Common........................................ (1,569) (1,569)
Preferred..................................... (16) (16)
Issuance of common stock for the
exercise of stock options..................... 153 405 558
Tax benefit related to stock options............ 58 58
Capital transactions by pooled bank:
Common stock issued........................... 75 75
Cash dividends declared (common).............. (125) (125)
Balance at December 31, 1993.................... 350 13,519 56,664 10,668 81,201
Net income...................................... 12,811 12,811
Cash dividends declared:
Common........................................ (2,263) (2,263)
Preferred..................................... (16) (16)
Issuance of common stock:
Exercise of stock options..................... 122 379 501
Acquisition of Boca Bancorp, Inc.............. 150 1,323 1,473
Issuance of common stock by pooled
bank for the exercise of stock options........ 170 170
Tax benefit related to stock options............ 639 639
Unrealized loss on investment securities........ (4,688) (4,688)
Balance at December 31, 1994.................... $350 $13,791 $59,175 $ 21,200 $ (4,688) $89,828
</TABLE>
See notes to consolidated financial statements.
INTERCONTINENTAL BANK AND SUBSIDIARIES 23
<PAGE>
Notes to Consolidated Financial Statements
Intercontinental Bank is a Florida state-chartered commercial bank based in
Miami, Florida which operated 26 commercial banking offices in Dade, Broward and
Palm Beach counties as of December 31, 1994. Intercontinental Bank also owns Pan
American Mortgage Corp. ("PAMCO"), a mortgage banking company which serviced
approximately $1.1 billion residential and commercial loans at December 31,
1994. Intercontinental Bank and its subsidiaries are collectively referred to
herein as "Intercontinental" or the "Bank".
1. Accounting
Policies
The accounting and reporting policies of the Bank conform with generally
accepted accounting principles and general practices within the banking
industry. The following is a summary of the more significant policies:
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include all subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. Assets held in an agency or fiduciary capacity are not included
in the Bank's consolidated financial statements. All amounts presented herein
for prior periods have been restated to reflect the 1994 acquisition of
Interstate Bank Holding Company ("Interstate") and its subsidiary, The Bank of
Coral Gables. This transaction, which was accounted for as a pooling of
interests, as well as other acquisitions are discussed in Note 2.
CASH AND CASH EQUIVALENTS
For purposes of the Bank's Consolidated Statement of Cash Flows, cash and
cash equivalents include cash and due from banks, interest earning deposits in
other banks and federal funds sold.
INVESTMENT SECURITIES
Intercontinental adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
No. 115"), on January 1, 1994. This statement requires all debt and equity
securities on the Bank's Consolidated Balance Sheet to be classified in one of
the following three categories at the time of their acquisition: trading
securities, securities held-to-maturity or securities available-for-sale. In
accordance with SFAS No. 115, classifications of investment securities for
periods prior to January 1, 1994 have not been restated. Shareholders' equity
at December 31, 1993 would have been increased $2 million had this statement
been implemented in 1993. Realized and unrealized gains and losses on all
investment securities are determined using the specific identification method.
Any realized gains or losses are reflected in earnings.
Trading securities include those securities that are bought and held
principally for the purpose of selling them in the near term. Such securities
are carried at fair value with any unrealized gains or losses reflected in
earnings. Intercontinental had no trading securities at December 31, 1994.
Securities that the Bank has a positive intent and ability to hold to maturity
are considered securities held-to-maturity. Such securities are carried at
amortized cost (cost adjusted for amortization of premiums and accretion of
discounts on a method which approximates the level yield method). Securities
that are not considered trading securities or securities held-to-maturity are
classified as securities available-for-sale. Such securities are carried at fair
value with any unrealized gains or losses, net of any tax effect, reflected as a
separate component of shareholders' equity.
Prior to the adoption of SFAS No. 115, management determined the appropriate
classification of securities at the time of purchase. Debt securities purchased
with the intent of holding them to maturity were designated as held-for-
investment and were reflected in the Bank's consolidated financial statements at
amortized cost. Debt securities purchased with the intent to profit from short-
term price movements were designated as trading securities and were reflected in
the Bank's consolidated financial statements at market value. At December 31,
1993, Intercontinental had no trading securities. Debt securities which were not
considered either held-for-investment or trading securities were designated as
held-for-sale and were reflected in Intercontinental's consolidated financial
statements at the lower of amortized cost or market value. Marketable equity
securities were carried at the lower of aggregate cost or market value.
Unrealized losses arising from temporary declines in market value of marketable
equity securities were included in shareholders' equity.
INTERCONTINENTAL BANK AND SUBSIDIARIES 24
<PAGE>
LOANS
Loans are stated at their principal amount outstanding except for loans
held-for-sale which are carried at the lower of cost or market value. Interest
on non-discounted loans is generally recognized based on the principal amount
outstanding. Interest on discounted loans is recognized based on methods that
approximate the interest method.
Non-accruing loans are those on which the accrual of interest has ceased and
all previously accrued and unpaid interest is reversed. Loans generally are
placed on non-accruing status when principal or interest is past due 90 days or
more or at the time when, in the opinion of management, full collection is
doubtful. Interest accrued but not collected as of the date of placement on non-
accruing status is reversed and charged against current income (or the allowance
for possible credit losses if it applies to a prior year).
Depending on management's assessment of the ultimate collectibility of
principal and interest, subsequent cash payments received are either applied to
the outstanding principal balance, recorded as interest income if the interest
reversal is in the same year as the subsequent cash receipt or applied to the
allowance for possible credit losses if the interest reversal is in a year prior
to the subsequent cash receipt. A loan is returned to full-accruing status when
it is brought current and management determines that the principal amount is
deemed collectible and that there is a reasonable expectation of a continued
ability to pay.
Loans whose contractual terms have been restructured granting a concession
to the borrower due to the borrower's financial difficulties are classified as
restructured loans.
ALLOWANCE FOR POSSIBLE CREDIT LOSSES
The allowance for possible credit losses is the amount that management
believes will be adequate to absorb possible losses on existing loans that may
become uncollectible based on evaluations of the loan portfolio, overall
portfolio quality, review of specific loans and current economic conditions
that may affect a borrower's ability to repay the loan. Management's evaluation
of the allowance is based on estimates, and ultimate losses may vary from the
current estimates. These estimates are reviewed periodically and adjustments,
as they become necessary, are reported in the period in which they become
known.
LOAN FEES
Loan origination and commitment fees and certain direct origination costs
are deferred and the net amount is amortized as an adjustment of the related
loan yield. The Bank generally amortizes these amounts over the contractual
life of the related loans using the interest method.
LOAN ADMINISTRATION FEES
Loan administration fees, which primarily consist of servicing fees, are
based on a stipulated percentage of the outstanding loan principal balances
being serviced and are included in income as related loan payments are
collected from the mortgagors.
REAL ESTATE ACQUIRED THROUGH FORECLOSURE
Real estate acquired through foreclosure, shown as Other real estate, net
on the Consolidated Balance Sheet, is carried at the lower of the recorded
amount of the loan for which the foreclosed property previously served as
collateral or an amount not in excess of the fair value of the property less
estimated selling costs. In addition, a separate reserve has been established
for other real estate based upon management's assessment of the current
economic environment. Such reserve further reduces the carrying value of other
real estate assets. Costs of maintaining and operating foreclosed properties
are expensed as incurred. Expenditures to complete or improve foreclosed
properties are expensed unless they are expected to be recovered, in which case
they are capitalized.
INTERCONTINENTAL BANK AND SUBSIDIARIES 25
<PAGE>
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed principally using the
straight-line method over the estimated useful lives of the assets which are
three to 25 years for buildings and improvements and three to seven years for
furniture and equipment.
INTANGIBLE ASSETS
Intangible assets, which include purchased mortgage servicing rights, core
deposit intangible assets and goodwill, are reported in Other assets, net on
the Consolidated Balance Sheet. Purchased mortgage servicing rights are
initially recorded at cost and are amortized in proportion to and over the
period of the estimated net servicing income. Amortization is adjusted
prospectively to reflect changes in prepayment experience. Core deposit
intangible assets are amortized on the straight-line method over eight years.
The excess of cost over the fair value of assets acquired (goodwill) is
amortized on the straight-line method for a period not to exceed 25 years.
The Bank annually evaluates whether events or circumstances have occurred
which indicate that the remaining useful life of any of its intangible assets
may warrant revision or that the remaining balances may not be recoverable. When
factors indicate that an intangible asset should be evaluated for possible
impairment, the Bank utilizes an estimate of the related cash flows over the
remaining useful life of the intangible asset in measuring whether it is
recoverable.
INCOME TAXES
Intercontinental adopted SFAS No. 109, "Accounting for Income Taxes",
during the first quarter of 1993, which superseded SFAS No. 96. SFAS No. 109
requires companies to compute deferred income taxes under the liability method.
Under this method, deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax reporting basis
of the Bank's assets and liabilities using enacted tax rates in effect when the
underlying items of income or expense are expected to be reported in the
Bank's income tax return. In the first quarter of 1993, the cumulative effect
of this change in accounting principle resulted in a benefit of $1.1 million,
or $.16 per common share.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income, after
deducting preferred stock dividend requirements, by the weighted average number
of common shares and equivalents outstanding for each period. Common share
equivalents include the dilutive effect of stock options using the treasury
stock method. Earnings per common share on a fully diluted basis reflect the
additional dilution related to stock options resulting from the use of the
market price of the Bank's common stock at the end of the period.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued two pronouncements related
to the accounting for loans - SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan", and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures", both of which are
effective January 1, 1995. These rules modify the accounting for certain loans
where it is probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The Bank does not
expect that the implementation of these rules in 1995 will have a material
impact on its financial position or results of operations.
SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments", which was effective December 31, 1994, requires
disclosure about the amount, nature and terms of derivatives. Intercontinental
had no derivative contracts outstanding at December 31, 1994 or 1993.
INTERCONTINENTAL BANK AND SUBSIDIARIES 26
<PAGE>
2. Acquisitions
and Sale of
Banking Office
1994 - THE BANK OF CORAL GABLES
Effective July 1, 1994, Intercontinental acquired Interstate and its
majority-owned subsidiary, The Bank of Coral Gables, in a transaction valued at
approximately $16 million. The total number of common shares issued aggregated
681,070. The Bank's historical consolidated financial statements were restated
to reflect this acquisition which was accounted for as a pooling of interests.
The former Bank of Coral Gables, which operated two Dade County banking
offices, had assets totaling $97 million at July 1, 1994. Net interest income
and net loss generated by Interstate prior to the date of merger and included
in the accompanying consolidated statement of income for the year ended
December 31, 1994 totaled $1.9 million and $64,000, respectively. The following
table summarizes the impact of the Interstate acquisition on the Bank's
previously reported results of operations:
Net
Interest Net
(IN THOUSANDS) Income Income
Year ended December 31, 1993:
Intercontinental, as previously reported..... $ 35,786 $10,327
Interstate................................... 4,128 765
$ 39,914 $11,092
Year ended December 31, 1992:
Intercontinental, as previously reported..... $ 31,368 $ 6,937
Interstate................................... 3,815 651
$ 35,183 $ 7,588
1994 - BOCA BANK
Effective December 30, 1994, Intercontinental acquired Boca Bancorp, Inc.
("BBI") and its wholly-owned subsidiary, Boca Bank, in a transaction accounted
for as a purchase. This transaction was valued at $4.9 million of which $3.4
million was paid in cash and the remaining consideration was 74,751 shares of
Intercontinental common stock. The former Boca Bank operated two banking
offices in Boca Raton, Florida with assets totaling $71 million at December 30,
1994. The assets acquired and liabilities assumed were recorded by
Intercontinental at their fair market value on the date of acquisition
resulting in $1.2 million of core deposit intangible assets. Net cash and cash
equivalents received totaled $31 million. Because this transaction occurred on
the last day of Intercontinental's fiscal year, there was no resulting impact
on the Bank's 1994 results of operations or average balances.
1993 - COMMERCIAL TRUST BANK
On December 31, 1993, Commercial Trust Bancorp, Inc. ("CTB") and its
majority-owned subsidiary, Commercial Trust Bank ("Commercial Trust"), were
merged into Intercontinental. Shareholders, warrant holders and option holders
of CTB and the minority shareholders of Commercial Trust received cash of $12.6
million in exchange for their shares, warrants and options. Commercial Trust,
which operated three banking offices in Dade County, had assets totaling $109
million at year-end 1993. This acquisition was accounted for as a purchase. The
assets acquired and liabilities assumed were recorded by Intercontinental at
their fair market value on the date of acquisition resulting in $2.2 million of
core deposit intangible assets and $2.7 million of goodwill. Net cash and cash
equivalents received totaled $15 million. Because this transaction occurred on
the last day of Intercontinental's fiscal year, there was no resulting impact
on the Bank's 1993 results of operations or average balances.
1993 - ORLANDO BANKING OFFICE
On November 22, 1993, Intercontinental sold its Orlando banking office. The
sale of this banking office, which had approximately $16 million in deposits,
resulted in a pretax gain of $650,000.
INTERCONTINENTAL BANK AND SUBSIDIARIES 27
<PAGE>
1992 ACQUISITIONS
On October 1, 1992, Interbanc was merged into Intercontinental and the
Interbanc shareholders received one share of Intercontinental common stock in
exchange for every two shares of Interbanc common stock owned by them. The
total number of shares of Intercontinental common stock issued aggregated
305,984. Prior to the merger, Interbanc had total assets of $50 million. For
the nine months ended September 30, 1992, Interbanc's revenues and net income
were $2.7 million and $8,000, respectively. The Bank's historical consolidated
financial statements were restated to reflect this acquisition which was
accounted for as a pooling of interests.
In 1992, Intercontinental purchased certain assets and assumed certain
liabilities of two separate entities in government-assisted transactions. Each
of these transactions was accounted for as a purchase; thus, the assets acquired
and liabilities assumed were recorded by Intercontinental at their fair market
value on the date of acquisition and these transactions had no impact on the
Bank's historical consolidated financial statements. On February 21, 1992,
Intercontinental purchased $7 million of assets and assumed $17 million of
liabilities of the former National City Bank for cash consideration of $415,000.
The $10 million difference between the assets acquired and the liabilities
assumed represented cash proceeds received from the Federal Deposit Insurance
Corporation and a core deposit premium of $415,000 recorded in connection with
this transaction. On March 13, 1992, Intercontinental assumed $37 million of
liabilities of the former Professional Federal Savings Bank for cash
consideration of $175,000. The Bank received cash of $37 million from the
Resolution Trust Corporation and recorded a $175,000 core deposit premium in
connection with this transaction.
3. Investment
Securities
The amortized cost, gross unrealized gains, gross unrealized losses and
market value of investment securities at December 31 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
(IN THOUSANDS) Cost Gains Losses Value
<S> <C> <C> <C> <C>
1994
Available-for-sale:
U.S. Government and agency securities...... $ 203,077 $ 3 $(8,428) $194,652
Mortgage-backed securities................. 2,096 45 2,141
Other debt securities...................... 7,359 (263) 7,096
Total debt securities.................... 212,532 48 (8,691) 203,889
Equity securities.......................... 1,114 1,142 2,256
$ 213,646 $1,190 $(8,691) $206,145
Held-to-maturity:
Mortgage-backed securities................. $ 116,796 $ 8 $(7,703) $109,101
Other debt securities...................... 357 (70) 287
Total debt securities.................... 117,153 8 (7,773) 109,388
Equity securities.......................... 231 231
$ 117,384 $ 8 $(7,773) $109,619
1993
U.S. Government and agency securities...... $ 297,373 $3,140 $ (734) $299,779
Mortgage-backed securities................. 140,438 3,037 (758) 142,717
Other debt securities...................... 21,977 16 (12) 21,981
Total debt securities.................... 459,788 6,193 (1,504) 464,477
Equity securities.......................... 1,346 1,336 2,682
$ 461,134 $7,529 $(1,504) $467,159
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 28
<PAGE>
The amortized cost and market value of investment securities at December 31,
1994 by contractual maturity are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to repay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Amortized Market Amortized Market
(IN THOUSANDS) Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less..................... $ 53,586 $ 53,157 $ $
Due after one to five years................. 146,570 139,800 48,706 45,372
Due after five to ten years................. 10,280 8,791 16,889 15,546
Due after ten years......................... 2,096 2,141 51,558 48,470
212,532 203,889 117,153 109,388
Securities with no contractual maturity..... 1,114 2,256 231 231
$213,646 $206,145 117,384 109,619
</TABLE>
Information related to the sales of debt securities follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Proceeds from sales of debt securities......... $262,716 $121,476 $227,358
Gross gains on sales of debt securities........ 643 1,895 3,037
Gross losses on sales of debt securities....... 2,886 211 1,409
</TABLE>
The unrealized loss on investment securities available-for-sale, net of its
related tax effect, reflected as a component of shareholders' equity at
December 31, 1994 was $4.7 million. Approximately $119 million of investment
securities were pledged as collateral for repurchase agreements, public
deposits and other purposes at December 31, 1994. In 1993, investment
securities totaling $75 million were transferred from held-for investment to
held-for-sale. Dividend income earned on investment securities was $96,000,
$84,000 and $105,000 in 1994, 1993 and 1992, respectively.
4. Loans
The loan portfolio consisted primarily of commercial and residential real
estate loans and commercial loans to borrowers in South Florida. Concentrations
of credit risk arise when a number of customers are engaged in similar business
activities, or activities in the same geographic region, or have similar
economic features that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic conditions. Although the Bank
has a diversified portfolio by loan type and a significant portion of the loan
portfolio is secured by residential property, its customers' ability to honor
their loan commitments is partially reliant upon the economic stability of the
South Florida geographic region. The composition of the loan portfolio at
December 31 is summarized as follows:
(IN THOUSANDS) 1994 1993
Commercial real estate.................... $326,652 $227,765
Commercial................................ 168,969 145,177
Residential real estate................... 157,338 123,515
Consumer.................................. 11,225 12,879
International............................. 2,169 2,284
666,353 511,620
Unearned income........................... (2,032) (1,574)
Allowance for possible credit losses...... (11,779) (9,521)
$652,542 $500,525
INTERCONTINENTAL BANK AND SUBSIDIARIES 29
<PAGE>
The following table summarizes various information about loans at December
31:
(IN THOUSANDS) 1994 1993
Non-accruing loans........................... $3,554 $2,465
Restructured loans.......................... 3,837
Loans past due 90 days or more............... 457 601
Potential problem loans...................... 2,238 2,474
Loans transferred to other real estate....... 134 3,457
The maturities of selected categories of the loan portfolio at December 31,
1994 were as follows:
<TABLE>
<CAPTION>
Over One
Year
One Year Through Over
(IN THOUSANDS) or Less Five Years Five Years Total
<S> <C> <C> <C> <C>
Commercial real estate..... $ 67,632 $ 184,639 $ 74,381 $326,652
Commercial................. 122,047 41,004 5,918 168,969
International.............. 95 2,074 2,169
$ 189,774 $ 225,643 $ 82,373 $497,790
</TABLE>
The December 31, 1994 loan portfolio included fixed and variable rate loans
due after one year amounting to $92 million and $369 million, respectively.
In the ordinary course of business, the Bank grants loans to officers,
directors, principal owners, entities in which officers and directors are
involved and other directly related companies. Such loans aggregated $24
million and $21 million at December 31, 1994 and 1993, respectively. An
analysis of the related party loan activity for 1994 is as follows:
(IN THOUSANDS)
Balance at December 31, 1993.... $21,400
Principal advances.............. 5,996
Principal repayments............ (3,300)
Balance at December 31, 1994.... $24,096
5. Allowance
for Possible
Credit Losses
Activity in the allowance for possible credit losses for the years ended
December 31 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(IN THOUSANDS) 1994 1993 1992
Balance at January 1................................. $ 9,521 $ 9,302 $ 9,303
Provision charged to expense......................... 678 951 2,286
Charge-offs.......................................... (426) (1,278) (3,207)
Recoveries........................................... 669 496 920
Allowance for possible credit losses of banks
acquired and banking office sold (see Note 2)...... 1,337 50
Balance at December 31............................... $11,779 $ 9,521 $ 9,302
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 30
<PAGE>
6. Premises and
Equipment
A summary of bank and office premises and equipment at December 31 is as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Buildings and improvements..................... $ 44,276 $ 42,457
Land........................................... 16,089 16,089
Furniture and equipment........................ 11,750 11,734
72,115 70,280
Accumulated depreciation and amortization...... (23,062) (20,241)
$ 49,053 $ 50,039
</TABLE>
Depreciation and amortization expense related to premises and equipment
totaled $3.3 million for 1994, $3 million for 1993 and $3.1 million for 1992.
7. Other Real
Estate
A summary of other real estate at December 31 is as follows:
(IN THOUSANDS) 1994 1993
Other real estate............... $4,252 $4,532
Reserve for possible losses..... (835) (130)
$3,417 $4,402
Market value.................... $4,643 $5,085
Activity in the reserve for possible losses for the three years ended
December 31 is summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Balance at January 1........................................ $ 130 $ 368 $ 419
Provision charged to expense................................ 835 275 824
Charge-offs................................................. (286) (513) (875)
Allowance for other real estate of bank aquired
(see Note 2).............................................. 156
Balance at December 31...................................... $ 835 $ 130 $ 368
</TABLE>
8. Intangible
Assets
Intangible assets, net of accumulated amortization, at December 31 included
the following:
(IN THOUSANDS) 1994 1993
Purchased mortgage servicing rights...... $11,927 $12,827
Core deposit intangible assets........... 4,875 4,352
Goodwill................................. 2,584 2,176
Amortization of intangible assets for the three years ended December 31
included the following:
(IN THOUSANDS) 1994 1993 1992
Purchased mortgage servicing rights...... $2,517 $4,014 $1,511
Core deposit intangible assets........... 629 350 328
Goodwill................................. 99 4 3
Included in 1993 was a provision for an additional $1.8 million of
amortization of purchased mortgage servicing rights caused by higher than
expected prepayment experience in PAMCO's mortgage servicing portfolio.
INTERCONTINENTAL BANK AND SUBSIDIARIES 31
<PAGE>
9. Deposits
Deposits at December 31 are summarized as follows:
(IN THOUSANDS) 1994 1993
Non-interest bearing accounts........... $278,013 $264,612
Interest bearing accounts:
NOW accounts.......................... 145,060 130,292
Savings accounts...................... 57,979 58,089
Money market accounts................. 232,561 252,884
Time deposits < $100,000............. 145,311 138,005
Time deposits (greater than or equal to symbol) $100,000 maturing in:
Three months or less................. 76,369 52,946
Over three through six months....... 11,387 15,353
Over six through 12 months......... 7,217 32,613
Over 12 months...................... 1,744 2,508
96,717 103,420
$955,641 $947,302
Interest on time deposits of $100,000 or more was $3.5 million, $2.8 million
and $3.9 million in 1994, 1993 and 1992, respectively. The Bank is required by
law to maintain non-interest earning deposits with the Federal Reserve Bank.
This amount averaged $16 million in 1994 and $13 million in 1993.
10. Borrowings
At December 31, 1993, long-term debt consisted of a variable rate mortgage
due in 1998 with a balance of $750,000. Such debt was repaid during 1994. The
following table presents the components of and related information about certain
short-term borrowings at and for the years ended December 31:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Securities sold under agreements to repurchase:
Balance at December 31........................... $ 96,660 $94,663 $20,251
Average balance during the year.................. 75,993 45,059 33,362
Maximum month-end balance........................ 125,284 94,663 57,086
Weighted average rate during the year............ 3.49% 2.28% 2.68%
Weighted average rate at December 31............. 5.42% 2.69% 2.33%
</TABLE>
11. Income Taxes
The components of the income tax provision for the years ended December 31
were as follows:
(IN THOUSANDS) 1994 1993 1992
Current income taxes:
Federal............... $7,127 $5,238 $2,143
State................. 954 670 62
8,081 5,908 2,205
Deferred income taxes:
Federal............... (571) (236) (88)
State................. (49) (9) (18)
(620) (245) (106)
$7,461 $5,663 $2,099
INTERCONTINENTAL BANK AND SUBSIDIARIES 32
<PAGE>
The amount of reported income tax provision differs from that computed by
multiplying pretax accounting income by the applicable statutory federal income
tax rate. A reconciliation for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Pretax accounting income.................................... $20,272 $15,643 $ 9,687
Statutory federal income tax rate........................... 35% 35% 34%
Provision for income taxes at statutory
federal income tax rate................................... 7,095 5,475 3,294
Increase (decrease) in income taxes resulting from:
State income tax expense, net of federal
benefit................................................. 620 430 25
Tax net operating loss carryforwards...................... (90) (1,341)
Non-taxable dividend and interest income.................. (201) (123) (19)
Other, net................................................ 37 (119) 140
$ 7,461 $ 5,663 $ 2,099
Provision for income taxes as a percentage of pretax
income.................................................... 36.8% 36.2% 21.7%
</TABLE>
For income tax reporting purposes, the Bank's net operating loss
carryforwards at December 31, 1994 totaled approximately $4.7 million which
expire in 2008. Income taxes paid in 1994, 1993 and 1992 totaled $7.5 million,
$6.2 million and $1.5 million, respectively.
In the first quarter of 1993, Intercontinental adopted SFAS No. 109,
"Accounting for Income Taxes", which superseded SFASNo. 96. This statement
requires companies to compute deferred income taxes under the liability method.
Under this method, deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax reporting basis of
the Bank's assets and liabilities using enacted tax rates in effect when the
underlying items of income or expense are expected to be reported in the Bank's
income tax return. The cumulative effect of this change in accounting principle
resulted in a benefit of $1.1 million, or $.16 per common share. SFAS No. 109
permits the recognition of deferred tax assets which contributed significantly
to this one-time benefit.
The components of the deferred tax asset at December 31 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Allowance for possible credit losses....................... $ 3,979 $3,214
Excess of tax bases over book value - investment
securities................................................ 2,813
Net operating loss carryforwards............................ 1,788
Excess of tax bases over book value - other real estate..... 1,155 514
Other, net.................................................. 1,049 933
$11,125 $5,535
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 33
<PAGE>
The components of the deferred tax liability at December 31 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Excess of book value over tax bases - premises.............. $4,006 $4,456
Excess of book value over tax bases - core deposit
intangible assets......................................... 437 836
Excess of book value over tax bases - investment
securities................................................ 389 492
Deferred installment income................................. 358 348
Excess of book value over tax bases - purchased mortgage
servicing rights.......................................... 347 465
Recapture of tax bad debt reserves.......................... 346 441
$5,883 $7,038
</TABLE>
12. Shareholders'
Equity
Shareholders' equity consists of preferred stock and common stock. Preferred
stock rights and preferences are as follows: $.045 cumulative annual dividends
per share, voting rights equivalent to common stock and preferred liquidation
rights of $1.00 per share plus accrued dividends.
13.Employee
Compensation
Plans
Intercontinental's stock option plans permit the granting of options to
purchase shares of its common stock to certain key employees. At December 31,
1994, the number of shares of stock available for future grants for all plans
was 196,600.
Under the provisions of the Bank's incentive stock option plans, the option
price is not less than the fair market value of the common stock on the date of
the grant. According to Florida law, stock options granted under the Bank's non-
qualified stock option plan must be issued at the greater of par value or fair
market value on the date of grant. The option becomes exercisable not less than
one year after the date of the grant for a period not to exceed ten years after
the date of the grant subject to certain conditions and limitations.
The stock option activity for 1994 and 1993 is summarized as follows:
<TABLE>
<CAPTION>
Number Option Price
of per Common
Options Share
<S> <C> <C>
Options outstanding December 31, 1992.......... 564,400 $ 5.25-14.50
Granted in 1993................................ 106,000 15.00-18.75
Exercised in 1993.............................. (76,550) 5.25- 9.00
Expired or cancelled in 1993................... (1,500) 9.00-17.00
Options outstanding December 31, 1993.......... 592,350 6.375-18.75
Granted in 1994................................ 153,000 18.25-22.25
Exercised in 1994.............................. (61,050) 6.50-14.50
Expired or cancelled in 1994................... (500) 16.75
Options outstanding December 31, 1994.......... 683,800
Options exercisable on December 31, 1994....... 490,450
</TABLE>
Intercontinental has established a deferred compensation profit sharing plan
under Section 401(k) of the Internal Revenue Code. In general, plan members may
contribute up to 15 percent of their compensation, subject to a limitation. For
each of the past three years, the Bank has matched up to three percent of each
participating employee's compensation in addition to contributing two percent of
each participating employee's compensation, subject to a five-year incremental
vesting schedule. The Bank's expense associated with this plan totaled $580,000
in 1994, $486,000 in 1993 and $448,000 in 1992.
Intercontinental has also established a non-qualified, non-contributory
defined contribution plan. Such plan will pay cash retirement and death benefits
to selected key executives. In general, the Bank annually contributes seven
percent of each participant's base salary to purchase insurance policies to fund
the benefits. The Bank's expense associated with this plan totaled $154,000 in
1994, $146,000 in 1993 and $141,000 in 1992.
INTERCONTINENTAL BANK AND SUBSIDIARIES 34
<PAGE>
14. Lease
Obligations
The Bank has various operating lease agreements for bank premises and
equipment. Lease expense totaled $2.3 million in 1994, $2.4 million in 1993 and
$2.7 million in 1992. As of December 31, 1994, future lease commitments under
the terms of these leases are summarized as follows: 1995 - $2.8 million, 1996
$2.4 million, 1997 - $1.9 million, 1998 - $1.6 million, 1999 - $1.3 million and
thereafter - $5 million for a total of $15 million.
15. Fair Value of
Financial
Instruments
and Certain
Other Assets
and Liabilities
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires all entities to disclose the estimated fair value of their financial
instrument assets and liabilities, both on-balance sheet and off-balance sheet.
Since the disclosure of the fair value of certain financial items, namely core
deposit premiums and mortgage servicing rights, is not required under SFAS No.
