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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-13153
HABERSHAM BANCORP
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(Exact name of small business issuer as specified in its charter)
Georgia 58-1563165
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Highway 441 North, P. O. Box 1980, Cornelia, Georgia 30531
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 778-1000
Securities registered pursuant to Section 12(b) of the Exchange Act:
None.
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Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $2.50 par value.
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
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Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained herein, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
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Exhibit index on page 22 Page 1 of 62 pages
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State the issuer's revenues for its most recent fiscal year: $13,641,792
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days:
253,637 Shares of Common Stock, $2.50 par value--$10,906,391 as of December 31,
1994 (based upon approximate market value of $43/share).
State the number of shares outstanding of each of the issuer's classes of
common equity stock, as of December 31, 1994, covered by this report.
Common Stock, $2.50 par value--334,651 shares
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Company's Annual Report to Shareholders for the year ended
December 31, 1994 (the "Annual Report") are incorporated by reference into Part
II.
(2) Portions of the Company's Proxy Statement relating to the 1995 Annual
Meeting of Shareholders (the "Proxy Statement") are incorporated by reference
into Part III.
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PART I
Item 1. BUSINESS.
Business of the Company
Habersham Bancorp (the "Company"), a Georgia corporation, was organized on
March 9, 1984. Effective December 31, 1984, the Company acquired all of the
outstanding shares of common stock, of Habersham Bank (the "Bank"). As a
result of this transaction, the former shareholders of the Bank became the
shareholders of the Company, and the Bank became the wholly-owned subsidiary of
the Company. Another wholly-owned subsidiary of the Company, The Advantage
Group, Inc., was organized on April 7, 1987. Currently, the primary business
of the Company is the same as that of the Bank and The Advantage Group, Inc.
The Company has entered into an Agreement and Plan of Merger dated January
16, 1995 (the "Merger Agreement") with Security Bancorp, Inc. ("Security")
pursuant to which Security will merge with and into the Company (the "Merger")
and each outstanding share of Security Common Stock (excluding shares held by
Security, Habersham or their subsidiaries or by shareholders who perfect their
dissenters' rights) will be converted into the right to receive, at the
election of each shareholder, either shares of Habersham Common Stock or cash.
The total value of the consideration to be in the Merger will be $9,022,048,
which represents 1.5 times the aggregate Book Value, as defined in the Merger
Agreement, of the Security Common Stock at December 31, 1994. Management
anticipates that if the Merger Agreement is approved by the shareholders of
Security and all of the other conditions to the consummation of the Merger are
met, the Merger will be completed in June 1995.
Business of the Bank
Habersham Bank is a financial institution which was organized under the
laws of the State of Georgia in 1904. The Bank operates a full-service
commercial banking business based in Habersham County, Georgia, providing such
customary banking services as checking and savings accounts, various types of
time deposits, safe deposit facilities and individual retirement accounts. It
also makes secured and unsecured loans and provides other financial services to
its customers. The Bank has a full-time trust officer on staff and offers a
full spectrum of trust services, including trust administration, asset
management services, estate and will probate and administration, and other
services in the area of personal trusts.
Business of The Advantage Group, Inc.
The Advantage Group, Inc. was organized as a wholly-owned nonbank
subsidiary of the Company in 1987. During 1994, The Advantage Group, Inc.
engaged in the development and marketing of personal computer software and
provided data processing services and management consulting advice to
depository institutions. Habersham Bank is now the primary provider of such
services, and The Advantage Group, Inc., administers the Company's Kids'
Advantage banking program and continues to market and develop certain personal
computer software and services.
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Competition
The banking industry is highly competitive. The Bank's primary market area
consists of Habersham County, Georgia, which has a population of approximately
27,621. The Bank competes for all types of loans, deposits and other financial
services with four other commercial banks located in Habersham County, Georgia.
As of December 31, 1994, the Bank was the largest of the commercial banks
located in the County based upon total assets.
The Bank also competes with other financial institutions in Habersham
County and with commercial banks, savings and loan associations and other
financial institutions located outside of Habersham County. To a lesser
extent, the Bank competes for loans with insurance companies, regulated small
loan companies, credit unions and certain governmental agencies.
The Company, The Bank, and The Advantage Group, Inc. compete with numerous
other companies and financial institutions engaged in similar lines of
business, such as other bank holding companies, leasing companies, insurance
companies, companies providing data processing services and companies providing
bank consulting services.
Recent legislation, together with other regulatory changes by the primary
regulators of the various financial institutions and competition from
unregulated entities, has resulted in the elimination of many traditional
distinctions between commercial banks, thrift institutions and other providers
of financial services. Consequently, competition among financial institutions
of all types is virtually unlimited with respect to legal ability and authority
to provide most financial services.
Employees
The three officers of the Company, who are also officers of the Bank, do
not receive compensation from the Bank in addition to their compensation from
the Company.
As of December 31, 1994, the Bank had 91 full-time equivalent employees.
The Bank is not a party to any collective bargaining agreement, and, in the
opinion of management, the Bank enjoys satisfactory relations with its
employees.
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Supervision and Regulation
Bank Holding Company Regulation
General
The Company is a registered holding company under the Bank Holding Company
Act of 1956, as amended (the "Federal Bank Holding Company Act"), and the
Georgia Bank Holding Company Act (the "Georgia Bank Holding Company Act") and
is regulated under such acts by the Board of Governors of the Federal Reserve
System (the "Federal Reserve") and by the Georgia Department of Banking and
Finance (the "Georgia Department"), respectively.
As a bank holding company, the Company is required to file an annual report
with the Federal Reserve and the Georgia Department and such additional
information as the applicable regulator may require pursuant to the Federal and
Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia
Department may also conduct examinations of the Company with the Federal
Reserve and the Georgia Department to determine whether the institution is in
compliance with both Bank Holding Company Acts and the regulations promulgated
thereunder.
The Federal Bank Holding Company Act also requires every bank holding
company to obtain prior approval from the Federal Reserve before acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any bank which is not already majority owned or controlled by that bank holding
company. The Federal Reserve is prohibited, however, from approving the
acquisition by the Company of the voting shares of, or substantially all the
assets of, any bank located outside Georgia, unless such acquisition is
specifically authorized by the laws of the state in which the bank is located.