107, Intercontinental has not disclosed these amounts. Core deposit premiums
include both the value of customer relationships resulting from deposits
purchased from other banks as well as the value of existing long-term customer
deposit relationships. Mortgage servicing rights include both the value of
mortgage servicing purchased from other financial institutions as well as the
value of mortgages originated and serviced by the Bank.
For Intercontinental, as with most other financial institutions, the
majority of its on-balance sheet assets and liabilities are considered financial
instruments as defined in SFAS No. 107. Fair value as defined in SFAS No. 107 is
the amount at which an instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Estimated
fair values have been determined by the Bank using the best available data and
an estimation methodology suitable for each category of financial instruments.
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values. Since it is the Bank's general practice and intent
to hold most of its financial instruments to maturity and not to engage in
trading or sales activities, the value eventually received for these instruments
may vary significantly from the estimated fair value at December 31, 1994.
The estimated fair value of the following financial assets and liabilities
on the December 31, 1994 Consolidated Balance Sheet is the same as the book
value: cash and due from banks, interest earning deposits in other banks,
federal funds sold, all receivables and payables, all deposits except for time
deposits and short-term borrowings. The fair value of investment securities is
shown in Note 3. The fair value of these securities was determined by using
quoted market prices for the specific securities owned, if available, or quoted
market prices for securities with similar characteristics. The estimated fair
value of the Bank's off-balance sheet financial instruments is shown in Note 16.
The estimated fair value of the loan portfolio at December 31, 1994 was $643
million compared with a book value of $653 million. The estimated fair value of
the loan portfolio at year-end 1993 was $505 million compared with a book value
of $501 million. Intercontinental utilized a commercially-available cash flow
market valuation model to compute the fair value of the Bank's loan portfolio.
The estimated fair value of loans with variable interest rates was assumed to
approximate book value, except for loans with a rate change frequency greater
than one year whose fair value is computed using a methodology similar to the
fixed rate loan portfolio. The estimated fair value of the fixed rate loan
portfolio was determined by computing the discounted value of the estimated cash
flows. The discount rates used for the cash flows were computed by adjusting the
average market interest rates for standard loan packages during December to
reflect the unique characteristics of Intercontinental's loan portfolio or by
using current rates offered by Intercontinental for similar loans. The estimated
future cash flows were also adjusted for expected prepayments. Non-accruing
loans were excluded from the above computation. The fair value of non-accruing
loans was based on net realizable value and management's estimates of collection
dates. The effect of credit risk on the loan portfolio was taken into account by
applying the allowance for possible credit losses to both the book value and
fair value of the loan portfolio.
INTERCONTINENTAL BANK AND SUBSIDIARIES 35
<PAGE>
The estimated fair value of time deposits at December 31, 1994 was $241
million, $716,000 lower than the book value. The estimated fair value of time
deposits at December 31, 1993 was $242 million, $574,000 higher than the book
value. The discounted value of the estimated future cash flows was used to
calculate the estimated fair value. The discount rate assumed was based on the
average December rates offered to the Bank's customers for these types of
deposit accounts. According to SFAS No. 107, for deposits with no stated
maturities, the fair value to be disclosed is the amount payable on demand which
at December 31, 1994 and 1993 was $714 million and $706 million, respectively.
This assumption, however, does not take into consideration the value of
Intercontinental's long-term customer deposit relationships (core deposit
premium).
Intercontinental had no long-term debt at year-end 1994. The estimated book
value of the Bank's long-term debt at December 31, 1993 of $750,000 was equal to
the fair value as the amount of interest paid fluctuated with market interest
rates.
Management is concerned that reasonable comparability of SFAS No. 107
disclosures between financial institutions may not be likely due to the wide
range of permitted valuation techniques and numerous estimates which must be
made given the absence of active secondary markets for many of the financial
instruments. This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values.
16. Financial
Instruments
with
Off-Balance
Sheet Risk
In the normal course of business, Intercontinental is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
commercial and standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the Consolidated Balance Sheet. The contract or notional amounts
of these instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments. Intercontinental
determines each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation. Collateral held varies but
may include cash deposits, marketable securities, accounts receivable,
inventory, equipment and real estate. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers.
Commitments to extend credit are legally binding agreements to lend to a
customer according to the terms and conditions of the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. At December 31, 1994 and 1993, unused commitments to
extend credit totaled $51 million and $50 million, respectively, substantially
all of which were secured. Of the $51 million at year-end 1994, $2.1 million
were to related parties. Since many of the commitments are expected to expire
without being fully drawn upon, the total commitment amount does not necessarily
represent future cash requirements. At December 31, 1994 and 1993, the estimated
fair value of these commitments of $317,000 and $169,000, respectively, was
based on fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present creditworthiness
of the counterparties.
The Bank issues commercial letters of credit to facilitate foreign and
domestic trade transactions. In general, commercial letters of credit are short-
term commitments used to finance commercial contracts for the shipment of goods.
Under these instruments, the Bank substitutes its own creditworthiness for that
of the customer by promising to pay a third party beneficiary under certain
contractual conditions. Intercontinental's risk in these transactions is reduced
because the contracts are generally of short duration and are frequently
collateralized by the merchandise being shipped or other assets of the borrower.
At
INTERCONTINENTAL BANK AND SUBSIDIARIES 36
<PAGE>
December 31, 1994, commercial letters of credit totaled $2.8 million, of
which $259,000 were secured. Commercial letters of credit at December 31, 1993
totaled $4.8 million, of which $62,000 were secured. These commitments generally
extend for a period not to exceed six months. At December 31, 1994 and 1993, the
estimated fair value of these commercial letters of credit was $14,000 and
$24,000, respectively, which was based on fees currently charged to enter into
similar agreements or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of, or payment by, a customer to a third party. The
Bank holds various types of collateral supporting those commitments for which
collateral is deemed necessary. At December 31, 1994, standby letters of credit
were $13 million, of which $4.6 million were secured. Standby letters of credit
at December 31, 1993 totaled $11 million, of which $4.7 million were secured.
These commitments generally extend for one year. At December 31, 1994 and 1993,
the estimated fair value of $136,000 and $107,000, respectively, of these
standby letters of credit was determined using the same method as the commercial
letters of credit described above.
17. Selected
Quarterly
Financial
Information
(UNAUDITED)
The following represents selected quarterly information for the years 1994
and 1993:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT 1994 1993
PER COMMON SHARE) Fourth Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Highlights
Interest income................ $18,322 $17,090 $16,141 $15,581 $14,853 $14,295 $14,073 $13,814
Interest expense............... 5,832 5,170 4,701 4,641 4,382 4,227 4,201 4,311
Net interest income............ 12,490 11,920 11,440 10,940 10,471 10,068 9,872 9,503
Provision for credit losses.... 300 175 51 152 151 287 256 257
Other income................... 3,317 3,862 2,219 3,570 3,921 4,984 3,050 2,686
Other expenses................. 9,609 9,726 9,890 9,583 9,963 10,498 8,734 8,766
Provision for income
taxes........................ 2,206 2,242 1,236 1,777 1,573 1,542 1,314 1,234
Income before cumulative
effect of change in
accounting principle......... 3,692 3,639 2,482 2,998 2,705 2,725 2,618 1,932
Cumulative effect of
change in accounting
principle.................... 1,112
Net income..................... 3,692 3,639 2,482 2,998 2,705 2,725 2,618 3,044
Common Stock Highlights
Income before cumulative
effect of change in
accounting principle......... $ .52 $ .52 $ .35 $ .43 $ .39 $ .39 $ .38 $ .28
Cumulative effect of
change in accounting
principle.................... .16
Net income..................... .52 .52 .35 .43 .39 .39 .38 .44
Cash dividends declared........ .09 .09 .08 .08 .08 .08 .05 .05
Common stock closing
prices:
High........................ 20.00 22.25 22.50 20.00 20.00 18.50 18.00 18.00
Low......................... 18.25 19.50 18.50 18.25 18.25 15.63 15.00 14.25
End of period............... 18.25 19.75 22.25 18.50 20.00 18.50 16.00 18.00
</TABLE>
INTERCONTINENTAL BANK AND SUBSIDIARIES 37
<PAGE>
18. Subsequent
Event
In November 1994, Intercontinental agreed to sell two banking facilities and
their related deposits. Deposits in these two banking offices totaled $32
million subsequent to year-end 1994. It is anticipated that these sales will be
consummated in the second quarter of 1995 and will result in a pretax gain of
approximately $2 million.
Report of Independent Certified Public Accountants
To the Shareholders and Directors of Intercontinental Bank:
We have audited the accompanying consolidated balance sheet of
Intercontinental Bank (a Florida corporation) and subsidiaries (the "Bank") as
of December 31, 1994 and 1993, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Bank'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 financial statements referred to above present fairly,
in all material respects, the financial position of Intercontinental Bank and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, the Bank changed its
method of accounting for investment securities effective January 1, 1994 and its
method of accounting for income taxes effective January 1, 1993.
ARTHUR ANDERSEN LLP
Miami, Florida
January 18, 1995
INTERCONTINENTAL BANK AND SUBSIDIARIES 38
<PAGE>
Directors and Senior Officers
Board of Directors
William H. Allen, Jr.
CHAIRMAN OF THE BOARD
Kathleen A. Assaf
PRIVATE INVESTOR
Teo A. Babun, Jr.
PRESIDENT AND CEO,
T. BABUN GROUP, INC.
Walter L. Banks
PRESIDENT, LAGO MAR PROPERTIES
Joe Ann Batcheller
VICE CHAIRMAN OF THE BOARD,
MIAMI HEART RESEARCH INSTITUTE
Patrick J. Cesarano
DIRECTOR EMERITUS,
RYDER SYSTEM, INC.
George M. Corrigan
VICE CHAIRMAN OF THE BOARD
Edward W. Easton
PRESIDENT, EASTON-BABCOCK &
ASSOCIATES, INC.
*Nathaniel B. Elkins
PRIVATE INVESTOR
Phillip Frost, M.D.
CHAIRMAN OF THE BOARD,
IVAX CORPORATION
Gerald N. Gaston
VICE CHAIRMAN OF THE BOARD
AND PRESIDENT, AMERICAN
BANKERS INSURANCE GROUP
B.B. Goldstein
CONSULTANT
Arthur J. Hill
MANAGING DIRECTOR OF PUBLIC FINANCE,
PRUDENTIAL SECURITIES, INC.
Jack Langer
DIRECTOR, NUI CORPORATION
Charles E. Largay
CHAIRMAN OF THE BOARD AND PRESIDENT,
TALLOWMASTERS
Neil E. Leach
PRESIDENT, FRANCHISE SERVICE CORP.
*Augustus C. Long
RETIRED CHAIRMAN OF THE BOARD,
TEXACO INC.
Michael E. Maroone
OWNER AND OPERATOR OF EIGHT
AUTOMOBILE AND TRUCK FRANCHISES
W. Sloan McCrea
PRIVATE INVESTOR
Ellen Whiteside McDonnell
CHAIRMAN OF THE BOARD,
BISCAYNE KENNEL CLUB, INC.
William L. Morrison
PRESIDENT
Marshal E. Rosenberg, Ph.D.
PRESIDENT, THE MARSHAL E.
ROSENBERG ORGANIZATION, INC.
Jacqueline Simkin
VICE CHAIRMAN OF THE BOARD AND
CEO, DENVER BRICK COMPANY
Stanley G. Tate
PRINCIPAL, TATE ENTERPRISES
J. Frost Walker, III, Esq.
ATTORNEY
Dr. Herbert A. Wertheim
PRESIDENT, BRAIN POWER INCORPORATED
*DIRECTOR EMERITUS
Senior Officers
William H. Allen, Jr.
CHAIRMAN OF THE BOARD
George M. Corrigan
VICE CHAIRMAN OF THE BOARD
William L. Morrison
PRESIDENT
Charles A. Arnett
EXECUTIVE VICE PRESIDENT
John A. Baron
EXECUTIVE VICE PRESIDENT
Thomas E. Beier
EXECUTIVE VICE PRESIDENT
AND TREASURER
Thomas B. Brady
EXECUTIVE VICE PRESIDENT
Hugo A. Castro
EXECUTIVE VICE PRESIDENT
Winthrop F. Davis
EXECUTIVE VICE PRESIDENT
Walter E. Howard
EXECUTIVE VICE PRESIDENT
John H. Lubera
EXECUTIVE VICE PRESIDENT
Phillip W. Py
EXECUTIVE VICE PRESIDENT
Bruce P. Steinberger
EXECUTIVE VICE PRESIDENT
John C. Waldron
EXECUTIVE VICE PRESIDENT
Mario J. Aedo
SENIOR VICE PRESIDENT
Stuart S. Bernstein
SENIOR VICE PRESIDENT
Donna V. Branse
SENIOR VICE PRESIDENT
Jack A. Furman
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND CORPORATE SECRETARY
Karen B. Gilmore
SENIOR VICE PRESIDENT
Rachelle E. Golub
SENIOR VICE PRESIDENT
Loren H. Hoeltke
SENIOR VICE PRESIDENT
Michael J. Orozco
SENIOR VICE PRESIDENT
Michael J. Tange
SENIOR VICE PRESIDENT
William C. Theodore
SENIOR VICE PRESIDENT
Subbarao Uppaluri
SENIOR VICE PRESIDENT
INTERCONTINENTAL BANK AND SUBSIDIARIES 39
<PAGE>
Branch Offices and Corporate Information
Branch Offices
Dade County
200 Southeast First Street
Miami, Florida 33131
1101 Brickell Avenue
Miami, Florida 33131
3663 Southwest Eighth Street
Miami, Florida 33135
8717 Coral Way
Miami, Florida 33165
3899 Northwest Seventh Street
Miami, Florida 33126
2500 Northwest 72 Avenue
Miami, Florida 33122
7208 Northwest 72 Avenue
Miami, Florida 33166
240 Crandon Boulevard
Key Biscayne, Florida 33149
2701 Ponce de Leon Boulevard
Coral Gables, Florida 33134
1533 Sunset Drive
Coral Gables, Florida 33143
1325 West 49 Street
Hialeah, Florida 33012
2100 West 76 Street
Hialeah, Florida 33016
930 Washington Avenue
Miami Beach, Florida 33139
9544 Harding Avenue
Surfside, Florida 33154
12700 Biscayne Boulevard
North Miami, Florida 33181
501 Northeast 167 Street
North Miami Beach, Florida 33162
1600 Northeast Miami Gardens Drive
North Miami Beach, Florida 33179
Broward County
200 Northeast Third Avenue
Fort Lauderdale, Florida 33301
2600 East Commercial Boulevard
Fort Lauderdale, Florida 33308
6401 West Commercial Boulevard
Tamarac, Florida 33319
6260 Powerline Road
Fort Lauderdale, Florida 33309
5100 North Dixie Highway
Oakland Park, Florida 33334
8211 West Broward Boulevard
Plantation, Florida 33324
1401 University Drive
Coral Springs, Florida 33071
Palm Beach County
302 Plaza Real
Boca Raton, Florida 33432
7000 West Palmetto Park Road
Boca Raton, Florida 33433
Mortgage Banking Affiliate
Pan American Mortgage Corp.
200 Southeast First Street
Miami, Florida 33131
Corporate Information
Corporate Headquarters
200 Southeast First Street
Miami, Florida 33131
305/377-6900
Transfer Agent and Registrar
Mellon Securities Trust Company
120 Broadway
33rd Floor
New York, New York 10271
Independent Certified
Public Accountants
Arthur Andersen LLP
One Biscayne Tower
Suite 2100
Miami, Florida 33131
Common Stock Listing
Trades on The Nasdaq
Stock Market
Symbol: ICBK
Financial Publications
Other financial publications may
be obtained by writing:
Intercontinental Bank
Attention: Treasurer
200 Southeast First Street
Suite 800
Miami, Florida 33131
INTERCONTINENTAL BANK AND SUBSIDIARIES 40
<PAGE>
EXHIBIT 8
<PAGE>
INTERCONTINENTAL BANK
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 26, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Intercontinental Bank ("Intercontinental"), a Florida state-chartered
commercial bank, will be held at the Hyatt Regency Miami, 400
Southeast Second Avenue, Miami, Florida, at 10:00 A.M. (Eastern
Daylight Savings Time), on Wednesday, April 26, 1995 (the "Annual
Meeting"), for the following purposes, which are more completely set
forth in the accompanying proxy statement:
1. To elect a total of 24 Directors to serve until the next
Annual Meeting of Shareholders or until their respective
successors are duly elected and qualified;
2. To authorize the Board of Directors during the year
following the Annual Meeting to increase the number of Directors
by not more than one and to appoint a person to fill the
resulting vacancy;
3. To ratify and approve the appointment of Arthur Andersen
LLP as Intercontinental's independent auditors for the fiscal
year ending December 31, 1995; and
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment thereof.
The Board of Directors has fixed March 10, 1995 as the record date
for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting. Only holders of record of Intercontinental
common stock and preferred stock at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting or at
any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED
STATES. IN THE EVENT YOU DECIDE TO ATTEND THE ANNUAL MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
March 30, 1995 THOMAS E. BEIER
Executive Vice President and
Chief Financial Officer
INTERCONTINENTAL BANK WILL PROVIDE A COPY OF ITS ANNUAL DISCLOSURE
STATEMENT AS REQUIRED BY 12 C.F.R. PART 350 UPON WRITTEN REQUEST TO
THOMAS E. BEIER, INTERCONTINENTAL BANK, 200 SOUTHEAST FIRST STREET,
MIAMI, FLORIDA 33131 - TELEPHONE 305/377-6900.
<PAGE>
INTERCONTINENTAL BANK
200 Southeast First Street
Miami, Florida
305/377-6900
_______________
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1995
This proxy statement and the enclosed proxy are furnished to the
shareholders of Intercontinental Bank ("Intercontinental" or the
"Bank"), a Florida state-chartered commercial bank, in connection
with the solicitation of proxies by the Bank's Board of Directors for
use at the Annual Meeting of Shareholders to be held at the Hyatt
Regency Miami, 400 Southeast Second Avenue, Miami, Florida, at 10:00
A.M. (Eastern Daylight Savings Time), on Wednesday, April 26, 1995,
and at any adjournment thereof (the "Annual Meeting"). This proxy
statement is first being mailed to shareholders of Intercontinental on
or about March 30, 1995.
A shareholder may revoke his or her proxy at any time prior to its
use. The form of proxy provides a space for a shareholder to withhold
his or her vote for each of the nominees to the Board of Directors if he
or she chooses to do so. Each shareholder is urged to indicate the
way he or she wishes to vote on each matter in the space provided.
If no space is marked, it will be voted by the persons therein named
at the Annual Meeting (a) FOR the election of Directors as set
forth below; (b) FOR the authorization to the Board of Directors to
increase the number of Directors by not more than one and appoint a
person to fill the resulting v a c a n cy; (c) FOR the ratification
and approval of the appointment of Arthur Andersen LLP as
Intercontinental's independent auditors; and (d) in their discretion
upon such other business as may properly come before the Annual Meeting.
Proxies are being solicited on behalf of the Board of Directors of the
Bank. The Bank will bear the cost of the solicitation of proxies
and will reimburse brokerage houses and other custodians,
fiduciaries and nominees for their expenses in sending
solicitation material to their principals. In addition to the
solicitation of proxies by mail, proxies may also be solicited by
the Directors, officers and employees of the Bank by telephone,
facsimile transmission and in person. Directors, officers and employees
of the Bank who solicit proxies will not receive additional
compensation.
All shares of Intercontinental common stock, $2.00 par value, ("Common
Stock") and Intercontinental Series A preferred stock, having no par
value, ("Preferred Stock") of Intercontinental represented by valid
proxies received pursuant to this solicitation, and not revoked, will
be voted at the Annual Meeting. The execution of a proxy will in no
way affect a shareholder's right to attend the Annual Meeting and to
vote in person. A proxy may be revoked at any time before it is used
either by written revocation received by Intercontinental prior to the
Annual Meeting or in person at the Annual Meeting.
On the record date for the Annual Meeting, the close of business
on March 10, 1995, Intercontinental had issued and outstanding
6,919,975 shares of Common Stock and 350,000 shares of Preferred Stock.
Each share of Common Stock and Preferred Stock held as of the record
date entitles the holder thereof to one vote on all matters
<PAGE>
to be considered at the Annual Meeting. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of
Common Stock and Preferred Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum for the transaction of
business at the Annual Meeting. In the event there are not
sufficient votes to constitute a quorum or to approve any of the
matters to be voted upon at the Annual Meeting, the Annual Meeting may
be adjourned in order to permit further solicitation of proxies.
OWNERSHIP OF EQUITY SECURITIES
Security Ownership by Principal Holders of Common Stock and Preferred Stock
To the best knowledge of Intercontinental, the following
persons, as of March 10, 1995, are the only persons who may be deemed
to be beneficial owners of more than five percent of any class of
Intercontinental's voting securities.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Title of Class Name and Address of Beneficial Owner Ownership (1) of Class (2)
<S> <C> <C> <C>
Common Stock Michael Weintraub, individually and as 1,078,338 (3)(4)(5) 15.6
Co-Trustee Under the Joseph Weintraub 1988
Revocable Trust Agreement dated June 14,
1988, as reformed
c/o Suite 901
200 Southeast First Street
Miami, Florida 33131
Common Stock Phillip Frost, M.D. 600,380 (8) 8.7
8800 N.W. 36th Street
Miami, Florida 33178
Common Stock Hortense Weintraub 570,477 (5) 8.3
c/o Suite 901
200 Southeast First Street
Miami, Florida 33131
Common Stock NationsBank of Florida, N.A., as Trustee 506,147 (3)(6) 7.3
and as Co-Trustee Under the Joseph
Weintraub 1988 Revocable Trust Agreement
dated June 14, 1988, as reformed
P.O. Box 4899
Atlanta, Georgia 30302
2
<PAGE>
Common Stock Miles Gauntt 452,873 (7) 6.6
c/o Suite 901
200 Southeast First Street
Miami, Florida 33131
Common Stock Herbert A. Wertheim 363,800 (9) 5.3
Brain Power Incorporated
4470 Southwest 74 Avenue
Miami, Florida 33155
Preferred Michael Weintraub, as Co-Trustee Under the 350,000 (3) 100.0
Stock Joseph Weintraub 1988 Revocable Trust
Agreement dated June 14, 1988, as reformed
200 Southeast First Street
Miami, Florida 33131
Preferred NationsBank of Florida, N.A. 350,000 (3) 100.0
Stock as Co-Trustee Under the Joseph Weintraub
1988 Revocable Trust Agreement dated June
14, 1988, as reformed
P.O. Box 4899
Atlanta, Georgia 30302
</TABLE>
(1) In each case, the nature of ownership is direct and
includes sole voting and investment powers, unless otherwise
indicated.
(2) Percent of class owned is calculated based on the number of
shares issued and outstanding. None of the persons named in
this table has options, warrants or rights to acquire
Intercontinental shares.
(3) Mr. Michael Weintraub, son of the late Mr. Joseph
Weintraub, and NationsBank of Florida, N.A. ("NationsBank") are
Co-Trustees Under the Joseph Weintraub 1988 Revocable Trust
Agreement dated June 14, 1988, as reformed (the "Trust"). Mr.
Michael Weintraub and NationsBank share equally in all voting
and dispositive rights with respect to the Common Stock and
Preferred Stock owned directly by the Trust. The Trust owns
directly 438,586 shares of Common Stock and 350,000 shares of
Preferred Stock. Mr. Michael Weintraub disclaims beneficial
ownership of all shares of Common Stock not held directly by
him.
(4) Mr. Michael Weintraub is President and Chairman of the Board of
Gibson Security Corp. ("Gibson") and President and Chairman
of the Board of Harrison-Gibson, Inc. ("Harrison-Gibson").
Mr. Weintraub shares voting and dispositive rights over the
Common Stock owned directly by Harrison-Gibson and
3
<PAGE>
Gibson with the other directors of those companies. Gibson,
97.6 percent of whose outstanding common stock is owned by
the Trust, owns directly 337,902 shares of Common Stock.
Harrison-Gibson, 100 percent of whose outstanding common
stock is owned by Gibson, owns directly 3,621 shares of Common
Stock. Mr. Michael Weintraub disclaims beneficial ownership
of all shares of Common Stock not held directly by him.
(5) Mr. Michael Weintraub is a Trustee and President of the Joseph
Weintraub Family Foundation, Inc. (the "Foundation") which
owns directly 111,350 shares of Common Stock. By reason of
Mr. Weintraub's position as a Trustee and President of the
Foundation, he may be deemed to exercise control over these
shares of Common Stock. Mr. Michael Weintraub and his wife own
directly 186,834 shares and 45 shares, respectively, of Common
Stock. Mr. Weintraub disclaims beneficial ownership of the
shares of Common Stock owned by his wife. Not included in
the above are 228,954 shares (3.3 percent of the class) of
Common Stock owned directly by Mrs. Hortense Weintraub (Mr.
Michael Weintraub's mother), and 53,820 shares (.8 percent of
the class) of Common Stock owned directly and indirectly through
a trust by Mrs. Joanne Gauntt (Mr. Michael Weintraub's
sister). Mr. Michael Weintraub disclaims beneficial ownership
of the shares of Common Stock beneficially owned by his mother
and sister. In addition to the shares of Common Stock owned
directly by Mrs. Hortense Weintraub, she may be deemed to own
beneficially: (i) the 3,621 shares of Common Stock owned
directly by Harrison-Gibson by reason of her position as a
Director and Vice President and (ii) the 337,902 shares of
Common Stock owned directly by Gibson by reason of her position
as a Director and Vice President.
(6) Includes 67,561 shares of Common Stock held directly by
trusts (other than the Trust identified in Note 3 above), of
which NationsBank is Trustee. NationsBank as Trustee has sole
voting rights with respect to these shares. It shares
dispositive rights with respect to 25,036 of these shares and
has sole dispositive rights with respect to 42,525 of these
shares. The shares of Common Stock owned indirectly by the
Trust through Gibson and Harrison-Gibson described in (4) above
are not included herein.
(7) Mr. Miles Gauntt, a nephew of Mr. Michael Weintraub and a
grandson of Mrs. Hortense Weintraub, may be deemed to own
beneficially 452,873 shares of Common Stock because he is a
Director of Gibson and Harrison-Gibson and a Trustee of the
Foundation. Mr. Gauntt disclaims beneficial ownership of these
shares.
(8) Includes 586,701 shares of Common Stock owned directly by
Frost-Nevada, Limited Partnership. As the sole limited
partner of Frost-Nevada, Limited Partnership and the sole
shareholder, Director and officer of Frost-Nevada
Corporation, which is the sole general partner of
Frost-Nevada, Limited Partnership, Dr. Frost has the power to
vote or direct the vote and dispose or direct the disposition of
these shares. Dr. Frost's wife indirectly owns 1,250 shares of
Common Stock which are included in this table. Dr. Frost
disclaims beneficial ownership of the shares of Common Stock
owned by his wife.
(9) All 363,800 shares of Common Stock are held jointly with Dr.
Wertheim's wife.
4
<PAGE>
Security Ownership by Management
To the best knowledge of Intercontinental, the following table sets
forth, as of March 10, 1995, as to each class of equity securities of
Intercontinental, the number and percent by class of shares of each such
class beneficially owned by each Director and nominee for Director and
by all Directors, nominees for Director and principal officers of
Intercontinental as a group. Other than as indicated below,
to the best of Intercontinental's knowledge, no Director will be
acting as a nominee and voting the shares of another shareholder.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Title of Class Name of Beneficial Owner Ownership (1)(2) of Class (2)
<S> <C> <C> <C>
Common William H. Allen, Jr. 133,850 (3) 1.91
Common Kathleen A. Assaf 12,394 (4) *
Common Teo A. Babun, Jr. 1,790 (5) *
Common Walter L. Banks 7,000 *
Common Joe Ann Batcheller 127,975 (6) 1.85
Common George M. Corrigan 27,387 *
Common Edward W. Easton 19,900 (7) *
Common Phillip Frost, M.D. 600,380 (8) 8.68
Common Gerald N. Gaston 1,000 *
Common B. B. Goldstein 6,000 *
Common William H. Hadler 36,488 (9) *
Common Arthur J. Hill 500 (10) *
Common Jack Langer 16,850 (11) *
Common Charles E. Largay 54,191 (12) *
Common Neil E. Leach 25,525 *
Common Michael E. Maroone 5,000 (13) *
Common W. Sloan McCrea 36,543 (14) *
Common Ellen Whiteside McDonnell 1,000 *
Common William L. Morrison 189,757 (15) 2.70
Common Marshal E. Rosenberg, Ph.D. 33,391 (16) *
Common Jacqueline Simkin 252,230 3.64
Common Stanley G. Tate 10,464 (17) *
Common J. Frost Walker, III 6,600 *
Common Herbert A. Wertheim 363,800 (18) 5.26
All Directors and principal
Common officers as a group (35 persons) 2,259,186 30.97
</TABLE>
* Less than 1 percent of the class.
5
<PAGE>
(1) In each case, the nature of ownership is direct and
includes sole voting and investment powers, unless otherwise
indicated.
(2) Number of shares and percent of class owned are calculated
based on the sum of (a) the number of shares issued and
outstanding and (b) for each individual or for the group, the
number of shares subject to options to acquire Common Stock
which are presently exercisable or exercisable within 60 days of
March 10, 1995 for that individual or the group.
(3) Includes options to purchase 98,850 shares of Common Stock which
are presently exercisable.
(4) All 12,394 shares of Common Stock are held jointly with Mrs.
Assaf's husband.
(5) Includes 290 shares of Common Stock held by a trust for which
Mr. Babun is a Trustee.
(6) Includes 4,563 shares owned by Mrs. Batcheller's husband
as to which Mrs. Batcheller disclaims beneficial ownership,
12,682 shares held by the estate of Mrs. Batcheller's mother and
18,628 shares held by the estate of Mrs. Batcheller's father.
Mrs. Batcheller is the Personal Representative for each of these
estates.
(7) Includes 4,900 shares of Common Stock in a pension plan of
which Mr. Easton is the sole Trustee and sole beneficiary and
9,000 shares owned directly by DSE Investments of which Mr.