Acquisition of any additional banks would require prior approval from both the
Federal Reserve and the Georgia Department. Under current Georgia law, a
holding company is authorized to acquire ownership or control of additional
banks in Georgia, Alabama, the District of Columbia, Florida, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee and
Virginia (collectively, the "Southeastern Compact"), provided such states enact
reciprocal legislation and 80% of the deposits of the holding company are
maintained in this region. As of December 31, 1994, reciprocal legislation was
in effect in all of the aforementioned states. Florida, Georgia, North
Carolina and Tennessee, however, have recently enacted legislation which will
remove such states from the Southeastern Compact and will permit national
interstate acquisitions by institutions located in Florida, Georgia, North
Carolina and Tennessee in states which also permit national interstate
acquisitions.
On March 16, 1994, the Georgia legislature adopted the "Georgia Interstate
Banking Act," which provides that Georgia will no longer be a member of the
Southeastern Compact, effective July 1, 1995. Instead, (1)
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interstate acquisitions by institutions located in Georgia will be permitted in
states which also allow national interstate acquisitions, and (2) interstate
acquisitions of institutions located in Georgia will be permitted by
institutions located in states which also allow national interstate
acquisitions; provided, however, that if the board of directors of a Georgia
bank or bank holding company adopts a resolution to except such bank or bank
holding company from being acquired pursuant to the provisions of the Georgia
Interstate Banking Act and properly files a certified copy of such resolution
with the Georgia Department, such Georgia bank or bank holding company may not
be acquired by an institution located outside of the State of Georgia.
In addition, the President of the United States signed into law the
"Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" on
September 29, 1994 (the "Interstate Branching Act"). Under the Interstate
Branching Act, effective June 1, 1997, (1) the regulatory agency responsible
for any acquiring bank or bank holding company may approve an application by a
bank to acquire a branch across state lines if both banks involved are
adequately capitalized and the responsible regulatory agency determines that
the resulting bank will continue to be adequately capitalized and that
management of the bank has the necessary management skills to manage the
extended operation, and (2) a bank holding company which has subsidiaries in
more than one state may, with the approval of the Federal Reserve, combine
banks across state lines.
The Federal and Georgia Bank Holding Company Acts further provide that the
Federal Reserve and the Georgia Department will not approve any acquisition,
merger or consolidation (1) which would result in a monopoly, (2) which would
be in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States, (3) the
effect of which may be substantially to lessen competition or to tend to create
a monopoly in any section of the country or (4) which in any other manner would
be in restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the community
to be served.
In addition to having the right to acquire ownership or control of other
banks, the Company is authorized to acquire ownership or control of nonbanking
companies, provided the activities of such companies are so closely related to
banking or managing or controlling banks that the Federal Reserve considers
such activities to be proper to the operation and control of banks. Regulation
Y, promulgated by the Federal Reserve, sets forth those activities which are
regarded as closely related to banking or managing or controlling banks and,
thus, are permissible activities for bank holding companies, subject to
approval by the Federal Reserve in individual cases.
Federal Reserve policy requires a bank holding company to act as a source
of financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not be warranted. Under these provisions, a bank
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holding company may be required to loan money to its subsidiaries in the form
of capital notes or other instruments which qualify for capital under
regulatory rules. Any loans by the holding company to such subsidiary banks
are likely to be unsecured and subordinated to such bank's depositors and
perhaps to its other creditors.
Federal Securities Laws
The Company is subject to various federal securities laws, including the
Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934
(the "1934 Act"). The 1933 Act regulates the distribution or public offering
of securities, while the 1934 Act regulates trading in securities that are
already issued and outstanding. Both Acts provide civil and criminal penalties
for misrepresentations and omissions in connection with the sale of securities,
and the 1934 Act also prohibits market manipulation and insider trading.
Pursuant to the 1934 Act, the Company files annual, quarterly and current
reports with the Securities and Exchange Commission. In addition, the Company
and its directors, executive officers and 5% shareholders are subject to
certain additional reporting requirements, including requirements governing the
submission of proxy statements and reports of beneficial ownership of the
Company's securities.
Bank Regulation
General
The Bank operates as a bank organized under the laws of the State of
Georgia subject to examination by the Georgia Department. The Georgia
Department regulates all areas of the Bank's commercial banking operations
including reserves, loans, mergers, payment of dividends, interest rates,
establishment of branches, and other aspects of operations.
The Bank is also insured and regulated by the Federal Deposit Insurance
Corporation (the "FDIC"). The major functions of the FDIC with respect to
insured banks include paying depositors to the extent provided by law in the
event an insured bank is closed without adequately providing for payment of the
claims of depositors, acting as a receiver of state banks placed in
receivership when so appointed by state authorities, and preventing the
continuance or development of unsound and unsafe banking practices. In
addition, the FDIC is authorized to examine insured banks which are not members
of the Federal Reserve to determine the condition of such banks for insurance
purposes. The FDIC also approves conversions, mergers, consolidations and
assumption of deposit liability transactions between insured banks and
noninsured banks or institutions to prevent capital or surplus diminution in
such transactions where the resulting, continued or assumed bank is an insured
non-member state bank.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Bank Holding Company Act on any
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extension of credit to the bank holding company or any of its subsidiaries, on
investment in the stock or other securities of the bank holding company or its
subsidiaries, and on the taking of such stock or securities as collateral for
loans to any borrower. In addition, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of any property or
services.
Under Georgia law, a bank must obtain the approval of the Georgia
Department before cash dividends may be paid if (1) the total classified assets
at the most recent examination of such bank exceeded 80% of the equity capital,
(2) the aggregate amount of dividends declared or anticipated to be declared in
the calendar year exceeds 50% of the net profits, after taxes but before
dividends, for the previous calendar year or (3) the ratio of equity capital to
adjusted assets is less than 6%.
The Bank is also subject to the provisions of the Community Reinvestment
Act of 1977, which requires the FDIC, in connection with its regular
examination of a bank, to assess the Bank's record in meeting the credit needs
of the communities served by the Bank, including low-and moderate-income
neighborhoods.