Easton is the President.
(8) Includes 586,701 shares of Common Stock owned directly by
Frost-Nevada, Limited Partnership. As the sole limited
partner of Frost-Nevada, Limited Partnership and the sole
shareholder, Director and officer of Frost-Nevada
Corporation, which is the sole general partner of
Frost-Nevada, Limited Partnership, Dr. Frost has the power to
vote or direct the vote and dispose or direct the disposition of
these shares. Dr. Frost's wife indirectly owns 1,250 shares of
Common Stock which are included in this table. Dr. Frost
disclaims beneficial ownership of the shares of Common Stock
owned by his wife.
(9) Includes 808 shares registered in the name of Suburban
Centers of Wisconsin, Inc., wholly owned by Mr. Hadler; 1,617
shares registered in the name of Suburban Centers, Inc.,
wholly owned by Mr. Hadler; 808 shares registered in the name
of Indianola Plaza, wholly owned by Mr. Hadler; and 19,481
shares registered in the name of Westerville Square, Inc.,
50 percent of whose outstanding common stock is owned by Mr.
Hadler. Mr. Hadler is President of all of the foregoing
corporations. Also includes 121 shares registered in the
name of Dorothea A. Hadler, his wife. Mr. Hadler disclaims
beneficial ownership of all shares of Common Stock not held
directly by him.
(10) All 500 shares of Common Stock are held jointly with Mr. Hill's
wife.
(11) Includes 7,150 shares of Common Stock owned by Mr. Langer's
wife as to which Mr. Langer disclaims beneficial ownership.
6
<PAGE>
(12) Includes 25,155 shares of Common Stock held by a trust for the
benefit of Mr. Largay's wife.
(13) All 5,000 shares of Common Stock are in a retirement plan of
which Mr. Maroone is the sole Trustee and sole beneficiary.
(14) Includes 766 shares of Common Stock held by the McCrea
Foundation, a charitable foundation of which Mr. McCrea is
President and a Director, and 600 shares owned directly
by Mr. McCrea's wife. Mr. McCrea disclaims beneficial ownership
of the shares owned by his wife.
(15) Includes options to purchase 97,980 shares of Common Stock
which are presently exercisable, 67,977 shares held by
various trusts of which Mr. Morrison is a Trustee and
1,000 shares held by Mr. Morrison's wife as to which Mr.
Morrison disclaims beneficial ownership.
(16) Includes 519 shares of Common Stock owned by Dr.
Rosenberg's wife and daughter as to which Dr. Rosenberg
disclaims beneficial ownership and 32,872 shares in a
pension plan of which Dr. Rosenberg is the sole Trustee and
sole beneficiary.
(17) Includes 1,000 shares of Common Stock in a trust of which
Mr. Tate is the sole Trustee and sole beneficiary.
(18) All 363,800 shares of Common Stock are held jointly with Dr.
Wertheim's wife.
Under federal securities law, Intercontinental's Directors, its
principal officers and any persons beneficially owning more than 10
percent of the Common Stock and Preferred Stock are required to report
their ownership of such stock and any changes in such ownership
to the Federal Deposit Insurance Corporation ("FDIC") and to
Intercontinental. Specific due dates for these reports have been
established and the Bank is required to report in this proxy statement
any failure to file by these dates during 1994. Based solely upon a
review of these reports and amendments thereto furnished to the Bank
during its most recent fiscal year and on written representations
received from the Directors and principal officers of the Bank and
certain of those persons who may be deemed to own beneficially
more than 10 percent of the Common Stock and the Preferred Stock, all
of these filing requirements were satisfied by the Bank's Directors,
principal officers and persons beneficially owning more than 10 percent
of the Common Stock and Preferred Stock, except that Mr. Easton filed
one incomplete Form F-8.
PROPOSAL 1 - ELECTION OF DIRECTORS
Description of Directors and Nominees for Director
Pursuant to Intercontinental's Bylaws, the number of Directors of the
Bank has been set at 24. As provided in the Bank's Bylaws, each
Director is elected at each annual meeting of shareholders and shall
hold office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. In accordance with
Florida law, Directors are elected by a plurality of the votes
cast at a meeting of shareholders by the shareholders entitled to vote
in the election. For these purposes, all shares of Common Stock and
Preferred Stock vote together as a single class. It is expected that
each of these nominees will be able to serve, but if before the
election it
7
<PAGE>
develops that any of the nominees are unavailable or decline to serve,
the persons named in the accompanying proxy will vote for the election
of such substitute nominee or nominees as management may recommend.
Set forth below is information concerning each nominee for Director.
No arrangement or understanding exists between any Director or any
nominee for Director and any other person pursuant to which he or she
was or is to be nominated as a Director.
UNLESS THE PROXY IS MARKED TO INDICATE THAT SUCH AUTHORIZATION IS
EXPRESSLY WITHHELD, THE PERSONS NAMED IN THE ENCLOSED PROXY INTEND
TO VOTE THE SHARES AUTHORIZED THEREBY FOR THE ELECTION OF THE
FOLLOWING 24 NOMINEES.
<TABLE>
<CAPTION>
Name Age Director Since Position with Intercontinental
<S> <C> <C> <C>
William H. Allen, Jr. 59 1987 Director, Chairman of the Board
George M. Corrigan 67 1994 Director, Vice Chairman
William L. Morrison 44 1987 Director, President
Kathleen A. Assaf 46 1995 Director
Teo A. Babun, Jr. 47 1993 Director
Walter L. Banks 51 1992 Director
Joe Ann Batcheller 62 1987 Director
Edward W. Easton 50 1987 Director
Phillip Frost, M.D. 58 1991 Director
Gerald N. Gaston 62 1993 Director
B.B. Goldstein 75 1994 Director
William H. Hadler 74 Nominee for Director
Arthur J. Hill 46 1993 Director
Jack Langer 58 1987 Director
Charles E. Largay 74 1994 Director
Neil E. Leach 56 1987 Director
Michael E. Maroone 41 1993 Director
W. Sloan McCrea 82 1991 Director
Ellen Whiteside McDonnell 84 1991 Director
Marshal E. Rosenberg, Ph.D. 58 1987 Director
Jacqueline Simkin 52 1987 Director
Stanley G. Tate 66 1991 Director
J. Frost Walker, III 55 1991 Director
Herbert A. Wertheim 52 1987 Director
</TABLE>
The following information refers, in part, to Atico Financial
Corporation ("AFC"), the former holding company of Intercontinental,
which, in March 1991, was merged with and into Intercontinental, with
Intercontinental the surviving entity.
8
<PAGE>
William H. Allen, Jr.: Mr. Allen was elected Chairman of the Board in
1987. He is a member of the Executive and Community Reinvestment
Act/Compliance ("CRA") Committees. Mr. Allen became Chairman of the
Board of Pan American Mortgage Corp. ("PAMCO"), a subsidiary of
Intercontinental, in 1988. He is a Director of American Bankers
Insurance Group, WinsLoew Furniture, Inc. and the Biscayne Kennel
Club and President of the Miami Heart Research Institute.
George M. Corrigan: Mr. Corrigan was elected Vice Chairman of the
Board of Directors in August 1994. Mr. Corrigan has been employed
by Intercontinental since the July 1, 1994 merger of Interstate Bank
Holding Company ("Interstate") and The Bank of Coral Gables
("BOCG") into Intercontinental. From 1991 until the merger with
Intercontinental, Mr. Corrigan was Chairman of the Boards of Interstate
and BOCG. From 1982 to 1991, he was Vice Chairman of each entity.
William L. Morrison: Mr. Morrison was elected President and a Director
in 1987. Mr. Morrison is a member of the Executive, Loan and CRA
Committees. He was elected a Director of PAMCO in 1987.
Kathleen A. Assaf: Mrs. Assaf was elected to the Board of
Directors in February 1995. She is a private investor. Mrs. Assaf
was Chairman of Boca Bancorp, Inc. ("BBI") from 1993 and a
Director of BBI's subsidiary, Boca Bank, from 1984 until the
December 30, 1994 acquisition of these entities by
Intercontinental.
Teo A. Babun, Jr.: Mr. Babun was elected to the Board of Directors in
1993. He has been President of the T. Babun Group, Inc., which is
a venture capital organization specializing in management,
manufacturing and marine transportation and consulting, for more than
the past five years.
Walter L. Banks: Mr. Banks was elected to the Board of Directors
in 1992. Mr. Banks is a member of the Audit Committee. He has been
President of Lago Mar Properties, Inc., a resort hotel and club; Walter
Banks Holding Co., a land and commercial development company;
and LM North Development Co., a residential development company, for
more than the past five years. Mr. Banks is a member of the Audit
Committee.
Joe Ann Batcheller: Mrs. Batcheller was elected to the Board of
Directors in 1987 and is a member of the Compensation and CRA
Committees. For more than the past five years, Mrs. Batcheller
has held various positions with the Miami Heart Research Institute
and its predecessor, the Miami Heart Institute. She has been Vice
Chairman since January 1993, President and Chief Executive Officer
from June 1989 until January 1993 and prior to that, she was an
Executive Vice President.
Edward W. Easton: Mr. Easton was elected to the Board of Directors in
1987 and is a member of the Executive Committee. He has been
President of Easton-Babcock & Associates, Inc., which is engaged in
real estate investments, brokerage, management, appraisal and
consulting, since 1974.
Phillip Frost, M.D.: Dr. Frost was elected to the Board of
Directors in 1991 and is a member of the Executive Committee. Dr.
Frost served on AFC's Board of Directors from July 1988 to 1991.
Since 1987, Dr. Frost has been Chairman of the Board and Chief
Executive Officer of IVAX Corporation. Dr. Frost is a Director of
North
9
<PAGE>
American Vaccine, Inc., American Exploration Company, Biochem Pharma,
Inc. and Whitman Medical Corporation and is a member of the Board of
Governors of the American Stock Exchange.
Gerald N. Gaston: Mr. Gaston was elected to the Board of Directors in
1993. He has been President and Vice Chairman of American Bankers
Insurance Group since 1980. Mr. Gaston is a member of the
Compensation and Audit Committees.
B. B. Goldstein: Mr. Goldstein was elected to the Board of Directors
in February 1994 and is a member of the Audit and Loan Committees.
He has been an independent business consultant and advisor since January
1994. For the prior five years, Mr. Goldstein was Vice Chairman of
Commercial Trust Bancorp, Inc. and Commercial Trust Bank until their
merger with Intercontinental on December 31, 1993.
William H. Hadler: Mr. Hadler is a nominee for Director. He was a
Director of BBI and Boca Bank from 1987 until their acquisition on
December 30, 1994 by Intercontinental. Mr. Hadler founded Hadler
Realty of Columbus, Ohio in 1947 and has been actively developing,
constructing and managing commercial property since that time.
Arthur J. Hill: Mr. Hill was elected to the Board of Directors in 1993
and is a member of the CRA Committee. He has been Managing Director of
Public Finance of Prudential Securities, Inc. since May 1993. From 1989
to January 1993, Mr. Hill held various senior level positions at
the U.S. Department of Housing and Urban Development.
Jack Langer: Mr. Langer was elected to the Board of Directors in
1987. He is a member of the Executive and Loan Committees. Mr. Langer
is a private investor. He was President and Chief Executive Officer of
City Gas Company of Florida, which is engaged in the distribution of
natural gas, for more than the past five years until his resignation in
December 1994. Mr. Langer is a Director of NUI Corp.
Charles E. Largay: Mr. Largay was elected to the Board of Directors
in August 1994. For more than the past five years, Mr. Largay has
been Chairman of the Board and President of Tallowmasters, a soap
manufacturing company, and President of Indianwood Development
Co., a real estate development company. He was also a member of the
Boards of Directors of Interstate and BOCG at the time of their merger
into Intercontinental.
Neil E. Leach: Mr. Leach was elected to the Board of Directors in
1987. He is a member of the Compensation and Loan Committees. He has
been President and Chief Executive Officer of Multifocal Rx Lens Labs.,
Inc. and Hurricane Labs., Inc., which are optical lens
laboratories, for more than the past 25 years. He has also been
President and Chief Executive Officer of Franchise Service Corp.,
which owns and operates numerous Blockbuster Video stores throughout the
United States, since 1992.
Michael E. Maroone: Mr. Maroone was elected to the Board of
Directors in 1993. He is a member of the Executive Committee. He
has been Vice President and Chief Operating Officer of various
automobile dealerships and other related companies for more than the
past five years.
10
<PAGE>
W. Sloan McCrea: Mr. McCrea was elected to the Board of Directors in
1991. Mr. McCrea served on AFC's Board of Directors from 1986 to
1991. He is a member of the Compensation Committee. Mr. McCrea is a
private investor.
Ellen Whiteside McDonnell: Mrs. McDonnell was elected to the
Board of Directors in 1991. Mrs. McDonnell served on AFC's Board of
Directors from 1987 to 1991. Prior to her election as Chairman of the
Board of Biscayne Kennel Club, Inc. in February 1990, Mrs. McDonnell
served as Executive Vice President and Secretary of that organization.
For more than the past five years, Mrs. McDonnell has been President of
the Hippodrome Company, the Shores-Park Company and the Biscayne
Foundation.
Marshal E. Rosenberg, Ph.D.: Dr. Rosenberg was elected to the
Board of Directors in 1987. He has been President of The Marshal E.
Rosenberg Organization, Inc., which is engaged in the sale of life,
health and disability insurance, for more than the past five years.
He also has been an adjunct associate professor of the School of
Business Administration at the University of Miami for more than the
past five years. Dr. Rosenberg is a Director of Sterling Healthcare
Group, Inc., a partner and Director of Frost Hanna Acquisition and Frost
Hanna Mergers Group, and a Trustee of the Miami Heart Research Institute
and Mount Sinai Hospital.
Jacqueline Simkin: Ms. Simkin was elected to the Board of
Directors in 1987. She is a member of the Executive and Loan
Committees. Ms. Simkin has been Chairman of the Melhan
Corporation, a restaurant development company, since 1991, and Vice
Chairman of the Board and Chief Executive Officer of the Denver Brick
Company since 1989. For more than the past five years, she also has
been a private investor in both public and privately-held companies.
Stanley G. Tate: Mr. Tate was elected to the Board of Directors in
1991 and is a member of the Executive and Audit Committees. Mr.
Tate served on AFC's Board of Directors from September 1990 to 1991. He
previously served on the Intercontinental Board from 1987 to March
1989. For more than the past five years, Mr. Tate has owned and
managed real estate development and construction companies
operating primarily in South Florida.
J. Frost Walker, III: Mr. Walker was elected to the Board of
Directors in 1991. Mr. Walker served on AFC's Board of Directors
from 1985 to 1991. Mr. Walker is a member of the Executive,
Compensation and Loan Committees. His primary occupation for more than
the past five years has been as a private attorney.
Herbert A. Wertheim: Dr. Wertheim was elected to the Board of
Directors in 1987. He is a member of the Executive, Audit, Loan and
CRA Committees. He has been President and a Director of Brain Power
Incorporated, a leading manufacturer of optical dye and ultrasonic
equipment, for more than the past five years.
Board of Directors Meetings
Intercontinental's Board of Directors held nine meetings during 1994.
Each Director who is standing for re- election attended at least 75
percent of the total number of meetings of the Board of Directors held
during the period for which he or she served as a Director, except
Messrs. Easton and McCrea, Mrs. McDonnell and Dr. Frost. Each
Director who is standing for re-election attended at least 75 percent
of the aggregate of (i) the total number of meetings of the Board of
Directors held during the period for which he or she served as a
Director and
11
<PAGE>
(ii) the total number of meetings held by all committees of the Board on
which he or she served (during the periods that he or she served),
except Messrs. Allen, Easton and McCrea, Ms. Simkin, Mrs. McDonnell and
Drs. Frost and Wertheim. Information about the Board Committees
follows:
o The Audit Committee is composed of five Directors. Its members
are Messrs. Banks, Gaston, Goldstein, Tate and Dr. Wertheim.
The Audit Committee has independent access to the officers and
external auditors of Intercontinental and advises the Board
of Directors on any audit matters. The Audit Committee met four
times during 1994.
o The Executive Committee is composed of ten Directors who
act for the Board of Directors between regularly scheduled
Board meetings. Its members are Messrs. Allen, Easton,
Langer, Maroone, Morrison, Tate, Walker, Ms. Simkin and Drs.
Frost and Wertheim. The Executive Committee met once during
1994.
o The Community Reinvestment Act/Compliance Committee is
composed of five Directors. Its members are Messrs. Allen,
Hill, Morrison, Mrs. Batcheller and Dr. Wertheim. The CRA
Committee met once in 1994.
o The Compensation Committee is composed of five Directors.
Its members are Messrs. Gaston, Leach, McCrea, Walker and Mrs.
Batcheller. The Compensation Committee met five times during
1994.
o The Loan Committee is composed of seven Directors. Its members
are Messrs. Goldstein, Langer, Leach, Morrison, Walker, Ms.
Simkin and Dr. Wertheim. The Loan Committee met 39 times in
1994.
I n t e rcontinental has no standing nominating or other
committees other than those listed above. Intercontinental
Directors who are also officers of Intercontinental do not
receive any additional compensation for their participation on the
Intercontinental Board or any of its Committees. Directors who are not
officers of Intercontinental are paid quarterly at a rate of $10,000
per annum. In addition, each Director is paid $300 for each Committee
meeting attended.
Compensation to Principal Officers
The disclosure of management compensation in this proxy statement
complies with the applicable regulations of the FDIC. The new
regulations on management compensation disclosure previously adopted by
the Securities and Exchange Commission are not yet effective for filings
with the FDIC.
The following table sets forth all cash compensation paid for
services rendered in all capacities to Intercontinental, during its
fiscal year ended December 31, 1994, to each of the five most highly
compensated principal officers whose aggregate cash compensation
exceeded $60,000 and to all principal officers as a group:
12
<PAGE>
<TABLE>
<CAPTION>
Name of Individual
and Number of
Persons in Group Positions In Which Served Compensation
<S> <C> <C>
William H. Allen, Jr. Director and Chairman of the Board
$ 456,000
William L. Morrison Director and President 381,000
Walter E. Howard Executive Vice President 211,000
Thomas B. Brady Executive Vice President 206,000
Bruce P. Steinberger Executive Vice President 191,000
All principal officers
as a group (14 persons) 2,406,000
</TABLE>
The above table includes:
(a) bonuses paid to Messrs. Allen, Morrison, Howard, Brady
and Steinberger and five other principal officers in
respect of their services rendered in 1994 pursuant to
the Intercontinental Bank Performance Bonus Plan;
(b) a car allowance (in annualized amounts ranging from
$6,000 to $7,680) paid to each of the individuals named
above and all other principal officers; and
(c) a $275 monthly payment for each principal officer into
a flexible spending account for use in paying for health
premiums under the Intercontinental Flex Care Plan -
a cafeteria-style insurance plan. Those individuals
electing to waive health insurance coverage under the
Intercontinental Flex Care Plan do not receive this
$275 monthly payment; they receive a flexible spending
amount of $100 per month. All employees of
Intercontinental are eligible for coverage under the
Intercontinental Flex Care Plan.
The above table does not include:
(a) club dues of approximately $43,000 paid on behalf
of all principal officers of which approximately
$32,000 was paid on behalf of Messrs. Allen,
Morrison, Howard, Brady and Steinberger;
(b) approximately $5,300 paid by Intercontinental as the
annual premium on a disability insurance policy purchased
on behalf of Mr. Allen;
(c) certain amounts paid by Intercontinental into the
Intercontinental Bank Retirement Plan (see "Compensation
Pursuant to Plans");
(d) amounts contributed by Intercontinental under
Intercontinental's Executive Retention Plan (see
"Compensation Pursuant to Plans"); and
(e) the value of any stock options exercised pursuant to
any of Intercontinental's stock option plans (see
"Compensation Pursuant to Plans").
Intercontinental has entered into employment agreements with Messrs.
Allen, Morrison and Howard and six other officers (two of whom were
not employed until December 30, 1994) pursuant to which they are
eligible under certain circumstances for annual merit increases in
compensation and bonuses. See "Compensation Pursuant
13
<PAGE>
to Plans." The above table includes all compensation paid in 1994
to Messrs. Allen, Morrison and Howard and three other principal officers
pursuant to these agreements.
Intercontinental also pays premiums on life and travel accident
insurance plans provided for individual principal officers who are
members of the group, which premiums are not included in the amounts set
forth in the above table. These plans do not discriminate in scope,
terms or operation in favor of principal officers of Intercontinental
and are generally available to all salaried employees. No Directors
who are not also employees of Intercontinental participate in any
of Intercontinental's benefit plans. Intercontinental provides free
parking to all of its employees, including its principal officers. The
value of the benefits not itemized above provided by
Intercontinental to its principal officers does not exceed the lesser
of $25,000, or ten percent of the compensation reported in the
above table, for any named individual or $300,000, or ten percent of the
compensation reported in the above table, for the group.
Compensation Pursuant to Plans
Intercontinental 1984 ISO Plan. The Intercontinental Bank
1984 Incentive Stock Option Plan ("Intercontinental 1984 ISO
Plan") is a stock option plan administered by the Board and the
Compensation Committee. The Compensation Committee consists of
five Directors, none of whom is eligible to receive options under any
of Intercontinental's option plans. Intercontinental reserved 325,000
shares of Common Stock for issuance upon exercise of options granted
under the Intercontinental 1984 ISO Plan, which may be either
authorized but unissued shares or treasury shares. Of these 325,000
shares, at December 31, 1994, 172,850 shares have been issued upon the
exercise of options previously granted, 151,650 shares are issuable upon
exercise of options currently outstanding under the Intercontinental
1984 ISO Plan and 500 shares are ineligible for exercise. The
Intercontinental 1984 ISO Plan was established in January 1984 and
was terminated in January 1994. Accordingly, no further options
will be issued thereunder. The most recent options were granted on
August 25, 1993. Such options can be exercised until August 24, 2003.
The average exercise price of unexercised options outstanding at
December 31, 1994 for all employees as a group was $8.48. The
exercise price for options is required to be paid wholly in cash.
Options granted under the Intercontinental 1984 ISO Plan were
intended to qualify as incentive stock options ("ISO") as defined in
Section 422 of the Internal Revenue Code (the "Code"). All key
employees of Intercontinental, as determined by the Board or the
Compensation Committee, were eligible to receive option grants under the
Intercontinental 1984 ISO Plan.
No consideration was required to be paid upon the grant of options.
Each grant, and the terms and conditions of each option granted
(including but not limited to the exercise price, length of option
term, number of options to be granted, and vesting period) were
subject to the sole discretion of the Board and the Compensation
Committee, provided that: (a) the exercise price for options granted
under the Intercontinental 1984 ISO Plan must have been at least 100
percent of the fair market value of the Common Stock on the date of
grant, and no option may have been exercisable for more than ten
years after its date of grant; (b) with limited exceptions, exercise
of options is subject to a requirement of the optionee's continuous
employment by Intercontinental between the date the option was
granted and the date it is exercised; (c) no option may be exercised
until the first anniversary of its date of grant; (d) options granted
after December 31, 1986 qualified as ISOs to the extent that the
aggregate fair market value (determined at the time the option was
granted) of the stock with respect to which such options first
become exercisable by the holder thereof during any calendar year
does not exceed $100,000;
14
<PAGE>
(e) each option granted under the Intercontinental 1984 ISO Plan is
not exercisable while there still is outstanding any incentive stock
option theretofore granted to the same person; and (f) no employee who,
together with members of his or her family and related entities, owned
more than ten percent of the shares of capital stock having voting
power of Intercontinental may have been granted an ISO unless the
exercise price was at least 110 percent of the fair market value of the
Common Stock on the date of grant and the term in which the option
may be exercised was limited to five years from
the date of grant. According to Florida law, Intercontinental's
options must be granted with an exercise price which is the greater of
par value or fair market value on the date of grant. Options granted
under the Intercontinental 1984 ISO Plan are not transferable
except by will or under the laws of descent and distribution. The
plan description in this paragraph is hereafter referred to as
the "ISO Terms and Conditions". Information about stock options
outstanding at December 31, 1994 to principal officers pursuant to the
Intercontinental 1984 ISO Plan follows.
<TABLE>
<CAPTION>
Unexercised Options at December 31, 1994
Number of Average Exercise
Name of Person or Description of Group Shares Covered Price per Share
<S> <C> <C>
William H. Allen, Jr. 16,000 $8.89
William L. Morrison 37,900 7.71
Walter E. Howard 0
Thomas B. Brady 17,200 9.69
Bruce P. Steinberger 4,500 8.22
All principal officers as a group 113,100 9.04
</TABLE>
There were no options granted under the Intercontinental 1984 ISO Plan
to any principal officers during 1994. In 1994, with respect to all
principal officers as a group, options granted under the
Intercontinental 1984 ISO Plan covering 36,200 shares were exercised
with a net value realized of $431,175. Included in that total were
exercises made by the following principal officers: Mr. Allen (options
covering 9,700 shares with a net value realized of $115,613), Mr.
Morrison (options covering 4,000 shares with a net value realized of
$50,000), Mr. Brady (options covering 5,500 shares with a net value
realized of $71,500) and Mr. Steinberger (options covering 2,500 shares
with a net value realized of $30,625).
Intercontinental 1992 ISO Plan. The Intercontinental 1992 Incentive
Stock Option Plan (the "Intercontinental 1992 ISO Plan") is a stock
option plan administered by the Board and the Compensation
Committee. Intercontinental has reserved 400,000 shares of Common
Stock for issuance upon exercise of options granted under the
Intercontinental 1992 ISO Plan, which may be either authorized but
unissued shares or treasury shares. Of these 400,000 shares, at
December 31, 1994, 3,250 have been issued upon the exercise of options
previously granted, 318,500 shares are issuable upon exercise of
options currently outstanding and 78,250 shares are issuable upon
exercise of options which may be granted in the future. The average
exercise price of unexercised options outstanding at December 31, 1994
for all employees as a group was $16.94. No options were exercised by
any principal officers pursuant to the Intercontinental 1992 ISO Plan
during 1994.
15
<PAGE>
Any employee who is determined by the Board or the Compensation
Committee to be a key employee is eligible to receive an option under
the Intercontinental 1992 ISO Plan. There are approximately 60 persons
who may be considered to be key employees eligible to receive
options under the Intercontinental 1992 ISO Plan. Directors who are
also principal officers of Intercontinental participate in the
Intercontinental 1992 ISO Plan. An option granted under the
Intercontinental 1992 ISO Plan is intended to qualify as an ISO within
the meaning of Section 422 of the Code. The Intercontinental 1992 ISO
Plan provides a means whereby selected key employees of
Intercontinental may, as an incentive to become an employee or to
continue to render service to Intercontinental, be given an
opportunity to acquire Common Stock, thereby giving them a proprietary
interest in Intercontinental, increasing their interest in its success
and encouraging them to remain in its employ. The most recent
options were granted on December 30, 1994. Such options can be
exercised until December 29, 2004.
The terms and conditions governing options under the
Intercontinental 1992 ISO Plan are substantially the same as the ISO
Terms and Conditions with respect to the Intercontinental 1984
ISO Plan. The Intercontinental 1992 ISO Plan terminates in 2002.
Information about stock option grants in 1994 and stock options
outstanding at December 31, 1994 to principal officers pursuant to the
Intercontinental 1992 ISO Plan follows.
<TABLE>
<CAPTION>
Total Options Unexercised Options
Granted in 1994 at December 31, 1994
Average
Number of Average Exercise Number of Exercise
Name of Person or Shares Price per Shares Price per
Description of Group Covered Share Covered Share
<S> <C> <C> <C> <C>
William H. Allen, Jr. 0 8,300 $16.75
William L. Morrison 0 8,300 16.75
Walter E. Howard 4,000 18.25 24,000 14.81
Thomas B. Brady 5,000 21.50 22,300 16.40
Bruce P. Steinberger 5,000 21.50 22,500 15.97
All principal officers as a
group 59,400 20.11 171,800 15.50
</TABLE>
Intercontinental NSO Plan. The Intercontinental Bank Non-qualified
Stock Option Plan ("Intercontinental NSO Plan") is a stock option plan
administered by the Board and the Compensation Committee.
Intercontinental has reserved 350,000 shares of Common Stock for
issuance upon exercise of options granted under the
Intercontinental NSO Plan, which may be either authorized but
unissued shares or treasury shares. Of these 350,000 shares, as of
December 31, 1994, 18,000 have been issued upon the exercise of
options previously granted, 213,650 shares are issuable upon
exercise of options currently outstanding and 118,350 shares are
issuable upon exercise of options which may be granted in the
future. The average exercise price of unexercised options outstanding
at December 31, 1994 for all employees as a group was $11.90. The
exercise price for options is required to be paid wholly in cash. No
options were exercised by any principal officers pursuant to the
Intercontinental NSO Plan in 1994. All key employees of
Intercontinental, as determined by the Board or the
16
<PAGE>
Compensation Committee, and persons that Intercontinental seeks to
employ are eligible to receive option grants under the
Intercontinental NSO Plan. There are presently 12 persons who may be
considered to be key employees eligible to receive options under the
Intercontinental NSO Plan.
Options granted under the Intercontinental NSO Plan are not intended
to qualify as incentive stock options under the Code. The
Intercontinental NSO Plan requires that: (i) options be granted at not
less than 80 percent of the fair market value of Common Stock at
the date of grant and for a term of not less than ten years from the
date of grant; (ii) with limited exceptions, options may be exercised
only if the optionee remains continuously employed by
Intercontinental; and (iii) no option may be exercised until the
first anniversary of its date of grant. According to Florida law,
Intercontinental's options must be granted at the greater of par
value or fair market value on the date of grant. The
Intercontinental NSO Plan was established in January 1987 and
terminates in January 2007. The most recent options were granted on
July 22, 1994. Such options can be exercised until July 21, 2004.
Information about stock option grants for 1994 and stock options
outstanding at December 31, 1994 to principal officers pursuant to
the Intercontinental NSO Plan follows.