Capital Requirements
Regulatory agencies measure capital adequacy with a framework that makes
capital requirements sensitive to the risk profile of the individual banking
institutions. The guidelines define capital as either Tier 1 or Core capital
(primarily shareholders equity) or Tier 2 capital (certain debt instruments and
a portion of the reserve for loan losses).
There are two measures of capital adequacy for bank holding companies and
their subsidiary banks: the leverage ratio and the risk-based capital ratios.
Bank holding companies and their subsidiary banks must maintain a minimum Tier
1 leverage ratio of 4%. In addition, Tier 1 capital must equal 4% of
risk-weighted assets, and total capital (Tier 1 plus Tier 2) must equal 8% of
risk-weighted assets. These are minimum requirements, however, and
institutions experiencing internal growth or making acquisitions, as well as
institutions with supervisory or operational weaknesses, will be expected to
maintain capital positions well above these minimum levels.
At December 31, 1994, the Bank had a Tier 1 leverage ratio of 9.37%, a Tier
1 risk-based ratio of 12.07%, and a Total risk-based ratio of 13.32%. The
Company's capital ratios were the same.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Act") imposes a regulatory matrix which requires the federal banking
agencies to take prompt corrective action to deal with depository institutions
that fail to meet their minimum capital requirements or are otherwise in a
troubled condition. The prompt corrective action provisions require
undercapitalized institutions to become subject to an
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increasingly stringent array of restrictions, requirements and prohibitions, as
their capital levels deteriorate and supervisory problems mount. Should these
corrective measures prove unsuccessful in recapitalizing the institution and
correcting its problems, the FDIC Act mandates that the institution be placed
in receivership.
Pursuant to regulations promulgated under the FDIC Act, the corrective
actions that the banking agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by
the FDIC Act, the banking agencies have developed a classification system,
pursuant to which all banks and thrifts will be placed into one of five
categories: well-capitalized institutions, adequately capitalized
institutions, undercapitalized institutions, significantly undercapitalized
institutions and critically undercapitalized institutions. The capital
thresholds established for each of the categories are as follows:
<TABLE>
<CAPTION>
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Total Tier 1 Risk-
Capital Category Tier 1 Capital Risk-Based Capital Based Capital Other
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<S> <C> <C> <C> <C>
Well Capitalized 5% or more 10% or more 6% or more Not subject
to a capital
directive
----------------------------------------------------------------------------------------------------------------
Adequately 4% or more 8% or more 4% or more --
Capitalized
----------------------------------------------------------------------------------------------------------------
Undercapitalized less than 4% less than 8% less than 4% --
----------------------------------------------------------------------------------------------------------------
Significantly less than 3% less than 6% less than 3% --
Undercapitalized
----------------------------------------------------------------------------------------------------------------
Critically 2% or less -- -- --
Undercapitalized tangible equity
================================================================================================================
</TABLE>
The undercapitalized, significantly undercapitalized and critically
undercapitalized categories overlap; therefore, a critically undercapitalized
institution would also be an undercapitalized institution and a significantly
undercapitalized institution. This overlap ensures that the remedies and
restrictions prescribed for undercapitalized institutions will also apply to
institutions in the lowest two categories.
An institution that falls into any of the three undercapitalized categories
automatically becomes subject to a number of supervisory sanctions, which,
among other things, (1) require the institution to submit a capital restoration
plan within forty-five (45) days after becoming undercapitalized; (2) prohibit
growth in the institution's average total assets from quarter to quarter,
unless its capital plan has been accepted and the increase in assets is
consistent with the plan and its capital levels are increasing at a rate that
will enable it to become
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adequately capitalized within a reasonable time; and (3) prohibit the
institution from making any acquisition, opening any branch office or engaging
any new line of business, unless its capital plan has been accepted, the
institution is in compliance with its plan, and the proposed action has been
approved by the appropriate banking agency and the FDIC.
The down-grading of an institution's category is automatic in two
situations: (1) whenever an otherwise well-capitalized institution is subject
to any written capital order or directive, and (2) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower capital level based on safety and soundness
considerations relating to factors other than capital levels.
All insured institutions regardless of their level of capitalizations are
prohibited by the FDIC Act from paying any dividend or making any other kind of
capital distribution or paying any management fee to any controlling person if
following the payment or distribution the institution would be
undercapitalized. While the prompt corrective action provisions of the FDIC
Act contain no requirements or restrictions aimed specifically at adequately
capitalized institutions, other provisions of the FDIC Act and the agencies'
regulations relating to deposit insurance assessments, brokered deposits, and
interbank liabilities treat adequately capitalized institutions less favorably
than those that are well-capitalized.
The FDIC has adopted or currently proposes to adopt other rules pursuant to
the FDIC Act that include: (1) real estate lending standards for banks, which
would provide guidelines concerning loan-to-value ratios for various types of
real estate loans; (2) revision to the risk-based capital rules to account for
interest rate risk, concentration of credit risk and the risks proposed by
"non-traditional activities"; (3) rules requiring depository institutions to
develop and implement internal procedures to evaluate and control credit and
settlement exposure to their correspondent banks; (4) a rule restricting the
ability of depository institutions that are not well capitalized from accepting
brokered deposits; (5) rules addressing various "safety and soundness" issues,
including operations and managerial standards for asset quality, earnings and
stock valuations, and compensation standards for the officers, directors,
employees and principal shareholders of the depository institutions; (6) rules
mandating enhanced financial reporting and audit requirements; and (7) rules
restricting the ability of a state bank, or a subsidiary thereof, to engage as
principal in activities not permissible for a national bank or make any
investment not permissible for a national bank.
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Deposit Insurance Premiums
Effective January 1, 1994, the FDIC adopted a new system of risk-based
insurance assessment. Under the FDIC's rule, each depository institution is
assigned to one of the three groups, well-capitalized, adequately capitalized
or undercapitalized, based on its capital ratios and is further assigned to one
of three subgroups within its capital category based on an evaluation of the
risk posed by the institution to its insurance fund. The capital standard
being used to set insurance premium rates are the same as those adopted by the
agencies with the prompt corrective action framework. The rule provides that
well-capitalized institutions pay assessment rates ranging from 23 to 29 basis
points, depending upon the subgroup to which they are assigned. Adequately
capitalized institutions pay from 26 to 30 basis points, and undercapitalized
institutions pay from 29 to 31 basis points. In February 1995, the FDIC
proposed a new rule which would significantly reduce the assessment rate
payable by well-capitalized institutions. Such institutions would pay
assessment rates ranging from 4 to 21 basis points, adequately capitalized
institutions would pay from 7 to 28 basis points, and undercapitalized
institutions would pay from 14 to 31 basis points.