<TABLE>
<CAPTION>
Total Options Unexercised Options
Granted in 1994 at December 31, 1994
Average
Number of Average Exercise Number of Exercise
Name of Person or Shares Price per Shares Price per
Description of Group Covered Share Covered Share
<S> <C> <C> <C> <C>
William H. Allen, Jr. 15,000 $21.50 99,700 $11.84
William L. Morrison 15,000 21.50 71,800 13.45
Walter E. Howard 0 0
Thomas B. Brady 0 6,500 8.93
Bruce P. Steinberger 0 7,500 8.70
All principal officers as a
group 31,100 21.53 211,100 11.79
</TABLE>
Intercontinental Bank Retirement Plan. The Intercontinental Bank
Retirement Plan (the "Retirement Plan") was established in 1985.
Under the Retirement Plan, an employee of Intercontinental may elect to
defer up to 15 percent of his or her compensation, but in no event
more than the government defined annual contribution maximum (such
amount was $9,240 in 1994), and have Intercontinental pay this amount
into the Retirement Plan for his or her retirement. In addition,
Intercontinental may make certain matching contributions and other
discretionary contributions. Employees may direct the investment of
the funds contributed and allocate them to any combination of eight
investment options, including a money market fund, a fixed income
fund, a balanced fund, two bond funds and three equity funds. The
Retirement Plan is a defined contribution plan, qualifying under
Section 401(k) of the Code, subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), but is not covered by the termination provisions of ERISA
administered by Pension Benefit Guaranty Corporation. The employee is
not taxed on either his or her own or Intercontinental's
17
<PAGE>
contributions until distributions are made to the employee from the
plan. The Retirement Plan is administered by three trustees. The
current trustees are Mr. Thomas E. Beier, Ms. Rachelle E. Golub and Mr.
William L. Morrison, all of whom are employees of Intercontinental.
Every employee who is 21 years of age or older, is employed by
Intercontinental has completed ninety days of service and is not
ineligible because of a break in service is eligible to participate.
Enrollment in the Retirement Plan takes place twice a year. Those
Directors who are not also employees of Intercontinental are not
eligible to participate in the Retirement Plan. The number of
persons eligible to participate in the Retirement Plan was approximately
490 as of December 31, 1994.
Amounts payable under the Retirement Plan will depend upon: (a) the
compensation deferred by the employee and contributed to the
Retirement Plan; (b) employer profit-sharing contributions which,
subject to limitations, match compensation deferred by the employee;
(c) employer discretionary profit-sharing contributions not linked to
employee contributions; (d) other employer contributions which,
subject to limitations, match compensation deferred by the employee;
and (e) other employer discretionary contributions not linked to
employee contributions.
Intercontinental's matching employer profit-sharing contribution
is equal to 100 percent of each participant's contribution to
the Retirement Plan, subject to a maximum of three percent of the
compensation of such individual. In addition, depending on
Intercontinental's performance, Intercontinental may make an additional
profit-sharing contribution of two percent of the compensation
of each participant. The contributions are subject to a graduated
vesting schedule reaching 100 percent upon an employee's completion of
five years of service, are made as soon as administratively possible
after the end of the year, are deemed under the plan to have been
made as of the last day of the preceding year, and are allocated
to a participant's account only if he or she is employed on such
date. There is immediate full and complete vesting for all other
employer and employee contributions. Intercontinental made no
contributions described in (c), (d) and (e) above in 1994.
Under the Retirement Plan, the normal retirement benefit is the
monthly pension which a plan participant may purchase with his or
her account balance when he or she has reached age 65, has completed
ten years of service and has decided to retire. Other terms of
distribution of the account balance are available to a participant at
this time, including a lump-sum distribution. An early retirement
benefit consisting of a participant's account balance is available to a
participant after he or she reaches age 55, has completed ten years of
service and decides to retire. A participant is entitled to the
vested account balance upon disability or termination of employment.
Upon a participant's death, his or her account balance or annuity
payments are distributed to his or her designated beneficiary.
Intercontinental may terminate the Retirement Plan at any time, in which
case a participant's account balance will become 100 percent vested.
There were no distributions pursuant to the Retirement Plan in 1994
to any of the individuals listed in the cash compensation table above
or to any of Intercontinental's current principal officers. A
distribution of approximately $38,000 was made in 1994 to a former
principal officer. The following amounts were contributed by
Intercontinental pursuant to the Retirement Plan in 1994:
18
<PAGE>
Name and Title of Person
William H. Allen, Jr. Chairman of the Board $7,500
William L. Morrison President 7,500
Walter E. Howard Executive Vice President 7,379
Thomas B. Brady Executive Vice President 7,145
Bruce P. Steinberger Executive Vice President 6,442
Executive Retention Plan. In 1990, the Board instituted the Executive
Retention Plan (the "ERP"). Under the ERP, Intercontinental will pay
cash retirement and death benefits to selected key executives.
The Compensation Committee determines who will participate in the
ERP and the level of their benefits. Under this nonqualified,
noncontributory defined contribution plan, Intercontinental contributes
an annual amount, initially set at seven percent of each participant's
base salary, to purchase insurance policies to fund the benefits. The
actual benefits payable to a participant under each policy will be a
function of his or her actuarial factors. Retirement benefits will
commence at age 65 payable over 15 years, with pre-retirement death
benefits payable to his or her beneficiary. Intercontinental
contributes on behalf of Mr. Allen, in addition to the seven percent
of his base salary, (i) a fixed amount of $12,000 annually and (ii)
an additional amount annually which may vary with the level of
interest rates. In 1994, Intercontinental contributed an additional
$15,000 to the ERP pursuant to clause (ii). A distribution of
approximately $32,000 was made in 1994 to a former principal
officer. Contributions by Intercontinental to the ERP were made in 1994
as follows:
Name and Title of Person
William H. Allen, Jr. Chairman of the Board $51,500
William L. Morrison President 18,900
Walter E. Howard Executive Vice President 10,500
Thomas B. Brady Executive Vice President 9,975
Bruce P. Steinberger Executive Vice President 9,100
Intercontinental Performance Bonus Plan. In 1989, the Board of
Directors established the Intercontinental Performance Bonus Plan (the
"Performance Bonus Plan"). Under the Performance Bonus Plan, on or
before March 31 of each year, the Compensation Committee determines
Intercontinental's attainable goal for income before security
transactions and extraordinary items (the "Income Goal") for that
year. If in any fiscal year the Income Goal is met or exceeded, up to
50 percent of that excess amount may be made available for funding the
payment of bonuses under the Performance Bonus Plan. Under the
Performance Bonus Plan, the Chairman of the Board and the President
provide the Compensation Committee with their recommendations as to
those certain key employees who should receive bonuses and the
amount to be considered for each such employee. The Compensation
Committee evaluates these recommendations and presents them to the Board
of Directors which acts on them at its regular meeting. No
participant, however, may receive a bonus in excess of 50 percent of his
or her base compensation. Each participant's bonus is paid in full
in cash within 60 days after the end of the fiscal year. A
participant must, at the time of payment, be employed by
Intercontinental or one of its affiliates. The amounts paid
pursuant to this plan in 1994 to the principal officers are included in
the cash compensation table.
19
<PAGE>
Employment Agreements. Effective January 1, 1994, Intercontinental
entered into employment agreements with Messrs. Allen and Morrison
(each individually, an "Agreement" and collectively, the "Agreements")
each for a term of three years with successive one year automatic
annual extensions unless either party gives 30 days written notice
prior to any annual anniversary of the Agreement of its intention not
to renew the Agreement at its then scheduled expiration. Pursuant
to the Agreements, Mr. Allen and Mr. Morrison will receive minimum
base annual salaries of $325,000 and $270,000, respectively, which
can be increased annually based upon the accomplishment of
performance goals mutually agreed upon by Intercontinental and each of
them and subject to the approval of any increase by the Compensation
Committee. In addition, each is entitled to (i) a car allowance of
$600 per month (which Intercontinental may agree to increase);
(ii) payment by Intercontinental of membership dues and expenses of
clubs (as agreed upon between each of them and Intercontinental);
(iii) participation in current and future incentive bonus plans
adopted or to be adopted by the Compensation Committee; (iv)
participation in the ERP; and (v) all benefits normally provided to all
employees of Intercontinental. Pursuant to the Agreements,
Intercontinental may terminate each officer for cause. If either
officer terminates his Agreement, he is precluded for a period of one
year or for the period from the date of termination to the stated
expiration date of the Agreement, whichever is shorter, from accepting
employment with a commercial bank or savings and loan association where
he would be domiciled in and have operating responsibilities within Dade
or Broward County, Florida.
In the event of an involuntary termination, each officer is
entitled, pursuant to the Agreement, to a lump sum payment equal to
twice the amount of (a) his base annual salary and (b) the amounts paid
to him under clauses (i) - (iv) for the fiscal year preceding his
involuntary termination. Intercontinental's termination of an officer
other than for cause or any act by Intercontinental which
significantly changes his responsibilities or job description
without his consent, requires him to relocate without his consent or
reduces or impairs any of his compensation or benefits is considered
involuntary termination.
In the event of a change of control of Intercontinental, each officer
is entitled, pursuant to his Agreement, to a lump sum payment equal
to twice the amount of his base annual salary for the fiscal year
preceding a change of control. A change of control is
considered to have occurred under the Agreements if
Intercontinental is involved in any merger, sale of stock, sale of
assets or other business combination in which more than one-third of
the current outstanding shares of stock or assets of Intercontinental
are sold or transferred.
Effective January 1, 1994, Intercontinental entered into an
employment agreement with Mr. Howard for a term of two years.
Pursuant to the agreement, Mr. Howard will receive a minimum base annual
salary of $150,000 which can be increased annually based upon the
accomplishment of performance goals mutually agreed upon by
Intercontinental and Mr. Howard and subject to the approval of any
increase by the Compensation Committee. In addition, Mr. Howard is
entitled to (i) a car allowance of $600 per month; (ii)
payment by Intercontinental of membership dues and expenses of
clubs (as agreed upon between Mr. Howard and Intercontinental);
(iii) participation in current and future incentive bonus plans
adopted or to be adopted by the Compensation Committee; (iv)
participation in the ERP; and (v) all benefits normally provided to all
employees of Intercontinental. Pursuant to the agreement,
Intercontinental may terminate Mr. Howard for cause. If Mr. Howard
voluntarily terminates his agreement, he is precluded for a period of
one year from the date of termination from accepting employment
with a financial institution having offices in Broward County, Florida.
20
<PAGE>
Certain Business Relationships
Intercontinental has outstanding loans to certain of its Directors
and principal officers, members of their i m m e diate families and
companies or organizations in which a Director or principal
officer of Intercontinental is a principal officer, partner or major
shareholder. These loans were made in the ordinary course of
business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and did not involve, in
the opinion of management, more than the normal risk of
collectibility or present other unfavorable features. The aggregate
amount of these loans at December 31, 1994 was approximately $24
million, representing approximately 27 percent of Intercontinental's
shareholders' equity.
PROPOSAL 2 - AUTHORIZATION TO THE BOARD OF DIRECTORS
TO INCREASE THE NUMBER OF DIRECTORS BY NOT MORE THAN ONE
AND TO APPOINT A PERSON TO FILL THE RESULTING VACANCY
Subject to the limitations imposed by Florida law and
Intercontinental's Articles of Incorporation, and pursuant to
Intercontinental's Bylaws, the Board of Directors has the
authority to fix the number of Directors. The number of Directors has
been set at 24. Directors are elected by shareholders at each annual
meeting of shareholders. The Board may generally fill vacancies
caused by the death or resignation of a Director or for any other
reason. Directors are, however, limited by Florida law in the number of
vacancies they can fill in newly created Directorships. The Bank's
Articles of Incorporation, pursuant to Florida law, authorize a
majority of the full Board of Directors, at any time during the year
following the annual meeting of shareholders in which such action
has been authorized, to increase the number of Directors by not more
than one, thus creating one vacancy, and appoint a person to
fill the resulting vacancy. The Board is requesting shareholder
authorization for such an increase at this Annual Meeting.
At this time, the Board of Directors does not have in mind any
specific individual which it wishes to add to the Board. However,
Intercontinental from time to time is presented with business
opportunities and potential acquisition transactions where the
possible appointment of a given individual to the Bank's Board may help
to facilitate a transaction which would be advantageous to the Bank.
The Board seeks to have the flexibility to make appointments to the
Board within the limits set by Florida law should such opportunity or
acquisition transaction arise.
Under Florida law, this authorization to the Board requires a greater
affirmative than negative vote of the shares of Common Stock and
Preferred Stock, voting together as a single class, present or
represented at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
AUTHORIZATION TO THE BOARD OF DIRECTORS DURING THE YEAR FOLLOWING THE
ANNUAL MEETING TO INCREASE THE NUMBER OF DIRECTORS BY NOT MORE THAN ONE
AND TO APPOINT A PERSON TO FILL THE RESULTING VACANCY.
21
<PAGE>
PROPOSAL 3 - RATIFICATION AND APPROVAL OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
Although it is not required to do so, the Board of Directors is
submitting the selection of Arthur Andersen LLP as Intercontinental's
independent auditors for the fiscal year 1995 for ratification and
approval in accordance with the Board of Directors' policy of
giving its shareholders an opportunity to express their opinions with
regard to such choice. If this selection is not ratified and approved
by a greater affirmative than negative vote of the shares of
Common Stock and Preferred Stock, voting together as a single class,
present or represented at the Annual Meeting, the Board of
Directors will reconsider its choice. Arthur Andersen LLP has served
as the Bank's auditors since 1978. During this time, Arthur Andersen
LLP has also provided tax and accounting advice to Intercontinental.
Arthur Andersen LLP has advised the Bank that the firm does not have
any direct or indirect financial interest in the Bank nor has such
firm had any such interest in connection with Intercontinental during
the past three fiscal years other than in its capacity as
Intercontinental's independent certified public accountants.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement
if they so desire and are expected to be available at such time to
respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
RATIFICATION AND APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT AUDITORS OF INTERCONTINENTAL FOR THE 1995 FISCAL YEAR.
PROXIES RECEIVED BY MANAGEMENT WILL BE VOTED IN FAVOR OF SUCH
RATIFICATION AND APPROVAL UNLESS A CONTRARY VOTE IS SPECIFIED.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1996
Annual Meeting of Shareholders of Intercontinental must be received
at the principal executive offices of Intercontinental for inclusion in
the proxy materials relating to that meeting no later than December 26,
1995.
OTHER INFORMATION
Management knows of no business which will be presented for
consideration at the Annual Meeting other than that stated in the
Notice of Meeting. Should any additional matters come before the Annual
Meeting, it is intended that proxies in the accompanying form will be
voted in accordance with the judgment of the person or persons named in
the proxy.
By Order of the Board of Directors,
March 30, 1995 THOMAS E. BEIER
Executive Vice President and
Chief Financial Officer
22
<PAGE>
EXHIBIT 9
<PAGE>
EXHIBIT 9
List of Subsidiaries of Intercontinental Bank
Pan American Mortgage Corp.
Incorporated in the state of Florida
Atico Financial Corporation d/b/a Cavalier Properties
Incorporated in the state of Florida
Atico Investment Management, Inc.
Incorporated in the state of Florida
200 Service Corp.
Incorporated in the state of Florida
<PAGE>
EXHIBIT 10
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Directors
of Intercontinental Bank:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Intercontinental
Bank's annual report to shareholders incorporated by reference in this
Form F-2, and have issued our report thereon dated January 18, 1995.
Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in the index on
page 14 are the responsibility of Intercontinental Bank's management,
are presented for purposes of complying with the Federal Deposit
Insurance Corporation's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements
and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
January 18, 1995.
<PAGE>
SCHEDULE I - SECURITIES
(In thousands)
<TABLE>
<CAPTION>
1994 1993
Book value Market value Book value Market value
<S> <C> <C> <C> <C>
1. U.S. Treasury securities $203,077 $194,652 $287,386 $289,792
2. U.S. Government agency and corporation
obligations:
a. All holdings of U.S Government-
issued or guaranteed certificates
of participation in pools of
residential mortgages 118,892 111,242 140,438 142,717
b. All other 25,248 25,248
3. Securities issued by states and
political subdivisions in the U.S. 7,509 7,183 6,556 6,557
4. Other domestic securities (debt and equity):
a. All holdings of private certificates
of participation in pools of
residential mortgages
b. All other 1,452 2,587 1,506 2,845
5. Foreign securities (debt and equity) 100 100
6. Total $331,030 $315,764 $461,134 $467,159
7. Pledged securities $119,112 $126,506
</TABLE>
<PAGE>
SCHEDULE II - LOANS TO OFFICERS, DIRECTORS,
PRINCIPAL SECURITY HOLDERS, AND ANY
ASSOCIATES OF THE FOREGOING PERSONS
(In thousands)
<TABLE>
<CAPTION>
1994
Loans to: Directors-5 Officers Other * Total
<S> <C> <C> <C> <C>
Balance at January 1 $17,592 $64 $3,744 $21,400
Additions 5,996 5,996
Deductions:
Amounts collected (2,936) (64) (300) (3,300)
Amounts charged-off
Balance at December 31 $20,652 $ 0 $3,444 $24,096
1993
Loans to: Directors-8 Officers Other * Total
Balance at January 1 $16,195 $160 $4,043 $20,398
Additions 15,041 15,041
Deductions:
Amounts collected (13,644) (96) (299) (14,039)
Amounts charged-off
Balance at December 31 $17,592 $ 64 $3,744 $21,400
1992
Loans to: Directors-11 Officers Other * Total
Balance at January 1 $12,677 $ 98 $4,343 $17,118
Additions 10,811 114 10,925
Deductions:
Amounts collected (7,293) (52) (300) (7,645)
Amounts charged-off
Balance at December 31 $16,195 $160 $4,043 $20,398
</TABLE>
* In 1987, Intercontinental Bank granted to Micco Groves, a Florida
general partnership, a loan for up to $5.6 million. Micco Groves owns,
through a land trust, 1,330 acres in Brevard County, Florida. The
partners in Micco Groves currently include Dr. Phillip Frost, a
Director and principal shareholder of Intercontinental; Mr. Nathan
S. Gumenick; and trusts established by the late Mr. Joseph Weintraub
and Mr. Wilbur L. Morrison. Mr. Weintraub's son, Mr. Michael
Weintraub, is individually and in a fiduciary capacity a principal
shareholder of Intercontinental. Mr. Morrison's son, Mr. William L.
Morrison, is President and a Director of Intercontinental. Each partner
of Micco Groves has guaranteed the loan in an amount limited to
the proportion of his or its ownership interest.
<PAGE>
SCHEDULE III - LOANS AND
LEASE FINANCING RECEIVABLES
(In thousands)
<TABLE>
<CAPTION>
Book value: 1994 1993
<S> <C> <C>
1. Loans secured by real estate:
a. Construction and land development $ 18,156 $ 16,969
b. Secured by farmland 6,990 7,079
c. Secured by 1-4 family residential properties 157,337 123,181
d. Secured by multifamily residential properties 51,367 24,583
e. Secured by nonfarm nonresidential properties 248,175 179,468
2. Loans to depository institutions:
a. To commercial banks in the U.S.
(1) To U.S. branches and agencies of foreign banks
(2) To other commercial banks in the U.S. 3,000
b. To other depository institutions in the U.S.
c. To banks in foreign countries
(1) To foreign branches of other U.S. banks
(2) To other banks in foreign countries 444
3. Loans to finance agricultural production and other loans to farmers 305
4. Commercial and industrial loans:
a. To U.S. addressees 124,867 98,717
b. To non-U.S. addressees 1,913 1,958
5. Acceptances of other banks 42
6. Loans to individuals for household, family and other personal expenditures:
a. Credit card and related plans 111
b. Other 11,225 12,201
7. Loans to foreign governments and official institutions 2,074 2,074
8. Obligations of states and political subdivisions of the U.S.:
a. Nonrated industrial development obligations
b. Other obligations 4,582 4,761
9. Other loans:
a. Loans for purchasing or carrying securities 3,014 1,505
b. All other loans 34,689 38,527
10. Lease financing receivables
11. Less: Unearned income 2,032 1,574
12. Total loans and leases, net of unearned income $662,662 $513,046
</TABLE>
<PAGE>
SCHEDULE IV - BANK PREMISES
AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
1994
Accumulated Amount
Gross depreciation carried on
book and balance
value amortization sheet
<S> <C> <C> <C>
Bank premises (including land $16,089) $58,189 $13,544 $44,645
Equipment 11,750 8,400 3,350
Leasehold improvements 2,176 1,118 1,058
Total $72,115 $23,062 $49,053
1993
Accumulated Amount
Gross depreciation carried on
book and balance
value amortization sheet
Bank premises (including land $16,089) $56,920 $11,187 $45,733
Equipment 11,734 8,181 3,553
Leasehold improvements 1,626 873 753
Total $70,280 $20,241 $50,039
</TABLE>
<PAGE>
SCHEDULE V - INVESTMENTS IN,
INCOME FROM DIVIDENDS AND
EQUITY IN EARNINGS OR LOSSES
OF SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
1994
Percent of Bank's share
voting of earnings
stock Total Equity in during the
owned investment net assets Dividends period
<S> <C> <C> <C> <C> <C>
Pan American Mortgage Corp. 100% $8,453 $8,453 $0 $ 530
Atico Financial Corporation 100% 557 557 0 (79)
Atico Investment Management, Inc. 100% 18 18 0 0
200 Service Corp. 100% 4 4 0 0
1993
Percent of Bank's share
voting of earnings
stock Total Equity in during the
owned investment net assets Dividends period
Pan American Mortgage Corp. 100% $7,923 $7,923 $0 $(966)
Atico Financial Corporation 100% 636 636 0 (95)
Atico Investment Management, Inc. 100% 18 18 0 0
200 Service Corp. 100% 4 4 0 (1)
Atico Brokerage Services, Inc. 100% 0 0 0 0
1992
Percent of Bank's share
voting of earnings
stock Total Equity in during the
owned investment net assets Dividends period
Pan American Mortgage Corp. 100% $8,889 $8,889 $0 $168
Atico Financial Corporation 100% 500 500 0 (85)
Atico Investment Management, Inc. 100% 18 18 0 0
200 Service Corp. 100% 5 5 0 0
Atico Brokerage Services, Inc. 100% 0 0 0 0
</TABLE>
<PAGE>
SCHEDULE VI - ALLOWANCE FOR
POSSIBLE CREDIT LOSSES
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance at January 1 $ 9,521 $ 9,302 $ 9,303
Recoveries credited to the allowance 669 496 920
Changes incident to mergers and branch sale (1) 1,337 50
Provision for credit losses 678 951 2,286
Less: Losses charged to allowance (426) (1,278) (3,207)
Balance at December 31 (2) $11,779 $ 9,521 $ 9,302
(1) Due to acquisition of Commercial Trust Bank
and sale of Orlando branch in 1993 and
acquisition of Boca Bank in 1994
(2) Amount deducted (included) for federal income
tax purposes $ (277) $ 827 $ 2,207
Maximum amount that could have been
deducted (included) for federal income
tax purposes (277) 827 2,207
Balance of the allowance reported for federal
income tax purposes 0 332 328
<PAGE>
</TABLE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-4
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
Florida 59-0725606
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 Southeast First Street. Miami, FL 33131
(Address of principal executive offices) (Zip code)
Bank's telephone number, including area code: (305) 377-6900
Indicate by check mark whether the bank (l) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the bank was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
The number of shares of common stock outstanding as of March 31, 1995 was
6,922,475 shares.
<PAGE>
INTERCONTINENTAL BANK
FORM F-4
INDEX
Page
No.
Item 1. Financial Statements
a) Consolidated Balance Sheet - March 31, 1995 and
December 31, 1994 1
b) Consolidated Statement of Income - Three Months Ended
March 31, 1995 and 1994 2
c) Consolidated Statement of Cash Flows - Three Months Ended
March 31, 1995 and 1994 3
d) Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Interim Financial
Condition and Results of Operations 7
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Intercontinental Bank and Subsidiaries
(dollars in thousands)
March 31, 1995 Dec. 31, 1994
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $67,014 $65,072
Interest earning deposits in other banks 4,265 381
Federal funds sold 32,000 27,000
Investment securities (market value of $316,498
in 1995 and $315,764 in 1994) 320,907 323,529
Gross loans 676,804 666,353
Less: Unearned income (2,134) (2,032)
Allowance for possible credit losses (11,846) (11,779)
Net loans 662,824 652,542
Other real estate, net 2,604 3,417
Premises and equipment, net 48,634 49,053
Other assets, net 32,077 35,116
$1,170,325 $1,156,110
Liabilities
Deposits:
Non-interest bearing accounts $287,946 $278,013
NOW accounts 133,951 145,060
Savings accounts 55,040 57,979
Money market accounts 216,460 232,561
Time deposits 270,285 242,028
963,682 955,641
Borrowings 100,210 96,660
Other liabilities 10,840 13,981
Total liabilities 1,074,732 1,066,282
Shareholders' Equity
Preferred stock, no par value:
2,000,000 shares authorized; 350,000 shares issued 350 350
Common stock, $2 par value:
10,000,000 shares authorized; 6,922,475 shares issued
in 1995 and 6,895,575 shares issued in 1994 13,845 13,791
Capital surplus 59,429 59,175
Retained earnings 24,118 21,200
Unrealized loss on investment securities (2,149) (4,688)
Total shareholders' equity 95,593 89,828
$1,170,325 $1,156,110
</TABLE>
See notes to consolidated financial statements.
- 1 -
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Intercontinental Bank and Subsidiaries
(in thousands except per common share)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
(unaudited)
<S> <C> <C>
Interest Income
Interest and fees on loans $14,759 $9,449
Interest and dividends on investment securities 4,719 5,717
Other interest income 355 415
19,833 15,581
Interest Expense
Interest on deposits 5,538 4,077
Interest on borrowings 1,341 564
6,879 4,641
Net interest income 12,954 10,940
Provision for credit losses 400 152
Net interest income after provision for credit losses 12,554 10,788
Other Income
Service charges on deposit accounts 2,182 2,091
Loan administration fees 995 1,096
Other customer fees 460 371
Gain (loss) on investment securities 6 (167)
Other 208 179
3,851 3,570
Other Expenses
Personnel 5,490 5,070
Occupancy and equipment, net 1,703 1,292
Other 3,457 3,221
10,650 9,583
Income before income taxes 5,755 4,775
Provision for income taxes 2,210 1,777
Net income $3,545 $2,998
Primary earnings per common share $0.49 $0.43
Average number of common shares and equivalents 7,171 6,999
Fully diluted earnings per common share $0.49 $0.43
Average number of common shares and equivalents 7,177 6,999
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Intercontinental Bank and Subsidiaries
(in thousands)
Three Months Ended
March 31,
1995 1994
(unaudited)
<S> <C> <C>
Operating Activities
Net income $3,545 $2,998
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization 903 787
Net amortization of premiums (accretion of discounts)
on investment securities (599) 308
Amortization of intangible assets 957 927
Provision for credit losses 400 152
Loss (gain) on sales of:
Investment securities (6) 167
Other real estate (112) (9)
Premises and equipment (7) (16)
(Increase) decrease in loans held-for-sale (292) 703
Increase in interest receivable 1,171 1,381
(Increase) decrease in all other assets (930) 391
Decrease in all other liabilities (2,091) (2,893)
Net cash provided by operating activities 2,939 4,896
Investing Activities
Investment securities held-to-maturity:
Proceeds from maturities and principal paydowns 2,219 11,425
Purchases (11,086)
Investment securities available-for-sale:
Proceeds from sales 9,985 122,216
Proceeds from maturities and principal paydowns 5,048 68,320
Purchases (9,990) (120,077)
Net increase in loans (10,442) (18,566)
Other real estate:
Proceeds from sales 961 369
Payments collected 16 19
Premises and equipment:
Proceeds from sales 8 167
Capital expenditures (492) (544)
Purchase of mortgage servicing rights (988)
Net cash provided by (used in) investing activities (2,687) 51,255
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Intercontinental Bank and Subsidiaries
(in thousands)
Three Months Ended
March 31,
1995 1994
(unaudited)
<S> <C> <C>
Financing Activities
Net increase in deposits 8,041 12,509
Net increase (decrease) in short-term borrowings 3,550 (35,948)
Repayment of long-term debt (250)
Exercise of stock options 237 69
Cash dividends paid (1,254) (492)
Cash dividends paid to shareholders of pooled bank (64)
Net cash provided by (used in) financing activities 10,574 (24,176)
Net increase in cash and cash equivalents 10,826 31,975
Cash and cash equivalents at January 1 92,453 89,292
Cash and cash equivalents at March 31 $103,279 $121,267
</TABLE>
Gross amounts of interest paid in 1995 and 1994 were $6.6 million and $4.6
million, respectively. Income taxes paid in 1995 and 1994 were $1 million
and $1.8 million, respectively.
See notes to consolidated financial statements.
-4-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intercontinental Bank and Subsidiaries
(unaudited)
Note 1 - Accounting Policies
The consolidated financial statements include Intercontinental Bank and its
subsidiaries ("Intercontinental" or the "Bank"). All significant intercompany
balances and transactions have been eliminated in consolidation. The condensed
financial information presented herein, while not necessarily indicative of
the results to be expected for the year, reflect, in the opinion of management,
all adjustments necessary for a fair presentation of the results of the
interim periods.
The accounting policies followed in the presentation of the interim
financial statements, except for the policy on certain loans as described in
Note 2 below, are the same as those followed on an annual basis. These
policies are presented on pages 24 to 26 of the 1994 Annual Report to
Shareholders.
Note 2 - Change in Accounting Principle
Intercontinental adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114"), as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures", on January 1, 1995.
These statements modify the accounting for certain loans (impaired loans)
where it is probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Under these new
standards, the 1995 allowance for possible credit losses related to these
loans is based on discounted cash flows using the loan's initial effective
rate or the fair value of the collateral for certain collateral dependent
loans. Prior to 1995, the allowance for possible credit losses related to
these loans was based on the undiscounted cash flows or the fair value of their
collateral.