Recent Legislation and Regulatory Action
Fair Lending
Effective April 15, 1994, ten federal agencies, including the federal
banking regulatory agencies, issued an "Interagency Policy Statement on
Discrimination in Lending" to provide guidance on what may be considered
discrimination in the offering of housing credit. The policy statement applies
to all financial institutions and sets forth three bases for discrimination
cases: (1) overt discrimination, (2) disparate treatment (treating credit
applicants differently because of race or one of the other prohibited factors),
and (3) disparate impact (neutral policies that have a discriminatory effect
not justified by business necessity).
Anti-Tying Restrictions Eased
The Federal Reserve has adopted amendments to Regulation Y that allow a
bank or bank holding company to offer a discount on traditional bank products
(loans, deposits, trust services, etc.) and securities brokerage services
without violating anti-tying restrictions. This exemption from the anti-tying
provisions is conditioned on (1) the customer's obtaining a traditional bank
product from an affiliate, and (2) the traditional bank or brokerage product's
being available separately to customers.
In addition, the Federal Reserve has adopted amendments to Regulation Y
that permit a bank holding company or its nonbank subsidiary to offer a
discount on its product or service on condition that a customer obtain any
other product or service from that company or from any of its nonbank
affiliates. These amendments generally remove Federal Reserve-imposed
restrictions on tying when no bank is involved in the arrangement and the
products are separately available for purchase by the customer.
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Community Development and Regulatory Improvement
The Riegle Community Development and Regulatory Improvement Act became
effective on September 23, 1994. The Act reduces much of the red-tape with
which insured banks and thrifts have had to contend and facilitates the
establishment of community development financial institutions.
The Act provides for more than 50 means of reducing the current
administrative requirements imposed by previously enacted legislation. Among
the regulatory relief provisions are the following:
(1) Elimination of Outmoded Regulations. The regulatory agencies must review
and eliminate outmoded regulations and policies within two years.
(2) Effective Date of New Rules. Regulators must make new rules and
amendments effective on the first day of a calendar quarter.
(3) Appeals. The regulatory agencies must set up a regulatory appeals system
and an ombudsman office.
(4) Call Reports. Banks will no longer have to publish their call report data
in their local newspapers. Banks will be permitted to file their call
reports electronically.
(5) Coordinated Exams. Federal and state regulators must coordinate their
exams and develop a system for naming a lead agency to conduct a unified
exam.
(6) Exam Schedules Extended. All CAMEL 1 banks under $250 million in assets
and CAMEL 2 banks under $100 million will be examined every 18 months
rather than every year.
(7) Audit Requirements. Holding companies with less than $5 billion in
assets, and CAMEL 1 or 2-rated institutions with more than $5 billion in
assets, may satisfy the FDIC Act audit requirements with a consolidated
holding company audit.
(8) Guidelines vs. Rules. Regulators may now issue guidelines -- instead of
rules -- for asset quality, earnings and stock valuations. Holding
companies will be exempt from these standards.
(9) Capital Rules. Regulators must take into account the size and activities
of a bank in issuing capital rules on interest rate risk, concentration of
credit risk and nontraditional activities risk.
(10) Loans to Insiders. Certain extensions of credit to insiders will not
require the prior approval of the board of directors, and current lending
limits to insiders will be less restrictive if the
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insider does not participate in policy-making for the bank.
(11) Holding Company Activities. The Act will streamline the application
process for bank holding company formations, reorganizations and new
activity requests.
(a) Applications and Notices. The Act requires the regulatory agencies to
work together to eliminate overlapping or unnecessary information
requested in the application process and to harmonize publication and
notice requirements. The bank regulatory agencies must take final
action on applications within a year of receiving a completed
application, unless the applicant waives this limit.
(b) Competitive Factors of Mergers. Under the Act, if the Federal Reserve
or the FDIC has not received any adverse comments from the Justice
Department regarding the competitive factors of the merger, bank
holding companies need wait only 15 days after approval to complete a
merger transaction. In addition, reports on the competitive effects
of merger transactions will not be required if the responsible
regulatory agency informs the other agencies involved before the
applicable date that the report is not necessary.
(c) New Activities. Bank holding companies must provide at least 60 days'
notice before engaging in a non-banking activity or acquiring shares
or control of a company that engages in non-banking activities.
(12) RESPA. Business, commercial and agricultural loans will be exempt from
the Real Estate Settlement Procedures Act.
(13) Reduction of CTRs. The Treasury Department must exempt banks from filing
currency reporting transactions on certain institutions, including
well-known businesses.
(14) Consumer Laws. The Act streamlines Truth in Lending disclosures for radio
ads of consumer leases and exempts business and commercial accounts from
the disclosure requirements of the Truth in Savings Act.
(15) Correspondent Banking. The Act will allow bankers' banks to offer
correspondent services to bank holding companies and will extend their
secured lending limits to 15% from 10%. In addition, holding companies,
banks and thrifts may invest in bankers' banks.
(16) Foreign Deposits. Banks will no longer be responsible for foreign
deposits in cases of sovereign action.
(17) Deposit Brokers. Well-capitalized institutions do not have to register as
deposit brokers.
(18) Bank Management. The Act extends the grandfather period on
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management interlocks another five years. In addition, only 51% (as
opposed to two-thirds) of a national bank's directors must meet residency
requirements.
(19) Flood Insurance. Where a borrower takes a mortgage loan for property in a
flood hazard area, the bank is required to deposit into an escrow account
flood insurance premiums on behalf of the borrower.
The Act also provides for the establishment of a Community Development
Financial Institutions Fund, which will have $382 million in funding available
over four years. The Fund may provide financial assistance through equity
investments, deposits, credit union shares, grants and technical assistance to
a Community Development Financial Institution ("CDFI"). However, the Fund may
not own more than 50% of the equity of a CDFI and cannot control its
operations. Furthermore, if the Fund deposits money in a CDFI, it may not
require collateral or security. A CDFI is any entity with the primary mission
of promoting community development, serving an investment area or targeted
population, that provides development services or equity investments and loans
through an affiliate or community partnership. One-third of the $382 million
authorized for CDFI is earmarked for the Bank Enterprise Act, under which banks
could receive a 5% to 15% rebate on their deposit insurance premiums for their
community development work in low- to moderate-income neighborhoods.