At March 31, 1995, the aggregate amount of loans that are considered
impaired under SFAS No. 114 was $2.7 million (all of which were on a
non-accrual basis). The related allowance for credit losses on these loans
totaled $491,000. For the quarter ended March 31, 1995, these loans averaged
$2.2 million. The Bank did not recognize any interest income on these impaired
loans during the 1995 first quarter.
Note 3 - Acquisition of The Bank of Coral Gables
Effective July 1, 1994, Intercontinental acquired Interstate Bank Holding
Company ("Interstate") and its subsidiary, The Bank of Coral Gables ("BOCG"),
in a transaction valued at approximately $16 million. The total number of
common shares issued aggregated 681,070. The Bank's historical consolidated
financial statements and schedules included in this report were restated to
reflect this acquisition which was accounted for as a pooling of interests.
The former BOCG, which operated two Dade County branch banking offices, had
assets totaling $97 million at July 1, 1994. The following table summarizes
the impact of the Interstate acquisition on the Bank's previously reported
results of operations for the quarter ended March 31, 1994 (in thousands):
-5-
<PAGE>
Net
Interest Net
Income Income
Intercontinental, as previously reported $ 9,977 $2,834
Interstate 963 164
$10,940 $2,998
Note 4 - Subsequent Event
Effective April 14, 1995, Intercontinental sold two banking facilities and
their related deposits recording a pretax gain on this transaction of
approximately $2 million. Deposits in these two banking offices totaled $30
million at the time of the sale.
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Intercontinental Bank, a Florida state-chartered commercial bank based in
Miami, Florida, currently operates 24 commercial banking offices in
Dade, Broward and Palm Beach counties. Intercontinental also owns Pan
American Mortgage Corp., a mortgage banking company which serviced
approximately $1.1 billion residential and commercial loans at March 31,
1995. Intercontinental Bank and its subsidiaries are collectively referred to
herein as "Intercontinental" or the "Bank". Effective December 30,
1994, Boca Bancorp, Inc and its subsidiary, Boca Bank, were merged into
Intercontinental in a transaction accounted for as a purchase.
FINANCIAL HIGHLIGHTS
The Bank's first quarter 1995 net income was $3.5 million, or $.49
per common share, compared with $3 million, or $.43 per common share, in the
first three months of 1994. This $547,000, or 18 percent, increase
in earnings was driven by the Bank's strong growth in its net interest
income which was also up 18 percent. The principal reason for this increase
was strong loan growth over the past year which also caused a 68 basis
point increase in the net interest margin (5.24 percent in 1995 and 4.56
percent in 1994). Average loans of $666 million for the 1995 first
quarter were $149 million, or 29 percent, higher than the comparable 1994
quarter.
The Bank's overall credit quality improved during the first quarter
of 1995. Non-performing assets expressed as a percentage of total assets
was .89 percent at March 31, 1995 compared with .93 percent at year-end 1994.
The annualized returns on average assets and average shareholders' equity
for the three months ended March 31, 1995 improved to 1.25 percent and
15.44 percent, respectively. Comparable first quarter 1994 returns were 1.08
percent and 14.36 percent.
EARNINGS ANALYSIS
Net Interest Income
Net interest income of $13 million in the 1995 first quarter was $2
million, or 18 percent, higher than the $11 million earned in the same
quarter in 1994. This positive variance resulted from a significant increase
in interest income which was partially offset by an increase in
interest expense. Table 1 reflects the average balances of interest
earning assets and interest bearing liabilities, interest income and interest
expense and the weighted average yields/rates of such assets and liabilities
for the three months ended March 31, 1995 and 1994. The components of the net
interest income variance are illustrated in Table 2.
Interest income of $20 million in the 1995 first quarter increased
$4.3 million, or 27 percent, over the 1994 comparable quarter. This
positive variance was primarily the result of the impact of increases in
both the volume (up $149 million) and rates earned (up 157 basis points) on
average loans. The December 30, 1994 acquisition of Boca Bank contributed
approximately $38 million to the higher level of average loans. A decrease
in the average volume of investment securities caused by the funding
requirements for new loans partially offset the positive variance created by
the higher loan volume.
Interest expense of $6.9 million in the 1995 first quarter
increased $2.2 million, or 48 percent, over the comparable 1994 quarter
primarily due to market interest rate increases. The significantly higher
interest rate environment, as reflected in a 250 basis point increase in
the federal funds rate since March 31, 1994, contributed to the higher
rates paid on a majority of the interest bearing
-7-
<PAGE>
liabilities. In addition, an increase in borrowings to fund loans and
change in the deposit mix also contributed to this increase in interest
expense. Average deposits in total remained virtually unchanged as the
decrease in time deposits was offset by the deposits from Boca Bank.
The net interest margin increased to 5.24 percent in the 1995
first quarter compared with 4.56 percent in the same 1994 period primarily
due to the impact of an increase in the average yields earned on
earning assets which was partially offset by the overall increased
cost of funds. The increase in the average yields on earning assets was due
to a higher ratio of average loans to average earning assets in 1995 (65
percent) compared with 1994 (52 percent) as well as an overall increase in
interest rates.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Table 1
(dollars in thousands)
Three Months Ended Three Months Ended
March 31, 1995 March 31, 1994
Average Average
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Loans, net of unearned income . . . . . . . . .. . . . .. . . . . $ 666,060 $14,759 8.99% $ 516,567 $ 9,449 7.42%
Investment securities . . . . . . . . . . . . . . . . . . . . . . . 327,446 4,719 5.84 421,066 5,717 5.51
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . 23,000 333 5.87 46,658 367 3.19
Interest earning deposits in other banks . . . . . . . . . . . . . . 1,700 22 5.25 6,157 48 3.16
Total earning assets . . . . . . . . . . . . . . . . . . . . . . .1,018,206 19,833 7.90 990,448 15,581 6.38
Allowance for possible credit losses (11,905) (9,405)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . 65,661 61,597
Other real estate, net . . . . . . . . . . . . . . . . . . . . 2,882 4,249
Premises and equipment, net . . . . . . . . . . . . . . . . . . 48,900 49,994
Other assets, net . . . . . . . . . . . . . .. . . . . . . . . . 28,290 33,000
Total assets . . . . . . . . . . . . . . . . . . . . . .$1,152,034 $1,129,883
Liabilities and Shareholders' Equity
Deposits:
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . $ 135,836 583 1.74 $126,511 527 1.69
Savings accounts . . . . . . . . . . . . . . . . . . . . . . . 56,406 285 2.05 58,647 301 2.08
Money market accounts . . . . . . . . . . . .. . . . . . . . . 222,398 1,723 3.14 248,538 1,413 2.31
Time deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 251,023 2,947 4.76 240,572 1,836 3.10
Total interest bearing deposits . . . . . . . . . . . . . . 665,663 5,538 3.37 674,268 4,077 2.45
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . 98,037 1,341 5.55 87,383 555 2.58
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 500 9 7.31
Total interest bearing liabilities . . . . . . . . . . . . . . . 763,700 6,879 3.65 762,151 4,641 2.47
Non-interest bearing deposits . . . . . . . . . . . . . . . . . 283,397 271,047
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 11,817 12,044
Total liabilities . . . . . . . . . . . . . . . . . . . . 1,058,914 1,045,242
Shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . 93,120 84,641
Total liabilities and shareholders' equity . . . . . . . . . . $1,152,034 $1,129,883
Net interest income/spread . . . . . . . . . . . . . . . . . . . . $12,954 4.25 $10,940 3.91
Cost of funds supporting earning assets . . . . . . . . . . . . . . 2.74 1.90
Net interest yield. . . . . . . . . . . . . . . . . . . . . . . . . . 5.16 4.48
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . 5.24 4.56
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Table 2
(in thousands)
Three Months Ended March 31, 1995/
Three Months Ended March 31, 1994
Changes in Interest Due to:
Average
Rate Balance Total
<S> <C> <C> <C>
Interest Income
Loans, net of unearned income . . . . . . . . . .$2,000 $3,310 $5,310
Investment securities . . . . . . . . . . . . . . 343 (1,341) (998)
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . 308 (342) (34)
Interest earning deposits in other banks . . . . 32 (58) (26)
Total interest income . . . . . . . . . . . . . 2,683 1,569 4,252
Interest Expense
Deposits:
NOW accounts . . . . . . . . . . . . . . . . . 16 40 56
Savings accounts . . . . . . . . . . . . . . . (4) (12) (16)
Money market accounts . . . . . . . . . . . . . 509 (199) 310
Time deposits . . . . . . . . . . . . . . . . . 985 126 1,111
Short-term borrowings . . . . . . . . . . . . . . 640 146 786
Long-term debt . . . . . . . . . . . . . . . . . (9) (9)
Total interest expense . . . . . . . . . . . . 2,146 92 2,238
Net interest income . . . . . . . . . . . . . . $ 537 $1,477 $2,014
</TABLE>
Provision for Credit Losses
The provision for credit losses was $400,000 in the first quarter of 1995
compared with $152,000 in the first three months of 1994. The higher
provision in 1995 was directly related to the higher level of charge-offs
during the quarter coupled with the overall increase in loans.
Other Income
Other income for the 1995 first quarter of $3.9 million was $281,000, or
8 percent, higher than the comparable 1994 quarter. The components of other
income for these periods are summarized in Table 3.
<TABLE>
<CAPTION>
Table 3
(in thousands)
Three Months
Ended March 31, Increase
1995 1994 (Decrease)
<S> <C> <C> <C>
Service charges on deposit accounts . . . . . . .$2,182 $2,091 $ 91
Loan administration fees . . . . . . . . . . . . 995 1,096 (101)
Other customer fees . . . . . . . . . . . . . . . 460 371 89
Gain (loss) on investment securities . . . . . . 6 (167) 173
Other income . . . . . . . . . . . . . . . . . . 208 179 29
$3,851 $3,570 $ 281
</TABLE>
-10-
<PAGE>
Service charges on deposit accounts for the 1995 first quarter of
$2.2 million increased $91,000, or 4 percent, over the comparable 1994
quarter due to the higher level of transaction accounts as a result of
the Boca Bank acquisition.
Loan administration fees of $995,000 in the first quarter 1995
decreased $101,000, or 9 percent, from the 1994 first quarter. Although the
level of the mortgage servicing portfolio has remained fairly constant,
the amount of fees earned on such portfolio has declined as the mix of
loans has changed towards those generating lower service fees.
Other customer fees for the three months ended March 31,
1995 of $460,000 were $89,000, or 24 percent, higher than the comparable
period in 1994 primarily due to higher letter of credit fees.
Other Expenses
Other expenses for the quarter ended March 31, 1995 of $11 million were
$1.1 million, or 11 percent, higher than the 1994 comparable quarter
primarily as a result of the impact of the Boca Bank acquisition. The
components of other expenses for these periods are summarized in Table 4.
<TABLE>
<CAPTION>
Table 4
(in thousands)
Three Months
Ended March 31,
Increase
1995 1994 (Decrease)
<S> <C> <C> <C>
Personnel expense . . . . . . . . . . . . . . . . $ 5,490 $5,070 $ 420
Occupancy and equipment, net . . . . . . . . . . 1,703 1,292 411
Amortization of intangible assets . . . . . . . . 957 927 30
FDIC insurance premium . . . . . . . . . . . . . 515 503 12
Professional fees . . . . . . . . . . . . . . . . 297 214 83
Stationery and supplies . . . . . . . . . . . . . 227 158 69
Postage and courier . . . . . . . . . . . . . . . 213 183 30
Communications . . . . . . . . . . . . . . . . . 162 143 19
Data processing . . . . . . . . . . . . . . . . . 140 186 (46)
Other . . . . . . . . . . . . . . . . . . . . . 946 907 39
$10,650 $9,583 $1,067
</TABLE>
Personnel expense of $5.5 million for the first quarter of 1995
was $420,000, or 8 percent, higher than the comparable 1994 quarter primarily
due to the increased staff level resulting from the acquisition of Boca Bank
coupled with merit increases.
Net occupancy and equipment expense of $1.7 million for the
first three months of 1995 was up $411,000, or 32 percent, over the prior
year due to the addition of two former Boca Bank banking offices, higher
depreciation expense due to capital improvements made in 1994 as well as
lower tenant rental income. Included in net occupancy and equipment
expense in the first quarters of 1995 and 1994 were $394,000 and $374,000,
respectively, in net tenant rental income related to a single tenant lease
on an office building owned by Intercontinental. The lease, which has a
ten-year term, is due to expire in December 1995. The current tenant has
notified Intercontinental that it is not renewing its lease.
Intercontinental is presently evaluating its alternatives including
selling the building, leasing the building to new tenants and/or using the
building for its own expansion purposes. The effect of the non-renewal of
this lease cannot be fully measured at the present time and may have a
material impact on the Bank's future occupancy expenses and net income.
- 11 -
<PAGE>
Professional fees, which include accounting and legal fees, for
the first three months of 1995 of $297,000 were $83,000, or 39 percent,
higher than the amount recorded for the comparable 1994 period. A legal
matter which was resolved during the quarter was the cause of this higher
level of expense.
Stationery and supplies expense for the first quarter of 1995
totaled $227,000, representing a $69,000, or 44 percent, increase over the
comparable 1994 period primarily due to the acquisition of Boca Bank and an
increase in overall costs of paper products and supplies.
Postage and courier expense for the first three months of 1995 was
$213,000 compared with $183,000 in the same quarter of 1994. This 16
percent increase is due to the increase in postal rates and increased
costs associated with the acquisition of Boca Bank.
Data processing expenses of $140,000 for the first quarter of 1995
were $46,000, or 25 percent, lower than the comparable 1994 quarter because
of the cancellation of certain contracts related to the former Bank
of Coral Gables.
Income Taxes
The provision for income taxes for the first quarter 1995 was $2.2 million
compared with $1.8 million in the first three months of 1994. The
$433,000, or 24 percent, increase in the provision was related to the
increase in income before income taxes over the prior year's comparable
quarter. The Bank's effective tax rate increased from 37.2 percent in the
1994 first quarter to 38.4 percent in the comparable 1995 period.
BALANCE SHEET REVIEW
Investment Securities
As shown in Table 5, the available-for-sale portfolio, which is recorded at
market value, was valued at $206 million at March 31, 1995. The $3.5
million unrealized loss in this portfolio, which resulted from the
impact of the rising interest rate environment was reflected, net of
its related tax effect, as a $2.1 million reduction in shareholders'
equity. At year-end 1994, this unrealized loss aggregated $7.5 million,
or $4.7 million net of tax.
At March 31, 1995, the held-to-maturity portfolio, which is
recorded at amortized cost, aggregated $115 million, representing an
unrealized loss of $4.4 million. This unrealized loss was primarily
attributable to the higher interest rate environment at March 31,
1995 in comparison with the Bank's investment portfolio yield. At year-end
1994, this unrealized loss aggregated $7.8 million.
- 12 -
<PAGE>
<TABLE>
<CAPTION>
Table 5
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
March 31, 1995:
Available-for-sale:
U.S. Government and agency securities. . .$198,786 $ $(4,808) $193,978
Mortgage-backed securities . . . . . 2,050 91 2,141
Other debt securities . . . . . . . . 7,357 (172) 7,185
Total debt securities . . . . . . 208,193 91 (4,980) 203,304
Equity securities . . . . . . . . . . 1,115 1,423 2,538
$209,308 $1,514 $(4,980) $205,842
Held-to-maturity:
Mortgage-backed securities . . . . . $114,482 $ 59 $(4,409) $110,132
Other debt securities . . . . . . . . 352 (59) 293
Total debt securities . . . . . . 114,834 59 (4,468) 110,425
Equity securities . . . . . . . . . . 231 231
$115,065 $ 59 $(4,468) $110,656
</TABLE>
<TABLE>
<CAPTION>
Table 5
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1994:
Available-for-sale:
U.S. Government and agency securities. . .$203,077 $ 3 $(8,428) $194,652
Mortgage-backed securities . . . . . 2,096 45 2,141
Other debt securities . . . . . . . . 7,359 (263) 7,096
Total debt securities . . . . . . 212,532 48 (8,691) 203,889
Equity securities . . . . . . . . . . 1,114 1,142 2,256
$213,646 $1,190 $(8,691) $206,145
Held-to-maturity:
Mortgage-backed securities . . . . . $116,796 $ 8 $(7,703) $109,101
Other debt securities . . . . . . . . 357 (70) 287
Total debt securities . . . . . . 117,153 8 (7,773) 109,388
Equity securities . . . . . . . . . . 231 231
$117,384 $ 8 $(7,773) $109,619
</TABLE>
Loans
Gross loans at March 31, 1995 of $677 million increased $10 million, or 1.6
percent, over the year-end 1994 level. While the level of gross loans increased
during the first quarter of 1995, the growth rate has slowed somewhat compared
with the previous quarter reflecting a general slowdown in the economy.
Allowance for Possible Credit Losses
As shown on Table 6, at March 31, 1995, the allowance for possible
credit losses totaled $12 million, an increase of $67,000 over the
amount reported at year-end 1994. Included in the allowance is
- 13 -
<PAGE>
$491,000 for impaired loans (see Note 2). The level of non-accruing loans,
which represents .59 percent of total loans, is an indication of the
overall credit quality of the Bank's loan portfolio. The Bank's ratio of
the allowance for possible credit losses to loans was 1.76 percent at
March 31, 1995 compared with 1.77 percent at December 31, 1994. The ratio
of the allowance to non-accruing loans was 296 percent at March 31, 1995
compared with 331 percent at year-end 1994.
Table 6
(in thousands)
Balance, December 31, 1994 . . . . . . . . . . . . . . . . $11,779
Provision charged to expense . . . . . . . . . . . . . . . 400
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . (433)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . 100
Balance, March 31, 1995 . . . . . . . . . . . . . . . . . . .$11,846
Credit Risk Assets
Table 7 summarizes the composition of non-performing assets at
March 31, 1995 and year-end 1994. Non-performing assets, which consist
of non-accruing loans, restructured loans and real estate acquired through
foreclosure (classified as Other real estate, net on the Consolidated
Balance Sheet), totaled $10 million at the end of March 1995, down
$369,000, or 3 percent, from the year-end 1994 level. Included in non-accruing
loans are $2.7 million of impaired loans (see Note 2). Non-performing
assets, expressed as a percentage of total assets, was .89 percent at
March 31, 1995 compared with .93 percent at year-end 1994.
Table 7
(in thousands)
March 31, Dec. 31,
1995 1994
Non-accruing loans . . . . . . . . . . . $ 3,998 $ 3,554
Restructured loans . . . . . . . . . . . 3,837 3,837
Other real estate, net . . . . . . . . . 2,604 3,417
$10,439 $10,808
Certain loans, although they are past due 90 days or more, are not
classified as non-accruing. These loans totaled $392,000 at March 31,
1995. In addition to non-accruing, restructured and past due loans, the
Bank has identified loans totaling $866,000 at March 31, 1995 for which
management has concerns about their continued performance and, in some
cases, their ultimate collectibility in full even though payments are
current or less than 90 days past due, and the borrowers are
complying with their loan agreements. Management, in its evaluation of the
adequacy of the allowance for possible credit losses, takes into account
the risks associated with these loans. Approximately $356,000 of these
loans were residential real estate loans which are substantially
collateralized.
Deposits
As shown in Table 8, the Bank's deposits of $964 million at March 31,
1995 were $8 million higher than year-end 1994. The mix between higher
cost deposits and lower cost deposits was negatively
- 14 -
<PAGE>
impacted during the first three months of 1995 by the significant increase
in the level of time deposits. The overall higher cost associated with
the increased level of time deposits was somewhat offset by the 3.6 percent
growth in non-interest bearing accounts.
<TABLE>
<CAPTION>
Table 8
(dollars in thousands)
Percent of Percent of
March 31, Total Dec. 31, Total
1995 Deposits 1994 Deposits
<S> <C> <C> <C> <C>
Non-interest bearing accounts . . . $287,946 30% $278,013 29%
NOW accounts . . . . . . . . . . . 133,951 14 145,060 15
Savings accounts . . . . . . . . . 55,040 6 57,979 6
Money market accounts . . . . . . . 216,460 22 232,561 25
Time deposits . . . . . . . . . . . . 270,285 28 242,028 25
$963,682 100% $955,641 100%
</TABLE>
INTEREST SENSITIVITY
The Bank's management believes that its interest rate risk is best measured
by the amount of earnings at risk given specified changes in interest
rates. The Bank analyzes interest rate sensitivity with an earnings
simulation model. This model captures all earning assets and interest
bearing liabilities and combines various factors affecting rate sensitivity
into an earnings outlook which incorporates management's view of
the interest rate environment that is most likely for the next 12
months. The Asset Liability Management Committee reviews and updates the
underlying assumptions included in the earnings simulation model on a
periodic basis.
The Bank's interest rate sensitivity analysis is based on
multiple interest rate scenarios and projected changes in balance sheet
categories and other relevant assumptions. Changes in management's
outlook and other market factors may cause actual results to differ from
the current simulated outlook. The sensitivity of earnings to changes in
interest rates is determined by assessing the impact on net interest
income of rising and falling interest rate scenarios. The model uses three
scenarios -- most likely, rising and declining -- in analyzing interest
rate sensitivity and determines the interest sensitivity by measuring the
change in net interest income between rising and falling rate scenarios
(dispersion). The Bank manages its interest rate risk by targeting to
maintain this dispersion within certain policy limits.
The interest rate risk sensitivity model is supplemented with
traditional gap measurement. The gap tables have certain limitations on
their ability to accurately portray interest sensitivity; however, they do
provide a static reading of the Bank's interest rate risk exposure. The
Bank's gap table at March 31, 1995 is shown in Table 9. As of that
date, Intercontinental remained liability sensitive (i.e., interest
sensitive liabilities subject to repricing exceeded interest sensitive
assets subject to repricing) on a 365-day basis, to the extent of $16
million. This "negative gap" at March 31, 1995 was 1.4 percent of total
assets compared with 3.7 percent at year-end 1994. The primary cause for
this decrease in the gap was due to increases in both loans which mature
or reprice within one year and investment securities with a remaining
maturity of less than one year. The Bank's targeted gap position varies
with management's outlook of the interest rate environment and generally
is in the range of negative 20 percent to positive 10 percent. The
Bank measures its gap position as a percentage of its total assets.
While the absolute level of gap is a measurement of interest rate
risk, the quality of the assets
- 15 -
<PAGE>
and liabilities in the balance sheet must be analyzed in order to
understand the degree of interest rate risk taken by the Bank. The
available-for-sale securities portfolio with a weighted average
maturity of 2.1 years provides further protection against structural
changes in the interest rate environment which are longer term than one
year. This reliance on highly liquid securities for gap management purposes
significantly mitigates the interest rate risk while simultaneously providing
a positive income stream for the Bank.
The Bank may, from time to time, utilize derivative products, such
as interest rate swaps, floors and caps, in its management of interest rate
risk; however, there were no such interest rate derivative contracts
outstanding at March 31, 1995.
<TABLE>
<CAPTION>
Table 9
(in thousands)
Over One
Year and
Total Non-
0-30 31-90 91-180 181-365 Interest interest
Days Days Days Days Sensitive Sensitive Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest sensitive assets
Loans . . . . . . . . . . . . . $333,061 $ 43,783 $ 62,782 $122,682 $562,308 $114,496 $ 676,804
Investment securities . . . . . 54,879 4,284 5,867 21,870 86,900 234,007 320,907
Federal funds sold . . . . . . 32,000 32,000 32,000
Interest earning deposits in
other banks . . . . . . . . . . 4,265 4,265 4,265
424,205 48,067 68,649 144,552 $685,473 $348,503 $1,033,976
Interest sensitive liabilities
Deposits . . . . . . . . . . . 404,525 65,690 56,575 74,610 $601,400 $362,282 $ 963,682
Borrowings . . . . . . . . . . 100,210 100,210 100,210
504,735 65,690 56,575 74,610 701,610 $362,282 $1,063,892
Gap . . . . . . . . . . . . . . $ (80,530) $(17,623) $ 12,074 $ 69,942 $(16,137)
Cumulative gap . . . . . . . . $ (80,530) $(98,153) $(86,079) $(16,137) $(16,137)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Management believes that maintaining an exceptionally strong capital
base enhances the profitable growth opportunities of the Bank. Management
carefully monitors the level and distribution of capital relative to
the size and mix of its balance sheet in order to maximize shareholder
returns. Earnings provide the main source of equity capital to support
asset growth.
Regulatory agencies have established a risk-based capital framework
that makes capital requirements more sensitive to the risk profiles of
individual banking companies. These guidelines define capital as either
core (Tier 1) capital or supplementary (Tier 2) capital. Tier 1
capital consists primarily of shareholders' equity, while Tier 2 capital
is comprised of certain debt instruments and a portion of the allowance for
possible credit losses. Leverage capital is the ratio of Tier 1 capital
to average total assets.
The Bank is required to have a minimum Tier 1 capital ratio of
4 percent and a total risk-based capital ratio (Tier 1 plus Tier 2) of 8
percent. At March 31, 1995, the Bank's Tier 1 and total risk-based capital
ratios were 12.31 percent and 13.61 percent, respectively. At that same
time, the Bank's leverage capital ratio was 7.87 percent. The Bank's
capital ratios not only exceeded the minimum standards, but substantially
exceeded the ratios required to meet the regulatory definition of
a "well capitalized institution".
Intercontinental's management intends to continue to expand
through internal growth and by seeking acquisition opportunities which
will strengthen and enhance its existing franchise. The
- 16 -
<PAGE>
consideration in such acquisitions may be cash and/or the issuance of
additional common stock or other securities of the Bank.
The Bank's liquidity policy requires that it maintain a 5 percent
primary liquidity ratio consisting of cash, due from bank deposits,
overnight and short-term investments maturing in less than 180 days and a
secondary liquidity ratio of 15 percent consisting of the components of
primary liquidity and all other unpledged investments. These ratios are
calculated as a percent of the deposit base excluding public fund
deposits. The Bank's primary and secondary liquidity ratios on
March 31, 1995 were 11 percent and 30 percent, respectively.
A minimum liquidity level approximating $25 million, in
addition to cash and due from banks, is deemed prudent by Intercontinental
for the effective operation of the Bank under present circumstances. At
March 31, 1995, Intercontinental had, in addition to cash and due from
banks, a total of $36 million of short-term assets maturing in less than
90 days primarily consisting of overnight investments. As a result of the
Bank's current strong liquidity position and its ability to borrow against
its securities portfolio, the Bank has sufficient liquidity to meet
any funding requirements in connection with its day-to-day operations.
- 17 -
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the bank has
duly caused this report to be signed on its behalf by the undersigned as its
duly authorized officer and principal accounting officer.
Intercontinental Bank
(Bank)
May 12, 1995 /s/ Thomas E. Beier
Date Thomas E. Beier
Executive Vice President and
Chief Financial Officer
- 18 -
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-4
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1995
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
Florida 59-0725606
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 Southeast First Street, Miami, FL 33131
(Address of principal executive offices) (Zip code)
Bank's telephone number, including area code: (305) 377-6900
Indicate by check mark whether the bank (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the bank was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
The number of shares of common stock outstanding as of June 30, 1995 was
6,926,225 shares.
<PAGE>
INTERCONTINENTAL BANK
FORM F-4
INDEX
Page
No.
Item 1. Financial Statements
a) Consolidated Balance Sheet - June 30, 1995
and December 31, 1994 1
b) Consolidated Statement of Income - Three Months
and Six Months Ended June 30, 1995 and 1994 2
c) Consolidated Statement of Cash Flows - Six
Months Ended June 30, 1995 and 1994 3
d) Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Interim Financial
Condition and Results of Operations 7
<PAGE>
CONSOLIDATED BALANCE SHEET
Intercontinental Bank and Subsidiaries
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1995 Dec. 31, 1994
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $59,864 $65,072
Interest earning deposits in other banks 7,484 381
Federal funds sold 28,000 27,000
Investment securities (market value of $288,608
in 1995 and $315,764 in 1994) 289,958 323,529
Gross loans 690,096 666,353
Less: Unearned income (2,023) (2,032)
Allowance for possible credit losses (11,871) (11,779)
Net loans 676,202 652,542
Other real estate, net 2,802 3,417
Premises and equipment, net 47,667 49,053
Other assets, net 30,419 35,116
$1,142,396 $1,156,110
Liabilities
Deposits:
Non-interest bearing accounts $285,928 $278,013
NOW accounts 118,750 145,060
Savings accounts 48,849 57,979
Money market accounts 218,363 232,561
Time deposits 280,292 242,028
952,182 955,641
Borrowings 78,319 96,660
Other liabilities 9,754 13,981
Total liabilities 1,040,255 1,066,282
Shareholders' Equity
Preferred stock, no par value:
2,000,000 shares authorized; 350,000 shares issued 350 350
Common stock, $2 par value:
10,000,000 shares authorized; 6,926,225 shares issued
in 1995 and 6,895,575 shares issued in 1994 13,852 13,791
Capital surplus 59,475 59,175
Retained earnings 28,320 21,200
Unrealized gain (loss) on investment securities 144 (4,688)
Total shareholders' equity 102,141 89,828
$1,142,396 $1,156,110
</TABLE>
See notes to consolidated financial statements.