Additionally, the Act provides for new consumer protections with respect
to high cost mortgages, i.e., credit transactions secured by the consumer's
home (such as a second mortgage or home equity loan), with an annual percentage
yield 10 points higher than Treasury securities of comparable maturity or with
total points and fees that exceed 8% of the loan amount or $400.
Furthermore, the Act amends securities, banking, pension and tax laws to
encourage securitization of small business loans and the development of a
secondary market for pools of such loans. Federally chartered banks, thrifts,
credit unions and federal- or state-chartered government corporations will be
permitted to invest in these small business related securities. Institutions
that are well-capitalized (or adequately capitalized, with regulatory
permission) will qualify for favorable accounting, reserve, and capital
treatment of small business loans sold into the secondary market.
Finally, lenders may participate in capital access programs, designed to
encourage lenders to make loans to small- and medium-sized businesses. For
each loan enrolled in the program, the borrower and lender pay a premium into a
loan loss reserve fund, and the state matches that contribution. Participating
lenders assume the risk of loss on their loans, if the losses exceed the total
contributions in the reserve fund. Federal funds of up to $50 million are
authorized to match state contributions to these programs.
14
<PAGE> 15
Interstate Banking and Branching
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
which took effect on September 29, 1994, greatly broadens the scope of
permissible interstate banking. The following are highlights of the Act:
(1) Acquisitions by Holding Companies. The Act authorizes a bank holding
company or a foreign bank, one year after the Act is signed into law, to
acquire a bank holding company or bank located in any state upon approval
of the Federal Reserve Board. State banks will not be able to "opt out"
of interstate banking.
(2) State Prohibitions Against Interstate Branching. The Act allows states to
enact laws by June 1, 1997, prohibiting all out-of-state banks from
acquiring a branch in that state. A national bank whose home state has
"opted out" may not acquire or establish a branch located in any other
state.
(3) De Novo Branches. The Act prohibits a bank from establishing a de novo
branch in a host state unless the host state adopts a law permitting all
out-of-state banks to establish de novo branches.
(4) Time Periods for Bank Acquisitions. The Act upholds state laws that
establish a time period for which an in-state bank must be in existence
before an out-of-state bank or bank holding company may acquire it.
(5) Anti-Trust Provision. The Act prohibits an acquirer from controlling more
than 10% of the insured deposits nationwide or 30% of the deposits in the
state after the acquisition is completed.
(6) Regulatory Approval. Beginning June 1, 1997, the regulatory agency
responsible for an acquiring bank or bank holding company may approve an
application by a bank to acquire a branch across state lines if:
(a) each bank involved is adequately capitalized, and
(b) the responsible regulatory agency determines that the resulting bank
will continue to be adequately capitalized and that the management of
the bank has the necessary management skills to manage the extended
operation.
(7) Combination of Banks. Beginning June 1, 1997, a bank holding company
which has bank subsidiaries in more than one state may, with the approval
of the Federal Reserve Board, combine banks across state lines.
(8) Community Reinvestment. Under the Act, national bank branches are subject
to state laws in the areas of community reinvestment,
15
<PAGE> 16
consumer protection, fair lending, and intrastate branching.
(9) Branch Closings. The Act requires regulators to consult with community
organizations before permitting an interstate institution to close a
branch in a low-income area.
Proposed Legislation and Regulatory action
New regulations and statutes are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed regulation or statute will be adopted or the
extent to which the business of the Company may be affected by such regulation
or statute.
Statistical Disclosure by Bank Holding Companies
Statistical information is included in the Annual Report, on pages 23
through 35, under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations, and is incorporated by reference
herein.
Item 2. PROPERTIES
The Company's principal office is located at the Bank's Central Habersham
office, on Highway 441 North, Cornelia, Georgia, and the telephone number of
that office is (706) 778-1000.
The Bank's North Habersham (main) office is located at 201 Washington
Street, Clarkesville, Georgia, and the telephone number of that office is (706)
778-1000. The Bank also has two full-service branch offices and one limited
service office for receiving deposits. Its Central Habersham office is located
on Highway 441 North, Cornelia, Georgia, and its South Habersham office is
located on Highway 441 By-Pass, Baldwin, Georgia. The Hospitality Center is
located at 802 N. Washington Street, Clarkesville, Georgia. Each office has a
24-hour teller machine. The Bank owns its office properties without
encumbrance.
The Advantage Group, Inc.'s principal office is located at the Bank's
Central Habersham office, on Highway 441 North, Cornelia, Georgia, and the
telephone number of that office is (706) 778-1000.
Item 3. LEGAL PROCEEDINGS
The Company and the Bank are not parties to, nor is any of their property
the subject of, any material pending legal proceedings, other than ordinary
routine litigation incidental to their business, and no such proceedings are
known to be contemplated by governmental authorities.
16
<PAGE> 17
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is not an established public trading market for the common stock of
the Company. Management is aware of a few recent sales at $43.00 per share.
Dividends are paid semi-annually and equalled $.40 per share per year in 1994
and $.40 in 1993. As of December 31, 1994, the Company had 400 shareholders of
record.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's discussion and analysis of the Company's financial condition
and its results of operations appear in the Annual Report, on pages 23 through
35 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and is incorporated by reference herein.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the Company as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders' equity
and of cash flows for each of the three years in the period ended December 31,
1994, and the report issued thereon by the Company's independent public
accountants, appear in the Annual Report, on pages 9 through 21 and are
incorporated herein by reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a)
Information concerning the Company's directors and executive officers
appears in the Proxy Statement under the headings "Stock Owned by
Management", "Election of Directors - Nominees," "Executive Officers" and
"Certain Transactions" is incorporated by reference herein.
Item 10. EXECUTIVE COMPENSATION
Information concerning the compensation of the Company's management appears
in the Proxy Statement under the heading "Executive Compensation" and is
incorporated by reference herein.
17
<PAGE> 18
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning beneficial owners of more than 5% of the Company's
Stock and information concerning the Stock owned by the Company's management
appears in the Proxy Statement under the heading "Ownership of Stock" and is
incorporated by reference herein.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
appears in the Proxy Statement under the heading "Certain Transactions" and is
incorporated by reference herein.
18
<PAGE> 19
PART IV
Item 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The registrant submits herewith as exhibits to this report on Form
10-KSB the exhibits required by Item 601 of Regulation S-K, subject to Rule
12b-32 under the Securities Exchange Act of 1934.
Exhibit No. Document
----------- --------
2.0 Agreement and Plan of Merger, dated January 16, 1995, between the
Company and Security Bancorp, Inc. (1)
3.1 Amended and restated Articles of Incorporation of Habersham Bancorp. (2)
3.2 By-laws of Habersham Bancorp, as amended as of November 20, 1989 (3) and
as of March 16, 1991. (4)
10.1 Habersham Bancorp Savings Investment Plan, as amended and restated
March 17, 1990, and the related Trust Agreements, as amended March 17,
1990. (3)
10.2 Habersham Bancorp Incentive Stock Option Plan, as amended February 26,
1994. (5)
10.3 Habersham Bancorp Outside Directors Stock Option Plan.
13.0 Habersham Bancorp 1994 Annual Report (except for those portions
specifically incorporated by reference, the 1994 Annual Report to
shareholders is not deemed to be filed as part of this report).
21.0 Subsidiaries of Habersham Bancorp. (6)
24.0 A Power of Attorney is set forth on the signature page to this Form
10-KSB.
27.0 Financial Data Schedule. (7)
(1) Incorporated herein by reference to Appendix A to the Proxy
Statement/Prospectus contained in the Registrant's Registration Statement on
Form S-4 filed with the Commission on March 2, 1995, (Regis. No. 33-57915).
(2) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1988
(File No. 0-13153).
(3) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989
(File No. 0-13153).
19
<PAGE> 20
(4) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 0-13153).
(5) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report of Form 10-KSB for the year ended December 31, 1993
(File No. 0-13153).
(6) Incorporated herein by reference to exhibit 21 in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988 (File No. 0-13153).
(7) Incorporated herein by reference to exhibit 27 in the Registrant's
Registration Statement on Form S-4 filed with the Commission on March 2, 1995,
(Regis. No. 33-57915).
Executive Compensation Plans and Arrangements
The following is a list of all of the Registrant's plans, management
contracts and compensatory arrangements, together with the location of each
such plan, contract or arrangement.
Title Location
----- --------
Habersham Bancorp Savings Investment Plan, Exhibit 10.1 in the
as amended and restated March 17, 1990, Registrant's Annual Report
and the related Trust Agreements, as on Form 10-K for the year
amended March 17, 1990. ended December 31, 1989.
Habersham Bancorp Incentive Stock Option Exhibit 10.2 in the
Plan, as amended February 26, 1994 Registrant's Annual Report
on Form 10-KSB for the year
ended December 31, 1993.
Habersham Bancorp Outside Directors Exhibit 10.3 in this
Stock Option Plan. Annual Report on
Form 10-KSB.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the year
ended December 31, 1994.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HABERSHAM BANCORP (Registrant)
By: /s/ David D. Stovall Date: March 18, 1995
----------------------- --------------
Director, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas A. Arrendale, Jr. and David D. Stovall,
and each of them, his attorneys-in-fact, each with full power of substitution,
for him in his name, place and stead, in any and all capacities, to sign any
amendment to this Report on Form 10-KSB, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission and hereby ratifies and confirms all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Signature Title Date
/s/ Thomas A. Arrendale, Jr. Chairman of the Board March 18, 1995
---------------------------- and Director
Thomas A. Arrendale, Jr.
/s/ Thomas A. Arrendale, III Vice Chairman of the Board March 18, 1995
---------------------------- and Director
Thomas A. Arrendale, III
/s/ David D. Stovall Director, President and March 18, 1995
---------------------------- Chief Executive Officer *
David D. Stovall
/s/ James Holcomb Director March 18, 1995
----------------------------
James Holcomb
/s/ James A. Stapleton, Jr. Director March 18, 1995
----------------------------
James A. Stapleton, Jr.
/s/ Calvin R. Wilbanks Director March 18, 1995
----------------------------
Calvin R. Wilbanks
* Principal financial officer, principal executive officer, controller and
principal accounting officer.
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Document Page
----------- --------- ------------
<S> <C> <C>
2.0 Agreement and Plan of Merger dated,
January 16, 1995 between Habersham Bancorp
and Security Bancorp, Inc. (1) .................... N/A
3.1 Amended and restated Articles of
Incorporation of Habersham Bancorp (2) ............ N/A
3.2 By-laws of Habersham Bancorp, as amended as of
November 20, 1989 (3) and as of March 16, 1991
March 16, 1991 (4)................................. N/A
10.1 Habersham Bancorp Savings Investment Plan, as
amended and restated March 17, 1990, and the
related Trust Agreements, as amended (3) .......... N/A
10.2 Habersham Bancorp Incentive Stock Option Plan,
as amended February 26, 1994 (5) .................. N/A
10.3 Habersham Bancorp Outside Directors Stock
Plan .............................................. 24
13.0 Habersham Bancorp 1994 Annual Report (except for
portions specifically incorporated by reference,
the 1994 Annual Report to shareholders is not
deemed to be filed as part of this report) ........ 31
21.0 Subsidiaries of Habersham Bancorp (6) ............. N/A
24.0 A Power of Attorney is set forth on the
signature page to this Form 10-KSB ................ 21
27.0 Financial Data Schedule (7) ....................... N/A
</TABLE>
(1) Incorporated herein by reference to Appendix A to the Proxy
Statement/Prospectus contained in the Registrant's Registration Statement on
Form S-4 filed with the Commission on March 2, 1995 (Regis. No. 33-57915).
(2) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.
(3) Incorporated herein by reference to exhibit of same number in the
Registrant Annual Report on Form 10-K for the year ended December 31, 1989.
22
<PAGE> 23
(4) Incorporated herein by reference to exhibit of same number in the
Registrant Annual Report on Form 10-K for the year ended December 31, 1991.