- 1 -
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Intercontinental Bank and Subsidiaries
(in thousands except per common share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(unaudited) June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $15,623 $10,500 $30,382 $19,949
Interest and dividends on investment securities 4,538 4,781 9,257 10,498
Other interest income 479 860 834 1,275
20,640 16,141 40,473 31,722
Interest Expense
Interest on deposits 6,142 4,252 11,680 8,329
Interest on borrowings 1,425 449 2,766 1,013
7,567 4,701 14,446 9,342
Net interest income 13,073 11,440 26,027 22,380
Provision for credit losses 300 51 700 203
Net interest income after provision for credit losses 12,773 11,389 25,327 22,177
Other Income
Service charges on deposit accounts 2,183 2,167 4,365 4,258
Loan administration fees 969 1,054 1,964 2,150
Other customer fees 463 422 923 793
Gain (loss) on investment securities (5) (1,526) 1 (1,693)
Gain on sale of banking offices 1,954 1,954
Other 157 102 365 281
5,721 2,219 9,572 5,789
Other Expenses
Personnel 5,470 4,926 10,960 9,996
Occupancy and equipment, net 1,667 1,461 3,370 2,753
Other 3,607 3,503 7,064 6,724
10,744 9,890 21,394 19,473
Income before income taxes 7,750 3,718 13,505 8,493
Provision for income taxes 2,922 1,236 5,132 3,013
Net income $4,828 $2,482 $8,373 $5,480
Primary earnings per common share $0.67 $0.35 $1.16 $0.78
Average number of common shares and equivalent 7,203 7,028 7,183 7,013
Fully diluted earnings per common share $0.66 $0.35 $1.15 $0.78
Average number of common shares and equivalent 7,266 7,057 7,264 7,029
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Intercontinental Bank and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(unaudited)
<S> <C> <C>
Operating Activities
Net income $8,373 $5,480
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization 1,795 1,590
Net amortization of premiums (accretion of discounts)
on investment securities (1,140) 568
Amortization of intangible assets 1,904 1,375
Provision for credit losses 700 203
Write-down of other real estate 276
Loss (gain) on sales of:
Investment securities (1) 1,693
Other real estate (201) (19)
Premises and equipment (7) (16)
Branch sales (1,954)
Decrease in loans held-for-sale 313 1,752
Decrease in interest receivable 569 1,197
(Increase) decrease in all other assets (481) 1,548
Decrease in all other liabilities (2,861) (5,776)
Net cash provided by operating activities 7,009 9,871
Investing Activities
Investment securities held-to-maturity:
Proceeds from maturities and principal paydowns 5,477 13,965
Purchases (11,086)
Investment securities available-for-sale:
Proceeds from sales 41,726 214,028
Proceeds from maturities and principal paydowns 5,233 96,437
Purchases (9,990) (154,752)
Net increase in loans (25,031) (57,133)
Other real estate:
Proceeds from sales 1,142 544
Payments collected 16 19
Premises and equipment:
Proceeds from sales 796 170
Capital expenditures (1,046) (1,029)
Purchase of mortgage servicing rights (650) (1,304)
Net cash paid for the sale of banking offices (29,534)
Net cash provided by (used in) investing activities (11,861) 99,859
</TABLE>
- 3 -
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Intercontinental Bank and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(unaudited)
<S> <C> <C>
Financing Activities
Net increase in deposits 27,689 13,701
Net decrease in short-term borrowings (18,341) (21,583)
Repayment of long-term debt (250)
Exercise of stock options 279 252
Cash dividends paid (1,880) (982)
Cash dividends paid to shareholders of pooled bank (64)
Net cash provided by (used in) financing activities 7,747 (8,926)
Net increase in cash and cash equivalents 2,895 100,804
Cash and cash equivalents at January 1 92,453 89,292
Cash and cash equivalents at June 30 $95,348 $190,096
</TABLE>
Gross amounts of interest paid in 1995 and 1994 were $14 million and $9.4
million, respectively. Income taxes paid in 1995 and 1994 were $5.6 million
and $6.2 million, respectively.
See notes to consolidated financial statements.
- 4 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intercontinental Bank and Subsidiaries
(unaudited)
Note 1- Accounting Policies
The consolidated financial statements include Intercontinental Bank and its
subsidiaries ("Intercontinental" or the "Bank"). All significant intercompany
balances and transactions have been eliminated in consolidation. The condensed
financial information presented herein, while not necessarily indicative of
the results to be expected for the year, reflect, in the opinion of management,
all adjustments necessary for a fair presentation of the results of the
interim periods.
The accounting policies followed in the presentation of the interim
financial statements, except for the policy on certain loans as described in
Note 4 below, are the same as those followed on an annual basis. These
policies are presented on pages 24 to 26 of the 1994 Annual Report to
Shareholders.
Note 2 - Pending Acquisition by NationsBank Corporation
On June 26, 1995, Intercontinental and NationsBank Corporation ("NationsBank")
jointly announced the signing of a definitive agreement for the acquisition of
Intercontinental by Nationsbank. Under the terms of the agreement,
Intercontinental shareholders will receive $30 per common share in the form of
NationsBank common stock. This tax-free transaction, which is subject to the
approval of the Intercontinental shareholders and various regulatory agencies,
is expected to close on or about December 31, 1995.
Note 3 - Sale of Banking Offices
Effective April 14, 1995, Intercontinental sold two banking facilities and
their related deposits recording a pretax gain on this transaction of
approximately $2 million. Deposits in these two banking offices totaled $30
million at the time of the sale.
Note 4 - Change in Accounting Principle
Intercontinental adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114"), as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures", on January 1, 1995. These statements
modify the accounting for certain loans (impaired loans) where it is
probable that the Bank will be unable to collect all amounts due according to
the contractual terms of the loan agreement. Under these new standards, the
1995 allowance for possible credit losses related to these loans is based on
discounted cash flows using the loan's initial effective rate or the fair
value of the collateral for certain collateral dependent loans. Prior to 1995,
the allowance for possible credit losses related to these loans was based on
the undiscounted cash flows or the fair value of their collateral.
At June 30, 1995, the aggregate amount of loans that are considered
impaired under SFAS No. 114 was $1.5 million (all of which were on a
non-accrual basis). The valuation allowance required on these impaired loans
totaled $244,000 and is included in the allowance for possible credit losses
on the Consolidated Balance Sheet. For the six months ended June 30, 1995,
these loans averaged $2.1 million. The Bank has not recognized any interest
income on these impaired loans during the first half of 1995.
- 5 -
<PAGE>
Note 5 - 1994 Acquisition of The Bank of Coral Gables
Effective July 1, 1994, Intercontinental acquired Interstate Bank Holding
Company ("Interstate") and its subsidiary, The Bank of Coral Gables ("BOCG"),
in a transaction valued at approximately $16 million. The total number of
common shares issued aggregated 681,070. The Bank's historical consolidated
financial statements and schedules included in this report were restated to
reflect this acquisition which was accounted for as a pooling of interests.
The former BOCG, which operated two Dade County branch banking offices, had
assets totaling $97 million at July 1, 1994. The following table summarizes
the impact of the Interstate acquisition on the Bank's previously reported
results of operations for the quarter and six months ended June 30, 1994
(in thousands):
Net Net
Interest Income
Three months ended June 30, 1994 Income (Loss)
Intercontinental, as previously reported $10,459 $2,710
Interstate 981 (228)
$11,440 $2,482
Net Net
Interest Income
Six months ended June 30, 1994 Income (Loss)
Intercontinental, as previously reported $20,436 $5,544
Interstate 1,944 (64)
$22,380 $5,480
Note 6 - Subsequent Event
On July 31, 1995, Intercontinental sold substantially all of the mortgage
servicing rights of its wholly-owned mortgage banking subsidiary, Pan
American Mortgage Corp. This sale of approximately $1 billion of mortgage
servicing rights will result in a pretax gain of approximately $6.2 million.
This transaction has had no impact on Intercontinental's operations or
financial results as of June 30, 1995.
- 6 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Intercontinental Bank, a Florida state-chartered commercial bank based in
Miami, Florida, currently operates 24 commercial banking offices in
Dade, Broward and Palm Beach counties. Intercontinental also owns Pan
American Mortgage Corp. ("PAMCO"), a mortgage banking company which
serviced approximately $1.1 billion residential and commercial loans at
June 30, 1995. Intercontinental Bank and its subsidiaries are
collectively referred to herein as "Intercontinental" or the "Bank".
Effective December 30, 1994, Boca Bancorp, Inc and its subsidiary, Boca
Bank, were merged into Intercontinental in a transaction accounted for
as a purchase.
Effective April 14, 1995, Intercontinental sold two banking facilities
and their related deposits recording a pretax gain on this transaction
of approximately $2 million. Deposits in these two banking offices totaled
$30 million at the time of the sale.
On June 26, 1995, Intercontinental and NationsBank Corporation
("NationsBank") jointly announced the signing of a definitive agreement for
the acquisition of Intercontinental by NationsBank. Under the terms of the
agreement, Intercontinental shareholders will receive $30 per common share
in the form of NationsBank common stock. This tax-free transaction,
which is subject to the approval of the Intercontinental shareholders
and various regulatory agencies, is expected to close on or about December 31,
1995.
On July 31, 1995, Intercontinental sold substantially all of the mortgage
servicing rights of PAMCO. This sale of approximately $1 billion of
mortgage servicing rights will result in a pretax gain of approximately
$6.2 million. This transaction has had no impact on Intercontinental's
operations or financial results as of June 30, 1995. Refer to the
section "Sale of Mortgage Servicing Rights" below for an explanation of the
future impact of the sale of the mortgage servicing portfolio.
FINANCIAL HIGHLIGHTS
The Bank's second quarter 1995 net income was $4.8 million, or $.67 per
common share, compared with $2.5 million, or $.35 per common share, in the
second quarter of 1994. On a year-to-date basis, net income was $8.4
million, or $1.16 per common share, in 1995 compared with $5.5 million,
or $.78 per common share, in 1994. Included in both 1995 periods was a $1.2
million net of tax gain on the sale of two banking offices. Losses on
investment securities were recorded in the 1994 second quarter totaling
$946,000, net of tax, and in the six months ended June 30, 1994 aggregating
$1 million, net of tax.
The Bank's overall credit quality improved during the second quarter of
1995. Non-performing assets expressed as a percentage of total assets were
.83 percent at June 30, 1995 compared with .93 percent at year-end 1994. The
annualized returns on average assets and average shareholders' equity for
the three months ended June 30, 1995 improved to 1.68 percent and 19.44
percent, respectively. Comparable second quarter 1994 returns were
.90 percent and 12.02 percent.
EARNINGS ANALYSIS
Net Interest Income
Net interest income of $13 million in the 1995 second quarter was $1.6
million, or 14 percent, higher than the $11 million earned in the same
quarter in 1994. For the six months ended June 30, 1995, net interest
income was $26 million compared with $22 million in the prior year
comparable period (a $3.6 million, or 16 percent, increase). These
positive variances resulted from significant increases
- 7 -
<PAGE>
in interest income which were partially offset by increases in interest
expense. Table 1 and 2 reflect the average balances of interest earning
assets and interest bearing liabilities, interest income and interest
expense and the weighted average yields/rates of such assets and liabilities
for the three and six months ended June 30, 1995 and 1994. The components of
the net interest income variance are illustrated in Tables 3 and 4.
Interest income of $21 million in the 1995 second quarter increased
$4.5 million, or 28 percent, over the 1994 comparable quarter. This
positive variance was primarily the result of the impact of increases in
both the volume (up $134 million) and rates earned (up 150 basis points)
on average loans. The December 30, 1994 acquisition of Boca Bank
contributed approximately $38 million to the higher level of average loans.
A decrease in the average volume of investment securities was caused by the
funding requirements for new loans. On a year-to-date basis, interest income
of $40 million in 1995 was $8.8 million, or 28 percent, higher than the 1994
amount. The reasons for this positive variance are the same as the reasons
discussed above for the quarter.
Interest expense of $7.6 million in the 1995 second quarter increased
$2.9 million, or 61 percent, over the comparable 1994 quarter primarily due
to market interest rate increases. The significantly higher interest rate
environment, as reflected in a 250 basis point increase in the federal funds
rate since March 31, 1994, contributed to the higher rates paid on a
majority of the interest bearing liabilities. In addition, an increase in
borrowings to fund loans and change in the deposit mix also contributed to
this increase in interest expense. For the six months ended June 30, 1995,
interest expense totaled $14 million compared with $9.3 million in the
comparable 1994 period, representing an increase of $5.1 million, or 55
percent. The reasons for the year-to-date variance are the same as those
discussed above for the quarterly variance.
The net interest margin increased to 5.20 percent in the 1995 second
quarter compared with 4.78 percent in the same 1994 period primarily due
to the impact of an increase in the average yields earned on earning assets
and a higher level of non-interest bearing deposits which were partially
offset by the overall increase in the cost of funds. The increase in
the average yields on earning assets was due to a higher ratio of average
loans to average earning assets in 1995 (66 percent) compared with 1994
(56 percent) as well as an overall increase in average yields. On a
year-to-date basis, the net interest margin was 5.22 percent in 1995 compared
with 4.66 percent in 1994.
Net interest income and the net interest margin will not be affected
materially by the April 1995 sale of the two banking offices due to the
higher cost of the deposit mix associated with these banking offices in
comparison with the overall deposit mix of the remaining deposits. Refer to
the section "Sale of Mortgage Servicing Rights" below for an
explanation of the future impact of the sale of the mortgage servicing
portfolio.
- 8 -
<PAGE>
Table 1
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
Average Average
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Loans, net of unearned income $ 677,400 $15,623 9.25% $ 543,597 $10,500 7.75%
Investment securities 310,878 4,538 5.84 346,167 4,781 5.54
Federal funds sold and securities
purchased under agreements to resell 25,923 391 6.05 59,091 583 3.96
Interest earning deposits in
other banks 6,044 88 5.84 27,721 277 4.01
Total earning assets 1,020,245 20,640 8.11 976,576 16,141 6.63
Allowance for possible credit losses (11,915) (9,577)
Cash and due from banks 63,174 61,029
Other real estate, net 2,625 3,818
Premises and equipment, net 48,073 49,553
Other assets, net 29,377 26,385
Total assets $1,151,579 $1,107,784
Liabilities and Shareholders' Equity
Deposits:
NOW accounts $ 122,946 533 1.74 $ 122,677 513 1.68
Savings accounts 50,458 259 2.06 60,206 313 2.09
Money market accounts 214,098 1,732 3.24 254,541 1,482 2.34
Time deposits 266,807 3,618 5.44 239,406 1,944 3.26
Total interest bearing deposits 654,309 6,142 3.77 676,830 4,252 2.52
Short-term borrowings 101,055 1,425 5.66 61,217 440 2.88
Long-term debt 500 9 7.22
Total interest bearing liabilities 755,364 7,567 4.02 738,547 4,701 2.55
Non-interest bearing deposits 286,890 278,027
Other liabilities 9,689 8,401
Total liabilities 1,051,943 1,024,975
Shareholders' equity 99,636 82,809
Total liabilities and
shareholders' equity $1,151,579 $1,107,784
Net interest income/spread $13,073 4.09 $11,440 4.08
Cost of funds supporting earning
assets 2.97 1.93
Net interest yield 5.14 4.70
Net interest margin 5.20 4.78
</TABLE>
- 9 -
<PAGE>
Table 2
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
Average Average
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Loans, net of unearned income $ 671,761 $30,382 9.12% $ 530,157 $ 19,949 7.59%
Investment securities 319,116 9,257 5.85 383,409 10,498 5.52
Federal funds sold and securities
purchased under agreements
to resell 24,470 724 5.97 52,909 950 3.62
Interest earning deposits in
other banks 3,884 110 5.71 16,999 325 3.86
Total earning assets 1,019,231 40,473 8.01 983,474 31,722 6.50
Allowance for possible credit
losses (11,910) (9,491)
Cash and due from banks 64,410 61,311
Other real estate, net 2,753 4,032
Premises and equipment, net 48,484 49,772
Other assets, net 28,837 29,674
Total assets $1,151,805 $1,118,772
Liabilities and Shareholders' Equity
Deposits:
NOW accounts $ 129,355 1,116 1.74 $ 124,583 1,040 1.68
Savings accounts 53,416 544 2.05 59,431 614 2.08
Money market accounts 218,225 3,455 3.19 251,556 2,895 2.32
Time deposits 258,959 6,565 5.11 239,986 3,780 3.18
Total interest bearing deposits 659,955 11,680 3.57 675,556 8,329 2.49
Short-term borrowings 99,554 2,766 5.60 74,228 995 2.70
Long-term debt 500 18 7.26
Total interest bearing
liabilities 759,509 14,446 3.84 750,284 9,342 2.51
Non-interest bearing deposits 285,153 274,556
Other liabilities 10,747 10,212
Total liabilities 1,055,409 1,035,052
Shareholders' equity 96,396 83,720
Total liabilities and
shareholders' equity $1,151,805 $1,118,772
Net interest income/spread $26,027 4.17 $22,380 3.99
Cost of funds supporting earning
assets 2.86 1.91
Net interest yield 5.15 4.59
Net interest margin 5.22 4.66
</TABLE>
- 10 -
<PAGE>
Table 3
(in thousands)
Three Months Ended June 30, 1995/
Three Months Ended June 30, 1994
Changes in Interest Due to:
Average
Interest Income Rate Balance Total
Loans, net of unearned income $2,033 $3,090 $5,123
Investment securities 268 (511) (243)
Federal funds sold and securities purchased
under agreements to resell 308 (500) (192)
Interest earning deposits in other banks 126 (315) (189)
Total interest income 2,735 1,764 4,499
Interest Expense
Deposits:
NOW accounts 18 2 20
Savings accounts (5) (49) (54)
Money market accounts 571 (321) 250
Time deposits 1,301 373 1,674
Short-term borrowings 424 561 985
Long-term debt (9) (9)
Total interest expense 2,309 557 2,866
Net interest income $ 426 $1,207 $1,633
Table 4
(in thousands)
Six Months Ended June 30, 1995/
Six Months Ended June 30, 1994
Changes in Interest Due to:
Average
Interest Income Rate Balance Total
Loans, net of unearned income $4,022 $6,411 $10,433
Investment securities 627 (1,868) (1,241)
Federal funds sold and securities purchased
under agreements to resell 617 (843) (226)
Interest earning deposits in other banks 156 (371) (215)
Total interest income 5,422 3,329 8,751
Interest Expense
Deposits:
NOW accounts 37 39 76
Savings accounts (9) (61) (70)
Money market accounts 1,085 (525) 560
Time deposits 2,297 488 2,785
Short-term borrowings 1,067 704 1,771
Long-term debt (18) (18)
Total interest expense 4,477 627 5,104
Net interest income $ 945 $2,702 $ 3,647
- 11 -
<PAGE>
Provision for Credit Losses
The provision for credit losses was $300,000 in the second quarter of
1995 compared with $51,000 in the second quarter of 1994. For the six
months ended June 30, 1995, the provision totaled $700,000 compared with
$203,000 in the prior year comparable period. The higher provisions
in 1995 were directly related to the higher level of charge-offs coupled
with the overall increase in loans.
Other Income
Other income for the 1995 second quarter of $5.7 million was $3.5
million higher than the comparable 1994 quarter. For the six months
ended June 30, 1995, other income totaled $9.6 million compared with $5.8
million in 1994, representing a $3.8 million increase. Included in both
1995 periods was a $2 million gain on the sale of two banking offices.
Losses on investment securities were recorded in the 1994 second quarter
totaling $1.5 million and in the six months ended June 30, 1994 aggregating
$1.7 million. Without the 1995 gain on the sale of the banking
offices and the 1994 investment losses, other income would have been
substantially unchanged year-to-year on both a quarter and six-month
basis. The components of other income for these periods are summarized
in Table 5.
Table 5
(in thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
Incr. Incr.
1995 1994 (Decr.) 1995 1994 (Decr.)
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $2,183 $2,167 $ 16 $4,365 $ 4,258 $ 107
Loan administration fees 969 1,054 (85) 1,964 2,150 (186)
Other customer fees 463 422 41 923 793 130
Gain (loss) on investment securities (5) (1,526) 1,521 1 (1,693) 1,694
Gain on sale of banking offices 1,954 1,954 1,954 1,954
Other income 157 102 55 365 281 84
$5,721 $2,219 $3,502 $9,572 $5,789 $3,783
</TABLE>
Loan administration fees of $969,000 in the second quarter 1995 decreased
$85,000, or 8 percent, from the 1994 second quarter. For the six months
ended June 30, 1995, loan administration fees of $2 million were $186,000,
or 9 percent, lower than the comparable 1994 period. Although the level of
the mortgage servicing portfolio has remained fairly constant, the amount
of fees earned on such portfolio has declined as the mix of loans has changed
towards those generating lower service fees. As discussed previously,
substantially all of the mortgage servicing portfolio was sold on
July 31, 1995. Refer to the section "Sale of Mortgage Servicing Rights"
below for an explanation of the future impact of the sale of the
mortgage servicing portfolio.
Other customer fees for the three months ended June 30, 1995 of $463,000
were $41,000, or 10 percent, higher than the comparable period in 1994
primarily due to higher letter of credit fees. On a year-to-date basis,
other customer fees totaled $923,000 in 1995 and $793,000 in 1994 for the
same reason.
Other Expenses
Other expenses for the quarter ended June 30, 1995 of $11 million were
$854,000, or 9 percent,
- 12 -
<PAGE>
higher than the 1994 comparable quarter. For the first half of 1995,
other expenses totaled $21 million compared with $19 million in 1994, a
$1.9 million, or 10 percent, increase. The impact of the Boca Bank
acquisition and the significantly higher amortization expense discussed
below are the main reasons for these increases. The components of other
expenses for these periods are summarized in Table 6.
Table 6
(in thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Incr. Ended June 30, Incr.
1995 1994 (Decr.) 1995 1994 (Decr.)
<S> <C> <C> <C> <C> <C> <C>
Personnel expense $ 5,470 $4,926 $ 544 $10,960 $ 9,996 $ 964
Occupancy and equipment, net 1,667 1,461 206 3,370 2,753 617
Amortization of intangible assets 954 448 506 1,904 1,375 529
FDIC insurance premium 497 502 (5) 1,012 1,005 7
Stationery and supplies 201 240 (39) 428 398 30
Professional fees 196 238 (42) 493 452 41
Postage and courier 190 182 8 403 365 38
Communications 144 137 7 306 280 26
Data processing 139 190 (51) 279 376 (97)
Other 1,286 1,566 (280) 2,239 2,473 (234)
$10,744 $9,890 $ 854 $21,394 $19,473 $1,921
</TABLE>
Personnel expense of $5.5 million for the second quarter of 1995
was $544,000, or 11 percent, higher than the comparable 1994 quarter. On
a year-to-date basis, personnel expense totaled $11 million in 1995
compared with $10 million in 1994, a $964,000, or 10 percent, increase.
Both increases were primarily due to the increased staff level resulting
from the acquisition of Boca Bank coupled with merit increases.
Net occupancy and equipment expense of $1.7 million for the
second quarter of 1995 was up $206,000, or 14 percent, over the prior year
due to the addition of two former Boca Bank banking offices and higher
depreciation expense due to capital improvements made in 1994.
Included in net occupancy and equipment expense in the second quarters of
1995 and 1994 were $394,000 and $374,000, respectively, in net tenant
rental income related to a single tenant lease on an office building owned
by Intercontinental. The lease, which has a ten-year term, is due to
expire in December 1995. The current tenant (NationsBank) has notified
Intercontinental that it is not renewing its lease. Intercontinental is
presently evaluating its alternatives including selling the building or
leasing bout December 31, 1995. The effect of the non-renewal of this
lease cannot be fully measured at the present time and may have a material
impact on the Bank's future occupancy expenses and net income.
On a year-to-date basis, net occupancy and equipment expense totaled $3.4
million in 1995 and $2.8 million in 1994. The $617,000, or 22 percent,
increase is due to the same reasons mentioned above as well as lower tenant
rental income.
Amortization of intangible assets was $954,000 in the second
quarter of 1995 compared with $448,000 in the same period of 1994,
a $506,000 increase. For the six months ended June 30, 1995,
amortization expense totaled $1.9 million compared with $1.4 million in
1994, a $529,000 increase. The majority of this amortization related to
purchased mortgage servicing rights (PMSRs).
- 13 -
<PAGE>
The 1994 three months and year-to-date totals included a $500,000 reduction
in amortization expense resulting from the improvement in the prepayment
performance of the mortgage servicing portfolio. Refer to the section
"Sale of Mortgage Servicing Rights" below for an explanation of the
future impact of the sale of the mortgage servicing portfolio.
Stationery and supplies expense for the second quarter of 1995
totaled $201,000, representing a $39,000, or 16 percent, decrease from
the comparable 1994 period. For the six months ended June 30, 1995,
stationery and supplies expense totaled $428,000 compared with
$398,000 in 1994 primarily due to the acquisition of Boca Bank and an
increase in overall costs of paper products and supplies.
Professional fees, which include accounting and legal fees,
for the second quarter of 1995 of $196,000 were $42,000, or 18 percent,
lower than the amount recorded for the comparable 1994 period. For the six
months ended June 30, 1995, professional fees of $493,000 were $41,000, or
9 percent, higher than 1994. The 1994 amounts include legal fees
incurred by The Bank of Coral Gables (a bank which Intercontinental
acquired in July 1994 and accounted for as a pooling of interests). Legal
expenses in the first quarter of 1995 include a legal matter which was
resolved during that quarter.
Data processing expenses of $139,000 for the second quarter of
1995 were $51,000, or 27 percent, lower than the comparable 1994 quarter
because of the cancellation of certain contracts related to the former
Bank of Coral Gables. On a year-to-date basis, data processing expenses
of $279,000 in 1995 were $97,000, or 26 percent, lower than 1994 for the same
reason.
Income Taxes
The provision for income taxes for the second quarter 1995 was $2.9
million compared with $1.2 million in the second quarter of 1994. The
$1.7 million, or 136 percent, increase in the provision was related to the
increase in income before income taxes over the prior year's comparable
quarter. The Bank's effective tax rate increased from 33.2 percent in
the 1994 second quarter to 37.7 percent in the comparable 1995 period. On a
year-to-date basis, the provision for income taxes aggregated $5.1 million
in 1995 and $3 million in 1994.
BALANCE SHEET REVIEW
Investment Securities
As shown in Table 7, the available-for-sale portfolio, which is recorded at
market value, was valued at $178 million at June 30, 1995. The $233,000
unrealized gain in this portfolio, which resulted from the impact of the
declining rate environment was reflected, net of its related tax effect,
as a $144,000 addition to shareholders' equity. At year-end 1994, an
unrealized loss of $7.5 million, or $4.7 million net of tax, was reported.
At June 30, 1995, the held-to-maturity portfolio, which is recorded
at amortized cost, aggregated $112 million, representing an unrealized
loss of $1.4 million. At year-end 1994, this unrealized loss aggregated
$7.8 million. The significant decrease in the unrealized loss was primarily
due to the current declining interest rate environment.
During the six months ended June 30, 1995, $42 million of investment
securities were sold for a realized gain of $1,400. Favorable market
conditions provided the opportunity to reduce the Bank's level of short-term
borrowings at a moderate cost saving.
- 14 -
<PAGE>
Table 7
(in thousands)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
June 30, 1995:
Available-for-sale:
U.S. Government and agency securities $169,635 $ 646 $(1,862) $168,419
Other debt securities 7,256 (118) 7,138
Total debt securities 176,891 646 (1,980) 175,557
Equity securities 1,114 1,567 2,681
$178,005 $ 2,213 $(1,980) $178,238
Held-to-maturity:
Mortgage-backed securities $111,142 $ 511 $(1,828) $109,825
Other debt securities 347 (33) 314
Total debt securities 111,489 511 (1,861) 110,139
Equity securities 231 231
$111,720 $ 511 $(1,861) $110,370
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1994:
Available-for-sale:
U.S. Government and agency securities $203,077 $ 3 $(8,428) $194,652
Mortgage-backed securities 2,096 45 2,141
Other debt securities 7,359 (263) 7,096
Total debt securities 212,532 48 (8,691) 203,889
Equity securities 1,114 1,142 2,256
$213,646 $1,190 $(8,691) $206,145
Held-to-maturity:
Mortgage-backed securities $116,796 $ 8 $(7,703) $109,101
Other debt securities 357 (70) 287
Total debt securities 117,153 8 (7,773) 109,388
Equity securities 231 231
$117,384 $ 8 $(7,773) $109,619
</TABLE>
Loans
Gross loans at June 30, 1995 of $690 million increased $24 million, or
3.6 percent, over the year-end 1994 level. While the level of loans
continues to increase, the rate of increase is not as strong as in 1994
reflecting general conditions in the economy.
Allowance for Possible Credit Losses
As shown on Table 8, at June 30, 1995, the allowance for possible credit
losses totaled $12 million, an increase of $92,000 over the amount
reported at year-end 1994. Included in the allowance is $244,000 for impaired
loans (see Note 4). The level of non-accruing loans, which represents .41
percent of total loans, is an indication of the overall credit quality
of the Bank's loan portfolio. The Bank's ratio of the allowance for
possible credit losses to loans was 1.73 percent at June 30, 1995
- 15 -
<PAGE>
compared with 1.77 percent at December 31, 1994. The ratio of the allowance
to non-accruing loans was 424 percent at June 30, 1995 compared with 331
percent at year-end 1994.
Table 8
(in thousands)
Balance, December 31, 1994 $11,779
Provision charged to expense 700
Charge-offs (791)
Recoveries 183
Balance, June 30, 1995 $11,871
Credit Risk Assets
Table 9 summarizes the composition of non-performing assets at
June 30, 1995 and year-end 1994. Non-performing assets, which consist of
non-accruing loans, restructured loans and real estate acquired through
foreclosure (classified as Other real estate, net on the Consolidated
Balance Sheet), totaled $9.4 million at the end of June 1995, down
$1.4 million, or 13 percent, from the year-end 1994 level. Included in
non-accruing loans are $1.5 million of impaired loans (see Note 4).
Non-performing assets, expressed as a percentage of total assets, was .83
percent at June 30, 1995 compared with .93 percent at year-end 1994.
Table 9
(in thousands)
June 30, Dec. 31,
1995 1994
Non-accruing loans $ 2,803 $ 3,554
Restructured loans 3,828 3,837
Other real estate, net 2,802 3,417
$ 9,433 $10,808
Certain loans, although they are past due 90 days or more, are not
classified as non-accruing. These loans totaled $3.4 million at June 30,
1995. In addition to non-accruing, restructured and past due loans, the
Bank has identified loans totaling $1.2 million at June 30, 1995 for
which management has concerns about their continued performance and, in
some cases, their ultimate collectibility in full even though payments are
current or less than 90 days past due, and the borrowers are complying with
their loan agreements. Management, in its evaluation of the adequacy of
the allowance for possible credit losses, takes into account the risks
associated with these loans. Substantially all of these loans were
residential real estate loans which are substantially collateralized.