(5) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1993.
(6) Incorporated herein by reference to exhibit 21 in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.
(7) Incorporated herein by reference to exhibit 27 in Registrant's
Registration Statement on Form S-4 filed with the Commission on March 2, 1995
(Regis. No. 33-57915).
23
<PAGE> 1
EXHIBIT 10.3
HABERSHAM BANCORP
OUTSIDE DIRECTORS STOCK OPTION PLAN
THIS INDENTURE is made as of the 21st day of January, 1995, by HABERSHAM
BANCORP, a corporation organized and doing business under the laws of the State
of Georgia (the "Company").
1. Purpose.
The Company adopts the Habersham Bancorp Outside Directors Stock Option
Plan (the "Plan") to secure and retain the services of those directors of the
Company and of any subsidiary bank (individually, a "Bank") who are not
employed by the Company, any subsidiary bank or any of its affiliates (the
"Eligible Optionees") by giving them an opportunity to invest in the future
success of the Company.
2. Administration.
The Board of Directors of the Company (the "Company Board") shall
appoint one or more of its employee members to administer (the "Plan
Administrator") the Plan on behalf of the Company. It is intended that the
grants of options under the Plan are being made pursuant to the formulae stated
herein and that the participation of directors shall constitute "participation
in a formula plan which does not disqualify a director from being
disinterested" as described in Rule 16b-3 of the Securities Exchange Act of
1934, as amended.
Each member constituting the Plan Administrator shall serve at the
pleasure of the Company Board. If more than one person serves as Plan
Administrator, the Plan Administrator shall select one of its members as a
chairman and shall hold meetings at the times and in the places as it may deem
advisable. All actions the Plan Administrator takes shall be made by majority
decision. Any action evidenced by a written instrument signed by all of the
members of the Plan Administrator shall be as fully effective as if the Plan
Administrator had taken the action by majority vote at a meeting duly called
and held.
The Plan Administrator shall have complete and conclusive authority to
(a) interpret the Plan, (b) prescribe, amend, and rescind rules and regulations
relating to it, (c) execute a stock option award in favor of those Eligible
Optionees who are granted options pursuant to Section 5, substantially in the
form attached hereto as Exhibit A (the "Award"), and (d) make all other
determinations necessary or advisable for the administration of the Plan. The
Plan Administrator's determinations on these matters shall be conclusive.
25
<PAGE> 2
In addition to any other rights of indemnification that they may have
as directors of the Company or as members of the Plan Administrator, the
directors of the Company and members of the Plan Administrator shall be
indemnified by the Company against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of action taken
or failure to act under or in connection with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided the settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit
or proceeding, except in relation to matters as to which it shall be adjudged
in the action, suit or proceeding that the director or Plan Administrator
member is liable for negligence or misconduct in the performance of his duties;
provided that within 60 days after institution of any action, suit or
proceeding, an indemnitee shall in writing offer the Company the opportunity,
at its own expense, to handle and defend the same.
3. Grant of Options.
(a) Initial Grants. Each Eligible Optionee serving as a member of
the Company Board on April 16, 1994, and who continues to be a member
of the Company Board on January 21, 1995, shall be granted an option as
of January 21, 1995 to purchase 1,000 shares of common stock, $2.50 par
value per share, of the Company (the "Stock") at an exercise price of
$45.94 per share.
(b) Subsequent Annual Grants During Tenure as a Director. Each
Eligible Optionee shall be granted as of December 31, 1995, and as of
December 31 of each subsequent year during which the Plan is in effect,
an option to purchase at an exercise price per share equal to the book
value of a share of Stock as of the grant date:
(i) 1,000 shares of Stock, if such Eligible Optionee serves on
the Company Board on such date of grant; or
(ii) 250 shares of Stock, if such Eligible Optionee serves on the
Board of Directors of a Bank (a "Bank Board") but not on the
Company Board on such date of grant;
provided the performance criteria set forth in Plan Section 3(d) is
satisfied on such date.
(c) Conditions to Grants. In the event the remaining number of
shares of Stock reserved for issuance under the Plan is insufficient to
grant options for the appropriate number of shares of Stock to all
Eligible Optionees as of any grant date, then no options shall be
granted as of that grant date or any subsequent grant date.
26
<PAGE> 3
(d) Performance Criteria. As of any grant date, no Eligible Optionee
will be granted an option pursuant to Section 3(b)(i) unless the
Company's return on beginning assets, on a consolidated basis, is at
least one percent (1%) for the 12-month period ended on the date of the
grant. As of any grant date, no Eligible Optionee who is then a member
of a Bank Board will be granted an option pursuant to Section 3(b)(ii)
unless that Bank's return on beginning assets is at least one percent
(1%) for the 12-month period ended on the date of the grant.
4. Stock Subject to Plan.
The Company has authorized and reserved for issuance upon the exercise
of options pursuant to the Plan an aggregate of 70,000 shares of Stock. If any
option is cancelled, expires or terminates without the respective optionee
exercising it in full, options with respect to those unpurchased shares of
Stock may be granted to that same optionee or to another eligible individual or
individuals under the terms of this Plan.
The Plan Administrator shall adjust the total number of shares of Stock
reserved for issuance under the Plan and any outstanding options, both as to
the number of shares Stock and the exercise price as set forth in the Plan and
in the applicable Award, for any increase or decrease in the number of
outstanding shares of Stock resulting from a stock split or a payment of a
stock dividend on the Stock, a subdivision or combination of the Stock, a
reclassification of the Stock, a merger or consolidation of the Stock or any
other like changes in the Stock or in their value; provided that any such
adjustment shall be made in a manner consistent with the reason for the
adjustment and shall be effected uniformly among optionees. Outstanding
options shall not be adjusted for cash dividends or the issuance of rights to
subscribe for additional stock or securities of the Company. Any adjustment
may provide for the elimination of any fractional share of Stock which might
otherwise become subject to an option.
In the event of the approval by the stockholders of the Company of a
reorganization, merger or consolidation with respect to which the Company is
not the surviving entity, or the sale of all or substantially all of the assets
of the Company, any outstanding, but unexercised option shall be cashed out on
the basis of the greater of the excess of the fair market value of a share of
Stock over the exercise price or, if applicable, the excess of the price paid
for a share of Stock in connection with such transaction over the exercise
price multiplied by the number of shares of Stock as to which the option
remains unexercised immediately preceding the date of the transaction.