Deposits
As shown in Table 10, the Bank's deposits of $952 million at June 30, 1995
were slightly lower than year-end 1994. The April 1995 sale of two of
Intercontinental's banking offices caused deposits to decrease $30 million.
The July 1995 sale of PAMCO's mortgage servicing will negatively impact
future deposit levels as PAMCO maintained its escrow deposits with
Intercontinental. This amount totaled $29 million at June 30, 1995. Refer
to the section "Sale of Mortgage Servicing Rights"
- 16 -
<PAGE>
below for an explanation of the future impact of the sale of the mortgage
servicing portfolio.
The mix between higher cost deposits and lower cost deposits was
negatively impacted during the first six months of 1995 by the
significant increase in the level of time deposits coupled with the
decreased level of NOW, savings and money market accounts. Non-interest
bearing accounts increased slightly during this period.
Table 10
(dollars in thousands)
Percent of Percent of
June 30, Total Dec. 31, Total
1995 Deposits 1994 Deposits
Non-interest bearing accounts $285,928 30% $278,013 29%
NOW accounts 118,750 12 145,060 15
Savings accounts 48,849 5 57,979 6
Money market accounts 218,363 23 232,561 25
Time deposits 280,292 29 242,028 25
$952,182 100% $955,641 100%
INTEREST SENSITIVITY
The Bank's management believes that its interest rate risk is best
measured by the amount of earnings at risk given specified changes in
interest rates. The Bank analyzes interest rate sensitivity with an
earnings simulation model. This model captures all earning assets and
interest bearing liabilities and combines various factors affecting rate
sensitivity into an earnings outlook which incorporates management's view
of the interest rate environment that is most likely for the next 12
months. The Asset Liability Management Committee reviews and updates
the underlying assumptions included in the earnings simulation model on
a periodic basis.
The Bank's interest rate sensitivity analysis is based on
multiple interest rate scenarios and projected changes in balance sheet
categories and other relevant assumptions. Changes in management's
outlook and other market factors may cause actual results to differ from
the current simulated outlook. The sensitivity of earnings to changes
in interest rates is determined by assessing the impact on net interest
income of rising and falling interest rate scenarios. The model uses three
scenarios -- most likely, rising and declining -- in analyzing interest rate
sensitivity and determines the interest sensitivity by measuring the change
in net interest income between rising and falling rate scenarios (dispersion).
The Bank manages its interest rate risk by targeting to maintain this
dispersion within certain policy limits.
The interest rate risk sensitivity model is supplemented with
traditional gap measurement. The gap tables have certain limitations on
their ability to accurately portray interest sensitivity; however, they do
provide a static reading of the Bank's interest rate risk exposure. The
Bank's gap table at June 30, 1995 is shown in Table 11. As of that
date, Intercontinental was asset sensitive (i.e., interest sensitive assets
subject to repricing exceeded interest sensitive liabilities subject to
repricing) on a 365-day basis, to the extent of $36 million. This "positive
gap" at June 30, 1995 was 3.2 percent of total assets compared with a
"negative gap" of 3.7 percent at year-end 1994. The primary causes for this
change in the gap were increases in both loans which mature or reprice
within one year and investment securities with a remaining maturity of
less than one year as well as an increase in time deposits with greater than
one year maturity. The Bank's targeted gap position varies with
management's outlook of the interest rate environment and generally is
in the range of
- 17 -
<PAGE>
negative 20 percent to positive 10 percent. The Bank measures its gap
position as a percentage of its total assets.
While the absolute level of gap is a measurement of interest
rate risk, the quality of the assets and liabilities in the balance
sheet must be analyzed in order to understand the degree of interest rate
risk taken by the Bank. The available-for-sale securities portfolio with a
weighted average maturity of 2.1 years provides further protection
against structural changes in the interest rate environment which are
longer term than one year. This reliance on highly liquid
securities for gap management purposes significantly mitigates the
interest rate risk while simultaneously providing a positive income stream for
the Bank.
The Bank may, from time to time, utilize derivative products, such as
interest rate swaps, floors and caps, in its management of interest
rate risk; however, there were no such interest rate derivative contracts
outstanding at June 30, 1995.
Table 11
(in thousands)
<TABLE>
<CAPTION>
Over One
Year and
Total Non-
0-30 31-90 91-180 181-365 Interest interest
Days Days Days Days Sensitive Sensitive Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest sensitive assets
Loans $ 324,094 $ 47,167 $ 70,374 $133,862 $575,497 $114,599 $ 690,096
Investment securities 4,210 33,787 6,158 47,719 91,874 190,084 289,958
Federal funds sold 28,000 28,000 28,000
Interest earning deposits in
other banks 7,484 7,484 7,484
363,788 80,954 76,532 181,581 $702,855 $312,683 $1,015,538
Interest sensitive liabilities
Deposits 401,803 51,964 51,296 83,271 $588,334 $363,848 $ 952,182
Borrowings 78,319 78,319 78,319
480,122 51,964 51,296 83,271 666,653 $363,848 $1,030,501
Gap $(116,334) $ 28,990 $ 25,236 $ 98,310 $ 36,202
Cumulative gap $(116,334) $(87,344)$(62,108)$ 36,202 $ 36,202
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Management believes that maintaining an exceptionally strong capital
base enhances the profitable growth opportunities of the Bank. Management
carefully monitors the level and distribution of capital relative to the
size and mix of its balance sheet in order to maximize shareholder returns.
Earnings provide the main source of equity capital to support asset growth.
Regulatory agencies have established a risk-based capital
framework that makes capital requirements more sensitive to the risk
profiles of individual banking companies. These guidelines define capital
as either core (Tier 1) capital or supplementary (Tier 2) capital.
Tier 1 capital consists primarily of shareholders' equity, while Tier 2
capital is comprised of certain debt instruments and a portion of the
allowance for possible credit losses. Leverage capital is the ratio of
Tier 1 capital to average total assets.
The Bank is required to have a minimum Tier 1 capital ratio of 4
percent and a total risk-based capital ratio (Tier 1 plus Tier 2) of 8
percent. At June 30, 1995, the Bank's Tier 1 and total risk-based capital
ratios were 12.80 percent and 14.10 percent, respectively. At that same
time, the Bank's leverage capital ratio was 8.26 percent. The Bank's
capital ratios not only exceeded the
- 18 -
<PAGE>
minimum standards, but substantially exceeded the ratios required to
meet the regulatory definition of a "well capitalized institution".
The Bank's liquidity policy requires that it maintain a 5
percent primary liquidity ratio consisting of cash, due from bank deposits,
overnight and short-term investments maturing in less than 180 days and a
secondary liquidity ratio of 15 percent consisting of the components of
primary liquidity and all other unpledged investments. These ratios are
calculated as a percent of the deposit base excluding public fund
deposits. The Bank's primary and secondary liquidity ratios on June 30,
1995 were 11 percent and 29 percent, respectively.
A minimum liquidity level approximating $25 million, in addition
to cash and due from banks, is deemed prudent by Intercontinental for the
effective operation of the Bank under present circumstances. At June 30,
1995, Intercontinental had, in addition to cash and due from banks, a
total of $66 million of short-term assets maturing in less than 90 days
primarily consisting of overnight investments. As a result of the Bank's
current strong liquidity position and its ability to borrow against its
securities portfolio, the Bank has sufficient liquidity to meet any
funding requirements in connection with its day-to-day operations.
SALE OF MORTGAGE SERVICING RIGHTS
As discussed in Note 6, substantially all of the mortgage servicing
rights of the Bank's wholly-owned mortgage banking subsidiary, PAMCO,
were sold on July 31, 1995. The sale of approximately $1 billion of
mortgage servicing rights will result in a pretax gain of approximately
$6.2 million. The transfer of the mortgage servicing operations is
scheduled on or about October 1, 1995. The estimated annual reduction in
the Bank's pretax income is approximately $500,000 resulting from a
combination of a loss of net interest income and loan administration fees
partially offset by a reduction in the amortization of mortgage
servicing rights and other mortgage banking related operating
expenses. It is anticipated that the transaction will result in a net
cash outflow of approximately $15 million which relates to the transfer of
the escrow deposits associated with the mortgage servicing portfolio
partially offset by net cash proceeds received from the sale of the
mortgage servicing rights. The funding requirements will not materially
affect the Bank's liquidity position discussed previously.
- 19 -
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the bank has
duly caused this report to be signed on its behalf by the undersigned as its
duly authorized officer and principal accounting officer.
Intercontinental Bank
(Bank)
August 10, 1995 /s/ Thomas E Beier
Date Thomas E. Beier
Executive Vice President and
Chief Financial Officer
- 20 -
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE MONTH OF DECEMBER 1994
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
200 SOUTHEAST FIRST STREET, MIAMI, FL 33131
(Address of principal executive office)
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Item 2 - Acquisition or Disposition of Assets
Effective December 30, 1994, Intercontinental Bank
("Intercontinental") acquired Boca Bancorp, Inc. ("BBI") and its
wholly-owned subsidiary, Boca Bank, in a transaction accounted for as
a purchase. Holders of BBI common stock may elect to receive their
consideration (valued in total at approximately $4.9 million) in cash or
shares of Intercontinental common stock or any combination therof
provided that no more than 773,994 shares of BBI common stock may
be converted into shares of Intercontinental common stock. A maximum
of 74,784 shares of Intercontinental common stock may be issued in
the transaction; such amount will be determined no later than February
6, 1995.
The former Boca Bank operated two branch banking offices in Boca
Raton, Florida. Prior to the merger, BBI had total assets of $71
million, of which $37 million were loans. BBI's total deposits were $68
million. At December 31, 1994, on a combined basis,
Intercontinental's assets totaled $1.2 billion and deposits totaled $956
million. Intercontinental now has 26 branches - 17 in Dade County,
seven in Broward County and two in Palm Beach County, Florida. The
purchase price, which was 1.5 times BBI's shareholders' equity, was
based on the best business judgment of Intercontinental's
management. Approximately $642,000 of fixed assets were acquired in
the transaction, substantially all of which will continue to be
used by Intercontinental subsequent to the merger. Additional
information about this transaction is incorporated by reference to the
definitive Proxy Statement/Offering Circular for the Special Meeting
of Shareholders held November 18, 1994 filed with the Federal Deposit
Insurance Corporation on October 14, 1994.
Item 13 - Financial Statements and Exhibits
(a) Financial Statements:
(bullet)BBI Consolidated Balance Sheet as of December 31, 1994
(unaudited)
(bullet)BBI Consolidated Statement of Operations for the year
ended December 31, 1994 (unaudited)
(bullet)The BBI Consolidated Balance Sheet as of
December 31, 1993 (audited) and the BBI
Consolidated Statement of Operations for each of
the three years ended December 31, 1993 (audited)
included as Appendix F to the definitive Proxy
Statement/Offering Circular for the Special Meeting
of Shareholders held November 18, 1994 filed with
the Federal Deposit Insurance Corporation on October
14, 1994 are incorporated by reference herein.
(b) Exhibits - The Agreement and Plan of Merger dated as of June
23, 1994, by and among BBI, Boca Bank, Intercontinental and
Boca Acquisition Corp. included as Appendix A to the
definitive Proxy Statement/Offering Circular for the Special
Meeting of Shareholders held November 18, 1994 filed with the
Federal Deposit Insurance Corporation on October 14, 1994 is
incorporated by reference herein.
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SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Intercontinental Bank
(Bank)
January 6, 1995 /s/ Thomas E. Beier
Date Thomas E. Beier,
Executive Vice President &
Chief Financial Officer
- 2 -
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EXHIBITS
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BOCA BANCORP, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(in thousands)
(unaudited)
ASSETS
Cash and due from banks....................... $4,019
Money market assets........................... 26,834
Investment securities......................... 125
Net loans..................................... 37,236
Other real estate, net........................ 1,460
Premises and equipment, net................... 642
Other assets, net............................. 576
$70,892
LIABILITIES
Deposits......................................$67,792
Other liabilities............................. 481
Total liabilities........................ 68,273
SHAREHOLDERS' EQUITY
Common stock.................................. 258
Capital surplus............................... 10,958
Accumulated deficit........................... (8,597)
Total shareholders' equity............... 2,619
$70,892
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BOCA BANCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FULL YEAR ENDED DECEMBER 31, 1994
(in thousands)
(unaudited)
INTEREST INCOME
Interest and fees on loans.................... $3,254
Interest and dividends on investment
securities.................................. 795
Other interest income......................... 341
4,390
INTEREST EXPENSE
Interest on deposits.......................... 1,419
Interest on borrowings........................ 129
1,548
Net interest income........................... 2,842
Provision for credit losses................... 270
Net interest income after provision
for credit losses........................... 2,572
OTHER INCOME
Service charges on deposit accounts........... 498
Loss on investment securities................. (197)
Other......................................... 228
529
OTHER EXPENSES
Personnel..................................... 1,703
Occupancy and equipment, net.................. 1,191
Other......................................... 832
3,726
Loss before income taxes...................... (625)
Provision for income taxes.................... O
Net loss...................................... ($625)
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FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE MONTH OF FEBRUARY 1995
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
200 SOUTHEAST FIRST STREET, MIAMI, FL 33131
(Address of principal executive office)
<PAGE>
Item 3 - Legal Proceedings
During 1994, suit was commenced against Intercontinental Bank (the
"Bank") and Sun States Management in the Circuit Court of Jackson
County, Mississippi by Natascia Potter, the plaintiff, who alleged
that she was assaulted while a tenant at an apartment building
which the Bank had acquired through foreclosure of a mortgage. The
plaintiff alleges that the Bank and other defendants were negligent
in failing to provide security, and plaintiff seeks compensatory
and punitive damages aggregating $25.2 million plus attorneys' fees and
costs. Counsel representing the Bank and its insurer in this matter
advises that, in its opinion, plaintiff's claim is without merit and
is not likely to result in a damage award in an amount which the Bank
would regard as material. The Bank plans to vigorously defend
this case and, in the event of an adverse judgment, does not believe it
will have a material adverse effect upon the Bank's financial condition.
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Intercontinental Bank
(Bank)
February 22, 1995 /s/ Thomas B. Brady
Date Thomas B. Brady,
Executive Vice President
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE MONTH OF APRIL 1995
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
200 SOUTHEAST FIRST STREET, MIAMI, FL 33131
(Address of principal executive office)
<PAGE>
Item 9 - Submission of Matters to a Vote of Security Holders
On April 26, 1995, the annual meeting of the shareholders of
Intercontinental Bank ("Intercontinental") was held. The
shareholders elected the Board of Directors listed in the proxy
statement for the annual meeting and approved the independent
auditors. In addition, the shareholders authorized the Board of
Directors during the year following the Intercontinental Annual Meeting
to increase the number of Directors by not more than one and to
appoint a person to fill the resulting vacancy. The vote was as
follows: 6,496,858 affirmative votes and 3,966 negative votes.
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Intercontinental Bank
(Bank)
May 8, 1995 /s/ Thomas E. Beier
Date Thomas E. Beier
Executive Vice President
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE MONTH OF JULY 1995
FDIC Certificate No. 17385
INTERCONTINENTAL BANK
(Exact name of bank as specified in its charter)
200 SOUTHEAST FIRST STREET, MIAMI, FL 33131
(Address of principal executive office)
<PAGE>
Item 2 - Acquisition or Disposition of Assets
On July 31, 1995, Intercontinental sold substantially all of
the mortgage servicing rights of its wholly-owned mortgage banking
subsidiary, Pan American Mortgage Corp. ("PAMCO") to Trans Financial
Mortgage Company, a subsidiary of Trans Financial, Inc. This sale of
approximately $1 billion of mortgage servicing rights will result in a
pretax gain of approximately $6.2 million. The total sales price of
approximately $19 million was based on the fair market value of the
mortgage servicing portfolio.
The transfer of the mortgage servicing operations is scheduled
on or about October 1, 1995. It is anticipated that the transaction
will result in a net cash outflow of approximately $15 million which
relates to the funding of the escrow deposits associated with the
mortgage serving portfolio partially offset by net cash proceeds
received from the sale of the mortgage servicing rights.
Item 13 - Exhibits
The Loan Servicing Purchase and Sale Agreement dated as of July 31,
1995 by and among PAMCO, Intercontinental and Trans
Financial Mortgage Company is attached hereto.
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the
bank has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Intercontinental Bank
(Bank)
August 9, 1995 /s/ Thomas E. Beier
Date Thomas E. Beier
Executive Vice President
<PAGE>
EXHIBIT
<PAGE>
LOAN SERVICING PURCHASE AND SALE AGREEMENT
THIS LOAN SERVICING PURCHASE AND SALE AGREEMENT, dated as of July 31, 1995,
is by and among PAN AMERICAN MORTGAGE CORPORATION, whose address is 200
Southeast First Street, Miami, Florida 33131 ("Seller"); INTERCONTINENTAL BANK,
whose address is 200 Southeast First Street, Miami, Florida 33131
("Intercontinental"), and TRANS FINANCIAL MORTGAGE COMPANY, whose address is
315 North Atlantic, Tullahoma, Tennessee 37388 ("Purchaser").
RECITALS
A. Seller desires to sell and transfer, and Purchaser desires to purchase and
assume, all of the Servicing Rights that Seller holds as mortgage seller and
servicer in and to the Loans; subject to the written consent of the
Investor(s).
B. In connection with such sale and purchase, Intercontinental is willing to
guaranty the obligations of Seller hereunder.
C. The Parties desire to execute this Agreement to set forth their respective
rights, duties and obligations in connection with the sale and purchase.
AGREEMENT
THEREFORE, in consideration of the mutual covenants, promises and
agreements herein contained, and for other good and valuable
consideration the receipt and sufficiency of which is acknowledged by
each party hereto, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. In addition to the other definitions contained
herein, the following words and phrases listed below shall have the
following meanings:
1.1 . Agreement. This Loan Servicing Purchase and Sale Agreement and all
exhibits and addenda hereto as the same may from time to time be
amended or supplemented by one or more instruments signed by all
parties hereto.
1.2. Bankruptcy Mortgage. A Mortgage in respect to which one or more of
the Mortgagors thereunder is in a proceeding under the United
States Bankruptcy Code (except those Mortgagors who have reaffirmed
under Chapter 7 of the United States Bankruptcy Code).
1.3. Collateral. All real and personal property securing a Loan.
1.4. Custodial File. All documents held, or required pursuant to
Investor rules and regulations to be held, by Custodian(s) with
respect to each Mortgage, including without limitation the
executed Mortgage and related Mortgage Note, title policy, and FHA
Insurance Certificate or VA Guaranty Certificate, as applicable.
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1.5. Custodian. The financial institution or other person (including
the Investor) designated to hold certain documents relating to the
Mortgages pursuant to Investor requirements.
1.6. Delinquent Mortgage. A Mortgage Note (and the related Mortgage) on which
any payment is 90 or more days past due as of the Sale Date.
1.7. Deposit Escrow Account. An escrow account established by Purchaser
and Seller at a mutually acceptable, Federally insured institution,
titled in both Purchaser's and Seller's names with both signatures
required for release of funds, for the deposit of a portion of the
Purchase Price as provided in Section 2 below.
1.8. Escrow Accounts. Mortgage escrow accounts, impound accounts, and
custodial accounts, including buydown and suspense accounts,
maintained by Seller for the account of a Mortgagor pursuant to
the terms of the Mortgages and Investor guidelines relating to the
Servicing Rights.
1.9. FHA. The Federal Housing Administration of HUD, or any successor
thereto.
1.10. FHA Mortgage. A Mortgage (including the related Mortgage Note) on
a l-to-4 family residential property, which is insured by FHA.
1.11. FHLMC. The Federal Home Loan Mortgage Corporation, or any
successor thereto.
1.12. FNMA. The Federal National Mortgage Association, or any successor
thereto.
1.13. FNMA Mortgage-Backed Securities. Certificates issued and
guaranteed by FNMA evidencing a proportionate interest in a pool
of Mortgage Notes (and related Mortgages) and the cash flow
therefrom.
1.14. FNMA Pool. A pool of Mortgages, combined for purposes of
accounting, which secures FNMA Mortgage-Backed Securities.
1.15. Foreclosure Mortgage. A Mortgage which has been referred to an
attorney for foreclosure purposes or referred to an attorney to
lift a stay in bankruptcy for foreclosure purposes, as of the Sale
Date.
1.16. GNMA. The Government National Mortgage Association, or any
successor thereto.
1.17. GNMA Pool. A pool of FHA Mortgages and/or VA Mortgages, combined for
purposes of accounting, which secures GNMA Mortgage-Backed Securities.
1.18. GNMA Mortgage-Backed Securities. Certificates issued by Seller, or
for which Seller became the substitute issuer, and guaranteed by
GNMA evidencing a proportionate interest in a pool of Mortgage
Notes (and related Mortgages) and the cash flow therefrom.
1.19. HUD. The Department of Housing and Urban Development of the
United States of America, or any successor thereto.
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1.20. Interim Servicing Agreement. The agreement, substantially in the
form of Exhibit 1.20 attached hereto; to be executed by Seller and
Purchaser, for the servicing of the Mortgages by Seller from the
Sale Date to the Transfer Date.
1.21. Investor. FHLMC, FNMA, GNMA, and/or any other investor who owns
the Loans.
1.22. IRS. Internal Revenue Service or any successor thereto.
1.23. Loans. The PanAm Loans and the Other Loans
1.24. Losses. Costs and any other actual losses, liabilities, damages,
charges, liens, penalties, fines, deficiencies or expenses of any
nature (including, without limitation, reasonable attorneys' fees),
with the exception of management and personnel overhead of the affected
party.
1.25. Mortgage Note. A promissory note, or other such instrument used in the
jurisdiction where the Collateral is located, that evidences the
indebtedness under a Loan.
1.26. Mortgage. Any mortgage, deed of trust, security deed or other real
estate security instrument customarily used in the jurisdiction
where the Collateral is located, that secures a Mortgage Note, and
all other documentation related thereto.
1.27. Mortgagee. The person or entity who holds a Mortgage Note and is
entitled to payment thereunder and to the benefits of the Mortgage
securing such Mortgage Note.
1.28. Mortgagor. The person(s) obligated to make payments pursuant to
the Mortgage Note and the related Mortgage and any assumptions
thereof.
1.29. Other Loans. The residential mortgage loans described in Exhibit
1.29 attached hereto and by this reference incorporated herein.
1.30. PanAm Loans. The residential mortgage loans described in Exhibit
1.30 attached hereto and by this reference incorporated herein.
1.31. Pending Payoff. Any Mortgage (and the related Mortgage Note) with
respect to which Seller has received notice of a pending payoff as
of the Sale Date.
1.32. PMI. Any private mortgage insurance company insuring Loans.
1.33. Predecessor. All Mortgagees of any or all of the Mortgages prior
to Seller, and all parties who have serviced any of the Mortgages
prior to Seller, including without limitation AIB Mortgage
Company.
1.34. Purchase Price. The amount to be paid by Purchaser to Seller for
the Servicing Rights, which is equal to the sum of (i) the product
of (a) the net total outstanding principal balances as of the Sale
Date of the PanAm Loans, less the outstanding principal balances
as of the Sale Date of all Delinquent Mortgages, Bankruptcy
Mortgages, Foreclosure Mortgages, and Pending Payoffs within the
PanAm Loans, multiplied by, (b) the Servicing Rights Purchase
Percentage; and (ii) the product of
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(x) the net total outstanding principal balances as of the Sale
Date of the Other Loans, less the outstanding principal balances
as of the Sale Date of all Delinquent Mortgages, Bankruptcy
Mortgages, Foreclosure Mortgages, and Pending Payoffs within the
Other Loans, multiplied by (y) 1.50%.
1.35. Purchaser's Account. Purchaser's bank account (account number
268402) at Trans Financial Bank, National Association (ABA Number
083900732) for the receipt of wire transfer of funds.
1.36. Repurchase. The purchase of any Loan from an Investor, at par plus
accrued interest and a refund of the portion of the Purchase Price with
respect to such Loan, based on the outstanding principal balance of the
Loan as of the date of Repurchase multiplied by the Servicing Rights
Purchase Percentage, plus any escrow advances as of the date of
Repurchase.
1.37. Sale Date. July 31, 1995.
1.38. Seller's Account. Seller's bank account (account number
9001200813) at Intercontinental Bank (ABA Number 067006063) for
the receipt of wire transfer of funds.
1.39. Servicing Agreements. Those agreements presently in effect between
the Seller (or any Predecessor) and each of the Investors setting
forth the terms and conditions between Seller (or Predecessor) and
such Investor under which the Loans shall be serviced.
1.40. Servicing Rights. All of Seller's (or Predecessor's) rights,
title, privileges, obligations and responsibilities with respect
to (i) servicing the Mortgages under the Servicing Agreements, and
(ii) the maintenance and servicing of the Escrow Accounts.
1.41. Servicing Rights Purchase Percentage. 1.865%.
1.42. Target Date. The deadline for Seller's completion of all necessary
endorsements and assignments with respect to the Mortgage Notes
and the Mortgages, which shall be December 31, 1995.
1.43. Transfer Date. The date on which all servicing functions are actually
transferred to Purchaser, which the parties hereto intend to be on or
before October 1, 1995.
1.44. VA. The Veterans Administration of the United States of America, or any
successor thereto.
1.45. VA Mortgage. A Mortgage (including the related Mortgage Note) on a 1 to 4
family residential property which is guaranteed by the Veterans
Administration.
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2. PURCHASE AND SALE.
2. 1 . Subject to the terms and conditions set forth herein, Purchaser
shall purchase and assume and Seller shall sell, assign, transfer
and convey the Servicing Rights, on the Sale Date for the
Purchase Price.
2.2. Unless otherwise stated herein or requested by Seller, all
payments to Seller under this Agreement shall be made in
immediately available federal funds by wire transfer to Seller's
Account. Unless otherwise stated herein or requested by Purchaser,
all payments to Purchaser under this Agreement shall be made in
immediately available federal funds by wire transfer to
Purchaser's Account. Payments under this Agreement shall be due no
later than three business days after the party responsible for
payment receives sufficient documentation to reconcile amounts due
under this Agreement. Payment by either party shall not be
unreasonably withheld.
2.3. The Purchase Price shall be paid as follows:
2.3.1. Purchaser has deposited $1,900,000.00, representing a good
faith-deposit equal to 10% of the estimated Purchase Price, into
the Deposit Escrow Account. Interest earned through the Sale
Date, if any, on the funds in the Deposit Escrow Account shall be
credited to Purchaser. Such Funds shall be released as provided
below.
2.3.2. On the Sale Date, (i) Purchaser and Seller shall cause all funds
held in the Deposit Escrow Account to be released to Seller by
wire transfer to Seller's Account, and (ii) Purchaser shall pay
to Seller an amount that, when aggregated with the amount
released pursuant to (i) above, equals 30% of the estimated
Purchase Price.
2.3.3. Within three days after the Transfer Date, but no later than
October 4, 1995, the parties shall determine the final Purchase
Price, and Purchaser shall pay to Seller an amount that, when
aggregated with the amounts already paid by Purchaser to Seller
as provided above, equals 90% of the final Purchase Price.
2.3.4. Provided that Seller is not in material breach and has
substantially complied in all material respects with the delivery
requirements set forth in this Agreement, Purchaser shall pay to
Seller the remaining 10% of the final Purchase Price, less a
holdback of $300,000.00, on the 30th day following the Transfer
Date, but in no event later than October 31, 1995. The holdback
will be held by Purchaser until 90% of all final documents have
been received. At that time 90% of the holdback will be remitted
to the Seller. The remaining 10% of the holdback will be
forwarded upon receipt of substantially all final documents.
2.4. If, within twelve months following the Sale Date, either party
notifies the other party that the outstanding principal balance of
a Loan or Loans is in error, or if for
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any reason the Purchase Price or other amounts due hereunder is in
error, the party benefiting from the error shall pay an amount
sufficient to correct and reconcile the Purchase Price or such
other amounts and shall provide a reconciliation statement and
other such documentation to reasonably satisfy the other party
concerning the accuracy of such reconciliation.
2.5. In the event that (i) Seller shall materially default on its
obligations hereunder prior to the Transfer Date, or (ii) this
Agreement is terminated by either party for failure of a condition
precedent to such party's obligations hereunder, Seller shall
refund to Purchaser all amounts paid by Purchaser to Seller.
2.6 Seller has contracted to acquire the Other Loans from AIB Mortgage
Company pursuant to a Loan Servicing Purchase and Sale Agreement entered
into as of July 15, 1995 between AIB Mortgage Company, as seller, and
Seller, as purchaser, a copy of which is attached hereto as Exhibit 2.7.
On or after the Sale Date, Seller shall assign to Purchaser all of
Seller's right, title and interest in and to the Loan Servicing Purchase
and Sale Agreement with AIB Mortgage Company to the extent necessary to
allow Purchaser to (i) enforce any of Purchaser's rights or perform any
of Purchaser's obligations hereunder with respect to the Servicing
Rights for the Other Loans, or (ii) enforce any of Seller's rights under
such Loan Servicing Purchase and Sale Agreement with respect to the
Other Loans; provided, however, that Purchaser shall not be responsible
for the performance of any of Seller's obligations under such Loan
Servicing Purchase and Sale Agreement.
3. SELLER'S CONDITIONS PRECEDENT TO PURCHASE AND SALE. Seller's
obligations to sell and transfer the Servicing Rights hereunder are
conditioned upon the satisfaction of the following conditions
precedent on or before the Sale Date:
3.1. All of Purchaser's representations and warranties set forth
herein shall be true in all material respects as of the Sale
Date, and Purchaser shall have, if so requested by
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Seller, delivered to Seller a certificate signed by an officer of
Purchaser stating that such representations and warranties are true in
all material respects as of the Sale Date;
3.2. Seller shall have received partial payment of the Purchase Price as
provided herein; and
3.3. There shall have been no change in the ability of Purchaser to
perform its obligations hereunder.
4. PURCHASER'S CONDITIONS PRECEDENT TO PURCHASE AND SALE.
4.1. Purchaser's obligations to purchase and assume the Servicing Rights
hereunder are conditioned upon the satisfaction of the following
conditions precedent on or before the Sale Date:
4.1.1. All of Seller's and Intercontinental's representations and
warranties set forth herein shall be true in all material
respects as of the Sale Date, and Seller and Intercontinental
shall have, if so requested by Purchaser, delivered to Purchaser
certificates signed by officers of Seller and Intercontinental
stating that such representations and warranties are true in all
material respects as of the Sale Date.
4.1.2. Purchaser shall have received an opinion, reasonably satisfactory
to Purchaser, from counsel for Intercontinental that the guaranty
of Intercontinental set forth herein is valid and enforceable in
accordance with its terms.
4.2. Seller and Intercontinental are making their representations and
warranties with respect to the Loans, Mortgages, Collateral and
Servicing Rights (collectively, the "Mortgage Loan Representations)
on the basis of their best knowledge. Notwithstanding, Seller shall
indemnify Purchaser as set forth in Section 8 below
(and Intercontinental shall guaranty such obligation to indemnify) for
any breaches of the Mortgage Loan Representations. In no event
shall an immaterial breach of any of the Mortgage Loan
Representations (i ) be used as evidence of or be deemed to
constitute bad faith, misconduct or fraud by Seller or
Intercontinental, or (ii) constitute a failure of Seller and/or
Intercontinental to fulfill the obligations precedent to the Sale
Date under Section 4.1, even if it is shown that Seller and/or
Intercontinental should have known that any of such Mortgage Loan
Representations were incorrect when made, and Purchaser, Seller and
Intercontinental acknowledge that certain of the Mortgage Loan
Representations may be immaterially incorrect.
5. REPRESENTATIONS AND WARRANTIES BY SELLER AND INTERCONTINENTAL. Seller
and Intercontinental, jointly and severally, represent and warrant to
Purchaser as follows, which representations and warranties are made
as of the date hereof and as of the Sale Date:
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5.1. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, and is duly
authorized to conduct business, is properly licensed and in good
standing in each jurisdiction where such authorization is necessary for
purposes herein.
5.2. Intercontinental is a Commercial Bank duly organized, validly
existing and good standing under the laws of the State of Florida and is
duly authorized to conduct business, is properly licensed and in good
standing in each jurisdiction where such authorization is necessary for
purposes herein.
5.3. The execution, delivery and performance by Seller and
Intercontinental of this Agreement (i) are within the corporate powers
of Seller and Intercontinental, (ii) have been duly authorized by all
requisite corporate action, and (iii) will not result in any violation
of any material contract, instrument or undertaking of Seller or
Intercontinental to which either is a party or by which either is bound,
nor violate any applicable provision of law or regulation. Further, such
execution, delivery and performance will not conflict with the terms of
Seller's or Intercontinental's charter or bylaws or (assuming receipt of
Investor consent) with any other governing instruments relative to the
conduct of its business or the ownership of its property or any other
agreement to which either is a party.
5.4. Seller's transfer and delivery to Purchaser of the Servicing Rights
and the instruments required to be executed and delivered to Purchaser
pursuant to this Agreement are valid in accordance with their terms and
effectively vest in Purchaser ownership free of any claims of any
creditor of or other party claiming under Seller.
5.5. There is no litigation or legal proceedings pending or, to the
knowledge of Seller or Intercontinental, threatened against Seller or
Intercontinental which can reasonably be expected to have a material
adverse effect upon the Servicing Agreements, the Loans, or Seller's or
Intercontinental's ability to perform their obligations under this
Agreement.
5.6. Neither Seller nor Intercontinental needs the consent of any
private or public organization, other than the Investor(s), in order to
consummate the transactions contemplated by this Agreement, or, to the
extent necessary, such consent has been obtained.
5.7. Seller is:
5.7.1. An approved FHLMC servicer in good standing:
5.7.2. An approved FNMA servicer in good standing;
5.7.3. An approved FHA/VA mortgagee in good standing.
5.7.4. An approved GNMA issuer in good standing.
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5.8. Seller has in full force and effect an adequate errors and
omissions policy or policies satisfying all Investor requirements with
respect to its servicing operations, and a standard fidelity bond.
5.9. The Servicing Rights to be transferred substantially conform to the
data indicated in Exhibits 1.29 and 1.30.
5.10. The amount of the unpaid balance for each Mortgage as provided by
Seller to Purchaser as of any date hereunder is correct as of such
date, and there are no defenses, setoffs or counterclaims against
the Mortgages.
5.11. All Loans were made and remain in compliance with all applicable
federal, state and local laws, ordinances, rules and regulations, and
Seller and all Predecessors have serviced the loans in accordance with
all applicable laws, ordinances, rules, regulations and guidelines.
5.12. Each Mortgage Note, the related Mortgage and all documents
executed by the Mortgagor(s) in connection therewith are genuine,
duly executed by the Mortgagors with legal capacity at the time of
execution, binding and enforceable obligations of the
Mortgagor(s), and in all respects true, accurate, correct,
complete and undisputed.
5.13. Each Mortgage is a valid and existing first (or second, where
indicated) lien on the Collateral therein described, and the
Collateral is free and clear of any and all valid claims, charges,
defenses, offsets, encumbrances and liens having priority over the
first (or second, where indicated) lien of the Mortgage, except
for liens for real estate taxes and special assessments not yet
due and payable and other matters of record (i.e., easements,
covenants and restrictions) described in the title policy to the
extent permitted by the Investor(s). Seller has, subject only to
Investor approval, the right to assign and transfer the Servicing
and endorse all of the Mortgage Notes and assign the Mortgages to
Purchaser.
5.14. A title policy or an opinion of counsel has been issued and is
currently in effect for each Mortgage insuring that the Mortgage
is a valid first (or second, where indicated) lien on the
Collateral, that such title policy or opinion of counsel has not
been modified, and that the Collateral is free and clear of all
encumbrances and liens having priority over the lien of the
Mortgage, except for (i) liens for real estate taxes and special
assessments not yet due and payable, (ii) easements and
restrictions of record identified in the title policy or opinion
of counsel, and (iii) where the lien is indicated to be a second
lien, the first lien noted in such title policy or opinion of
counsel.
5.15. All Mortgages in GNMA Pools are either FHA Mortgages or VA
Mortgages, and each such Mortgage is eligible in all respects for
inclusion in a GNMA Pool.
5.16 Each Mortgage which is represented by Seller to have private
mortgage insurance is insured in the amount represented.
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<PAGE>
5.17. Seller has complied with all obligations under all applicable
insurance contracts, is maintaining hazard and flood insurance
policies and insurance contracts with private mortgage insurers in
accordance with Investor requirements.
5.18. Seller has paid and will pay all taxes, insurance and other items
that are due to be paid from the Escrow Accounts.
5.19. Seller has processed and posted all payoffs received.
5.20. Except for transfer and termination fees as may be imposed in connection
with the sale of Servicing Rights contemplated by this Agreement and
which are to be paid by Seller, there are no accrued liabilities of
Seller with respect to the Loans or Servicing Rights. Seller does not
know of any events that could result in any such accrued liabilities
arising against Purchaser as successor to the Servicing Rights.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents
and warrants to Seller as follows, which representations and
warranties are made as of the date hereof and as of the Sale Date:
6.1. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Kentucky, and
is duly authorized to conduct business, is properly licensed and in
good standing in each jurisdiction where such authorization is
necessary for purposes herein.
6.2. The execution, delivery and performance by Purchaser of this
Agreement (i) are within the corporate powers of Purchaser, (ii)
and have been duly authorized by all requisite corporate action,
and (iii) will not result in any violation of any material
contract, instrument or undertaking of Purchaser or to which it is
a party or by which it is bound, nor violate any applicable
provision of law or regulation. Further, such execution, delivery
and performance will not conflict with the terms of its charter or
bylaws or (assuming receipt of Investor consent) with any other
governing instruments relative to the conduct of its business or
the ownership of its property or any other agreement to which it is
a party.
6.3. There is no litigation or legal proceedings pending or, to the
knowledge of Purchaser, threatened against Purchaser which would
prevent the purchase of the Servicing Rights hereunder.
6.4. Purchaser has the requisite financial capability and adequate
resources to complete this transaction, and Purchaser knows of no
reason why any Investor would disapprove the servicing transfer
provided for in this Agreement.
6.5. Purchaser does not need any consent of a private or public
organization, other than the Investor(s), in order to consummate
the transactions contemplated by this Agreement or, to the extent
necessary, such consent has been obtained. Purchaser will provide
to Seller a corporate resolution confirming the authority of
parties signing this agreement on behalf of Purchaser. Purchaser
represents no shareholder approval is required.
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6.6. Purchaser is:
6.6.1. An approved FHLMC servicer in good standing;
6.6.2. An approved FNMA servicer in good standing;
6.6.3. An approved FHA/VA mortgagee in good standing.
6.6.4. An approved GNMA issuer in good standing.
7. COVENANTS.
7.1. As soon as practicable after execution of this Agreement, Seller
shall submit to the Investor(s) the forms and information necessary
for the approval of the transfer of the Servicing Rights. Purchaser
agrees to cooperate in a timely fashion with Seller so that all
Investor requirements can be satisfied. Seller shall be responsible
for any fees due the Investor(s) for its(their) approval(s).
7.2. Seller shall obtain final certification, in accordance with GNMA
requirements, on all GNMA Pools lacking certification as of the
Sale Date, and shall take all steps reasonably necessary to obtain
such final certification, including without limitation the
repurchase of Loans preventing GNMA Pools from receiving final
certification. Notwithstanding this requirement, if a GNMA Pool
remains uncertified after the final certification deadline, and as
a result, GNMA requires Purchaser to post a letter of credit
("LOC") against the Loans preventing final certification, Seller
shall indemnify Purchaser for all costs associated with such LOC,
until such time as the GNMA Pools receive final certification and
the LOC requirement is removed and the LOC released. Seller shall
clear any exception in accordance with GNMA guidelines as a result
of the certification/recertification audit. Purchaser shall provide
a list of any exceptions resulting from the
certification/recertification audit to Seller no later than 60 days
after receipt of the documentation to complete its custodial audit.
In the event Seller has not removed the exceptions prior to the
recertification deadline and as a result, GNMA requires Purchaser
to post an LOC against the Loans preventing recertification, Seller
shall indemnify Purchaser for all costs associated with such LOC,
until such time as the GNMA Pools receive recertification and the
LOC requirement is removed and the LOC released.
7.3. On the Sale Date, Seller shall provide to Purchaser a list
identifying by Loan number and principal balance each Foreclosure
Mortgage, Delinquent Mortgage, Bankruptcy Mortgage, and Pending
Payoff.
7.4. Seller shall furnish the following to Purchaser no later than 3
business days, (except for those items marked with an "*" on
Exhibit 7.4.5 which shall be furnished within 15 business days)
following the Transfer Date:
7.4.1. All Loan data from Seller's master file by tape-to-tape transfer
and any other information necessary to complete successfully the
conversion, and
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<PAGE>
7.4.2. An accounting and bank wire payable to Purchaser, for the
outstanding balances identified on the Mortgage records in full
payment of all funds held or due for the benefit of the
Mortgagor's Escrow Accounts, including unapplied funds held for
any purposes less any outstanding advances, including, without
limitation, unreimbursed foreclosure expenses, and any and all
ancillary income which is earned as collected. Seller understands
that any ancillary income which remains uncollected as of the
Transfer Date shall become the property of Purchaser on the
Transfer Date.
7.4.3. List of accounts on automatic draft;
7.4.4. All other documents reasonably required by Purchaser.
7.4.5. The materials and information listed on Exhibit 7.4.5 attached
hereto and by this reference incorporated herein. (Seller has
provided as an "Attachment to Exhibit 7.4.5" a list of those
items which are either missing or which Seller is otherwise unable
to deliver to Purchaser pursuant to this Section 7.4.5. The
Seller's inability to deliver the items referenced on the
Attachment to Exhibit 7.4.5 shall not relieve Seller of its
obligations under Section 8 should Purchaser incur a loss as a
result of the missing items.)
7.5. Simultaneous with the execution of this Agreement, Purchaser and
Seller shall enter into the Interim Servicing Agreement for the
servicing of Mortgages from the Sale Date to the Transfer Date.
Prior to the Transfer Date, Seller shall service the subject Mortgages
(or cause the subject Mortgages to be serviced) with the standard of
care promulgated by all Investor rules and regulations. Purchaser's
personnel shall have the right at reasonable times with 48 hours notice
where possible to examine any and all files, documents, ledgers,
computer printouts, papers and records pertaining to the Mortgages.
7.6. Prior to the Transfer Date, Seller shall on each Investor
remittance date remit funds to or withhold funds from the principal and
interest custodial accounts maintained with respect to FNMA Pools
and GNMA Pools in such amounts as are necessary to bring such FNMA Pools
and GNMA Pools to a no-over/under collateralized position. Purchaser
shall on the Investor remittance date reimburse Seller for advances to
FNMA Pools and GNMA Pools for which Seller is awaiting recovery from
Loan liquidations when liquidation occurs. Seller shall provide
Purchaser copies of Form 2010 monthly on the affected FNMA Pools,
and Form 11170a monthly on affected GNMA Pools, along with payments
representing recoveries until fully repaid. Purchaser shall also
reimburse Seller, on the Investor remittance date, for any previously
made and unrecovered advances for the purpose of security holder
remittances for the period ending as of the Sale Date.
7.7. Seller and Purchaser shall each write an announcement letter to be
sent to each Mortgagor notifying them of the transfer of Servicing
Rights. Seller and Purchaser shall exchange copies of letters prior
to mailing and shall cooperate on a joint mailing program for
notification to the Mortgagors. Such letters shall comply with
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<PAGE>
all applicable laws and regulations, including without limitation
the National Housing Act of 1990 and any amendments thereto. Seller
shall mail its required notice on or before two weeks before the
Transfer Date and Purchaser shall mail its required notice on or
before two weeks after the Transfer Date.
7.8 Seller shall individually assign to Purchaser by appropriate
endorsements and/or assignments satisfactory in form and substance
to Purchaser and its counsel all of Seller's rights, title and
interest in and to the Mortgages (and the related Mortgage Notes)
which are the subject of the Servicing Rights. Seller shall pay all
costs of preparing, recording and tracking all assignments
(including interim assignments). Seller may use blanket assignments
where feasible. In the event Seller has not completed all necessary
endorsements and prepared assignments and sent them for recording as
required by this paragraph on or before the Target Date, Seller
shall pay to Purchaser a penalty in the amount of $100.00 per day
for each day after the Target Date that such endorsements and
assignments have not been completed. Seller shall also prepare
endorsements and/or assignments from Purchaser to each Investor as
required by such Investor.
7.9 Seller shall cause its data service to cooperate with Purchaser and
to provide a test-tape and an accurate conversion tape containing
all history and Loan information as of the Transfer Date so as to
complete this conversion on a tape-to-tape basis in a timely manner.
7.10. Within 15 business days following the Transfer Date, Seller shall
cause the Custodian(s) to transfer to Purchaser's Custodian all
Custodial Files with respect to the Mortgages. Cost of shipping of
Custodial Files and any termination fees for the Custodians shall
be borne by Seller.
7.11. Seller shall no later than 15 days following the Transfer Date
comply with Purchaser's reasonable requirements pertaining to
insurance records, tax records, collection records, Investor
accounting records and any other records that Purchaser deems
necessary to convert and service the Loans in accordance with good
practice prevailing in the mortgage servicing industry and in
compliance with regulatory requirements. In addition, Seller shall
furnish Purchaser, in either hardcopy, microfiche, or as a part of
the tape-to-tape transfer, the information and materials listed on
Exhibit 7.11 attached hereto and by this reference incorporated
herein, no later than 15 days following the Transfer Date.
7.12. Seller shall pay over to Purchaser all funds received after the
Transfer Date in regard to the Mortgages, including, but not
limited to, taxes, insurance, any other type of funds and PMI
insurance payments, without offset or deduction. If Seller
receives any Loan payments during the two months following the
Transfer Date, Seller shall endorse such Loan payments to
Purchaser and send such Loan payments to Purchaser by next day
delivery service. If Seller receives any Loan payments during the
subsequent four month period, Seller shall endorse such Loan
payments to Purchaser and mail them by regular mail service on the
day payments
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<PAGE>
are received. After such six month period, Seller may, at its
option, return any payment it receives to the Mortgagor with
notification that the Mortgagor must submit the payment directly
to Purchaser. Seller shall send to Purchaser copies of all such
correspondence returning payments to the Mortgagor. All Mortgagor
correspondence, insurance notices, tax bills or any other
correspondence or documentation received by Seller during the six
months following the Transfer Date, shall be sent by next day
delivery service to Purchaser. Seller shall forward all such
correspondence received after such six month period to Purchaser
by regular mail service on the same day the correspondence is
received, or may, as its option, return any such correspondence to
the sender with notification that the sender should contact
Purchaser regarding the correspondence. Seller agrees to send
Purchaser copies of all such correspondence returning items to the
sender.
7.13. Seller shall fund and issue payments of remittances due security
holders with respect to all GNMA Mortgage-Backed Securities for
the month preceding the Transfer Date.
7.14. Purchaser shall furnish IRS 1098/1099 statements to Mortgagors and
the IRS for the period during the current calendar year that
Seller administered the Loans.
7.15. Seller shall provide evidence of notice to all interested third
parties, including without limitation foreclosure attorneys,
bankruptcy trustees, tax services, hazard insurance carriers,
flood insurance carriers, private mortgage insurance carriers,
FHA, VA, and optional insurance carriers. All such notices shall
be subject to prior approval by Purchaser.
7.16. Purchaser shall furnish Forms 1041 and K1 to the IRS and the
security holders with respect to all GNMA Mortgage-Backed
Securities, for the period during the current calendar year that
Seller administered the GNMA Pools.
7.17. Seller shall not directly solicit or provide information for any
other party to directly solicit Mortgagors (i) for the refinance
of any Mortgages, or (ii) for any insurance program. In the event
that Seller or any other such party does refinance any Mortgage as
a result of such direct solicitation, Seller shall pay to
Purchaser an amount equal to the outstanding principal balance of
such Mortgage at the time of payoff multiplied by the Servicing
Rights Purchase Percentage. Promotions undertaken by Seller or any
third party which are directed to the general public at large
(e.g., newspaper advertisements, radio or TV ads) or to all
customers with which Seller has business relationships other than
the Mortgages, shall not constitute direct solicitations in
violation of this paragraph.
8. HOLD HARMLESS AND INDEMNITY BY SELLER.
8.1. Seller shall indemnify and hold harmless Purchaser against any
Losses incurred by Purchaser which:
8.1.1. Are based on or arise out of the failure of Seller to fulfill or
perform its obligations or duty as required under Investor
guidelines and/or under the
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Servicing Agreements; including without limitation Losses
arising out of (i) the acts or omissions of Seller or any
Predecessor prior to the transfer of the Servicing Rights
under this Agreement, including without limitation any
violation of Investor regulations, erroneous or incomplete
Loan documentation, improper application of any payment or
improper escrow disbursements, or (ii) for FHA Loans,
claims not completely covered by FHA insurance or loss of
interest due to failure to foreclose on a timely basis.
8.1.2. Are based on any circumstances which existed prior to the
Transfer Date which arose out of Seller's or any Predecessor's
negligence and which relate to the Loans.
8.1.3. Are based on any violation of law by Seller or any Predecessor as
it relates to the Loans.
8.1.4. Are suffered by Purchaser as a result of (i) any breach by Seller
of any provision of this Agreement, or (ii) the inaccuracy of any
representation or warranty of Seller set forth in this Agreement.
8.2. Seller's obligation under this indemnification and hold harmless
provision shall include the obligation of Seller to pay to
Purchaser all costs and expenses incurred by Purchaser to a third
party incident to the foregoing, including, but not limited to,
reasonable attorneys' fees in defending Purchaser or in enforcing
the provisions of this paragraph.
8.3. Purchaser shall make reasonable efforts to minimize its losses and
expenses in respect to matters as to which Seller indemnifies
Purchaser hereunder. Purchaser shall not settle any claim covered
by this provision without prior notification to and approval by
Seller, which approval shall not be unreasonably withheld.
Purchaser shall promptly notify Seller of any such claim or claims,
and Seller may elect to defend such claim or claims at its own
expense, and may settle such claim or claims as it deems
appropriate; provided that any such settlement does not involve any
admission of wrongdoing on the part of Purchaser and that Seller
has made arrangements satisfactory to Purchaser for the payment or
other satisfaction of such settlement.
9. HOLD HARMLESS AND INDEMNITY BY PURCHASER.
9.1. Purchaser shall indemnify and hold harmless Seller against any
claims, demands, liabilities, losses, causes of action and expenses
of any kind against Seller which:
9.1.1. Are based on or arise out of the failure of Purchaser to fulfill
or perform its obligations or duty as required under Investor
guidelines, and/or under the Servicing Agreements to the extent
that the same apply to the Loans; including without limitation
Losses arising out of the acts or omissions of Purchaser after
the transfer of the Servicing Rights under this Agreement,
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including without limitation any violation of Investor
regulations, improper application of any payment or improper
escrow disbursements.
9.1.2. Are based on any circumstances which arise solely after the
Transfer Date as a result of Purchaser's negligence and which
relate to the Loans.
9.1.3. Are based on any violation of law by Purchaser as it relates to
the Loans.
9.1.4. Are suffered by Seller as a result of (i) any breach by
Purchaser, of any provision of this Agreement, or (ii) the
inaccuracy of any representation or warranty of Purchaser set
forth in this Agreement.
9.2. Purchaser's obligation under this indemnification and hold harmless
provision shall include the obligation of Purchaser to pay to
Seller all costs and expenses incurred by Seller to a third party
incident to the foregoing, including, but not limited to,
reasonable attorneys' fees in defending Seller or in enforcing the
provisions of this paragraph.
9.3. Seller shall make reasonable efforts to minimize its losses and
expenses in respect to matters as to which Purchaser indemnifies
Seller hereunder. Seller shall not settle any claim covered by this
provision without prior notification to and approval of Purchaser;
which approval shall not be unreasonably withheld. Seller shall
promptly notify Purchaser of any such claim or claims, and
Purchaser may elect to defend such claim or claims at its own
expense, and may settle such claim or claims as it deems
appropriate; provided that any such settlement does not involve an
admission of wrongdoing on the part of Seller and that Purchaser
has made arrangements satisfactory to Seller for the payment or
other satisfaction of such settlement.
10. GOVERNMENTAL AUTHORITIES AND LAWS/SEVERABILITY. The terms and
provisions of this Agreement are expressly made subject to the acts
and actions of the Investor(s) and its(their) rules and regulations
in effect as to the Mortgages at the time the Mortgages were
processed and originated and as such rules and regulations may be or
have been amended from time to time. In the event any provision of
this Agreement is inconsistent with or in violation of any federal
statute or any rule or regulation of governmental agencies, it is
agreed by the parties hereto that such provision shall be of no
force or effect, and that the Agreement shall continue as though
said inconsistent and violative provision was not contained in this
Agreement.
11. ASSIGNMENT AND DELEGATION. Except as otherwise expressly set forth
herein, neither Purchaser, Seller nor Intercontinental shall assign
this Agreement or any rights or obligations hereunder, including,
but not limited to, the right to receive compensation or money due
hereunder, without the prior express written consent of the other
parties. Neither Purchaser, Seller nor Intercontinental shall
delegate any duty hereunder without the prior express written
consent of the other parties. The consent of any party under this
paragraph may be withheld in the absolute discretion of such party.
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12. GUARANTY. Intercontinental acknowledges that the sale and transfer
of the Servicing Rights by Seller, its wholly-owned subsidiary, is
in the best interests of Intercontinental, and Intercontinental
hereby guaranties the performance of each and every obligation and
the payment of each and every obligation of Seller hereunder and
shall perform such obligations or cause such obligations to be
performed, and shall pay such obligations, in accordance with this
Agreement, upon written demand from Purchaser.
13. MISCELLANEOUS.
13.1. Purchaser shall pay fees or commissions of any person or
organization acting on behalf of Purchaser in this transaction.
Seller shall pay any fees or commissions of any person or
organization acting on behalf of Seller in this transaction.
13.2. The representations, warranties, covenants and all other
obligations and rights of the Parties hereto under this Agreement
shall survive the Sale Date, the Transfer Date and the closing of
the transactions contemplated by this Agreement and shall continue
and remain in full force and effect thereafter.
13.3. This Agreement shall be binding upon and shall inure to the
benefit of parties hereto and their respective successors and
permissible assigns.
13.4. All notices, demands, requests and other communications required
between the parties hereto under this Agreement shall be in
writing and shall be deemed given when received if sent by
Certified Mail, return receipt requested, postage prepaid,
addressed to the party for whom it is intended at its address as
set forth above at such other address as the recipient party has
specified by written notice to the other, given at least 10 days
before such change of address is to become effective.
13.5. Notwithstanding any acts, omissions or statements of any party
hereto, no party shall be deemed to have waived any of its rights
under this Agreement except by an instrument in writing signed by
the party making such waiver.
13.6. In case of any one or more of the provisions of the Agreement
shall be invalid, illegal or unenforceable in any respect, such
provisions shall be null and void and the validity of the
remaining portion of this Agreement shall in no way be affected,
prejudiced or disturbed.
13.7. Except as provided herein, Seller and Purchaser shall each pay its
own respective costs and expenses in connection with the
negotiation and execution of this Agreement and the consummation
of the transactions contemplated hereby.
13.8. The terms and provisions of this Agreement and the transactions
contemplated hereby shall be governed by the laws of the State of
Florida
13.9. Purchaser, Seller and Intercontinental hereby knowingly,
irrevocably, voluntarily and intentionally waive any right that
any of them may have to a trial by jury, in respect of any action,
proceeding, claim or counterclaim arising out of this
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Agreement or any agreements related hereto. This provision is a
material inducement for the parties hereto entering into this
Agreement.
13.10. This Agreement sets forth the entire understanding of the parties
regarding the transactions contemplated hereby and supersedes all
prior oral and written agreements, arrangements and
understandings relating to the subject hereof.
13.11. In the event that the sale of servicing contemplated by this
Agreement shall be rescinded, terminated or not occur for any
reason, Purchaser and Seller shall immediately return to each
other any and all files, records, books, computer tapes, paper,
correspondence or other materials or information obtained or
derived by Purchaser or Seller. Purchaser and Seller shall
protect and keep confidential any and all such information until
the Transfer Date and shall indemnify each other against damages,
costs or other liabilities arising from release or other
disclosure of such information due to the indemnifying party's
action or inaction.
13.12. Seller and Purchaser will each, at the request of the other,
execute and deliver to the other all such other instruments or
documents that the other may reasonably request in order to
perfect the transfer, assignment and delivery to Purchaser of the
Servicing Rights as provided for herein.
13.13. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which together
shall constitute one and the same document.
EXECUTED as of the date first set forth above.
<TABLE>
<CAPTION>
TRANS FINANCIAL MORTGAGE COMPANY
<S> <C>
ATTEST:
By: (Signature of James K. Oliver appears here) By: (Signature of Michael L. Norris appears here)
James K. Oliver Michael L. Norris
Title: Exec. Vice President Title: President
ATTEST:
PAN AMERICAN MORTGAGE CORPORATION
By: (Signature of Jack A. Furman appears here) By: (Signature of William H. Allen, Jr. appears here)
Jack A. Furman William H. Allen, Jr.
Title: Secretary Title: Chairman
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
INTERCONTINENTAL BANK
<S> <C>
ATTEST:
By: (Signature of Jack A. Furman appears here) By: (Signature of William L. Morrison appears here)
Jack A. Furman William L. Morrison
Title: Secretary Title: President
</TABLE>
STATE OF TENNESSEE )
COUNTY OF COFFEE )
I, Denise Kelley, a Notary Public, in and for said County and
State aforesaid, hereby certify that Michael L. Norris and James K.
Oliver whose names as President and Exec. Vice President of Trans
Financial Mortgage Company are signed to the foregoing and who are known
to me, acknowledged before me on this day in the city of Tullahoma,
Tennessee, that, being informed of the contents of this Agreement, they,
as officers and with full authority, executed the same voluntary for and
as the act of such company.
Given under my hand this the 26th day of July, 1995.
(Signature of Denise Kelly appears here)
[SEAL] Notary Public
My Commission Expires: September 19, 1998
19
<PAGE>
STATE OF FLORIDA )
)
COUNTY OF DADE )
I Ginger L. Hein, a Notary Public, in and for said County and State
aforesaid, hereby certify that William H. Allen, Jr. and Jack A. Furman
whose names as Chairman and Secretary of Pan American Mortgage
Corporation are signed to the foregoing and who are known to me,
acknowledged before me on this day in the city of Miami, Florida, that,
being informed of the contents of this Agreement, they, as officers and
with full authority, executed the same voluntarily for and as the act of
such corporation.
Given under my hand this the 31st day of July, 1995.
<TABLE>
<CAPTION>
<S> <C>
(Seal of Ginger L. Hein appears here) (Signature of Ginger L. Hein appears here)
GINGER L. HEIN
Notary Public
My Commission Expires: January 2, 1999
</TABLE>
STATE OF FLORIDA )
)
COUNTY OF DADE )
I GINGER L. HEIN, a Notary Public, in and for said County and State
aforesaid, hereby certify that William H. Morrison and Jack A. Furman
whose names as President and Secretary of Intercontinental Bank are
signed to the foregoing and who are known to me, acknowledged before me
on this day in the city of Miami, Florida, that, being informed of the
contents of this Agreement, they, as officers and with full authority,
executed the same voluntarily for and as the act of such bank.
Given under my hand this the 31st day of July, 1995.
<TABLE>
<CAPTION>
<S> <C>
[SEAL] (Signature of Ginger L. Hein appears here)
GINGER L. HEIN
My Commission Expires: (Seal of Ginger L. Hein appears here)
</TABLE>
20