In the event of a dissolution or liquidation of the Company, all options
under the Plan shall terminate as to any unexercised portion thereof as of the
effective date of the dissolution or liquidation.
The grant of an option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations, or changes in
its capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.
27
<PAGE> 4
5. Terms and Conditions of All Options.
Each option granted pursuant to the Plan shall expire on the earlier of
(1) the fifth anniversary of the date of grant, (2) the date the optionee
ceases to be a member of the Company Board or Bank Board, except in the event
of his death, or (3) the first anniversary of the optionee's death in the event
the optionee ceases to be a member of the Company Board or Bank Board due to
the optionee's death.
Each option granted pursuant to the Plan shall be fully vested on the
date of grant but may not be exercised until the later of (a) six (6) months
following the date of grant or (b) the date stockholders approve the Plan in
accordance with Plan Section 13 and is not transferrable by the optionee other
than as provided by the will of the optionee or the applicable laws of descent
and distribution. Each option granted pursuant to the Plan shall be subject to
such additional terms as set forth in the Award.
6. Term of Plan.
The effective date of the Plan is the date on which the Company Board
adopts the Plan. The Plan shall terminate ten (10) years after that date,
subject to Plan Section 10.
7. Exercise of Option.
The optionee may purchase shares of Stock subject to an option (the
"Shares") only upon receipt by the Company of a notice in writing from the
optionee of his intent to purchase a specific number of Shares and which notice
contains such representations regarding compliance with the federal and state
securities laws as the Plan Administrator may reasonably request. The purchase
price shall be paid in full upon the exercise of an option and no Shares shall
be issued or delivered until full payment therefor has been made. Payment of
the purchase price for all Shares purchased pursuant to the exercise of an
option shall be made in cash or by certified check.
Until stock certificates reflecting the Shares accruing to the optionee
upon the exercise of the option are issued to the optionee, the optionee shall
have no rights as a shareholder with respect to the Shares. The Company shall
make no adjustment to the Shares for any dividends or distributions or other
rights for which the record date is prior to the issuance of that stock
certificate, except as the Plan otherwise provides.
8. Assignability.
Except as Plan Section 5 permits, no option or any of the rights and
privileges thereof accruing to an optionee shall be transferred, assigned,
pledged or hypothecated in any way whether by operation of law or otherwise,
and no option, right or privilege shall be subject to execution, attachment or
similar process.
28
<PAGE> 5
9. No Right to Continued Service.
No provision in the Plan or any option shall confer upon any optionee
any right to continue performing services for or to interfere in any way with
the right of the stockholders of the Company to remove such optionee as a
director of the Company or a Bank at any time for any reason.
10. Amendment and Termination.
The Company Board at any time may amend or terminate the Plan without
stockholder approval; provided, however, that the Company Board may condition
any amendment on the approval of the stockholders of the Company if such
approval is necessary or advisable with respect to tax, securities (which
require such approval for a material increase of the number of shares of Stock
subject to options, and for material modifications to the eligibility
requirements of the Plan, among others) or other applicable laws to which the
Company, the Plan, optionees or Eligible Optionees are subject.
Notwithstanding the foregoing, in no event shall the Company Board amend the
Plan more than once every six (6) months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. No amendment or termination of the Plan shall adversely affect the
rights of an optionee with regard to his options without his consent.
11. General Restriction.
Each option is subject to the condition that if at any time the
Company, in its discretion, shall determine that the listing, registration or
qualification of the shares of Stock covered by such option upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such option or the purchase
or delivery of shares of Stock thereunder, the delivery of any or all shares of
Stock pursuant to such option may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under the option then outstanding, the Company may
require, as a condition of exercise of any option or as a condition to any
other delivery of shares of Stock pursuant thereto, that the optionee or the
optionee's representative represent, in writing, that the shares of Stock
received pursuant to the option are being acquired for investment and not with
a view to distribution and agree that the shares of Stock will not be disposed
of except pursuant to an effective registration statement, unless the Company
shall have received an opinion of counsel that such disposition is exempt from
such requirement under the Securities Act of 1933 and any applicable state
securities laws. The Company may endorse on certificates representing shares
of Stock delivered pursuant to an option such legends referring to the
foregoing representations or restrictions or any other applicable restrictions
on resale as the Company, in its discretion, shall deem appropriate.
12. Choice of Law.
The laws of the State of Georgia shall govern the Plan.
29
<PAGE> 6
13. Stockholder Approval.
The Company shall submit the Plan to its stockholders for approval by a
majority of stockholders present and entitled to vote within twelve months of
the adoption of the Plan by the Company Board; provided that unless stockholder
approval is obtained within the twelve-month period, both the Plan and all
outstanding options issued thereunder shall be rendered immediately void and of
no effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in
the form and as of the date set forth above.
HABERSHAM BANCORP
By:/s/ David D. Stovall
--------------------
David D. Stovall
Title: President
-----------------
ATTEST:
/s/ Edward D. Ariail
--------------------------------------------------------
Edward D. Ariail
Title: Secretary
--------------------------------------
[CORPORATE SEAL]
30
<PAGE> 1
EXHIBIT 13
HABERSHAM BANCORP
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
ASSETS ------------ ------------
<S> <C> <C>
Cash and due from banks $ 4,450,912 $ 4,125,961
Federal funds sold 1,020,000 3,944,000
Investment securities available
for sale, at market value (Note 3) 28,529,679 23,953,213
Investment securities held to maturity, at cost
(estimated market value of $21,092,769
in 1994 and $18,777,353 in 1993) (Note 4) 21,619,504 18,160,786
Loans (Notes 5 and 13) 100,848,483 104,154,099
Less: Unearned income (45,338) (74,959)
Allowance for loan losses (Note 5) (1,744,335) (1,601,902)
------------ ------------
Loans, net 99,058,810 102,477,238
------------ ------------
Premises and equipment, net (Note 6) 2,947,889 3,362,505
Interest receivable 1,346,942 1,336,574
Other assets 2,353,248 1,496,014
----------- - ------------
TOTAL ASSETS $161,326,984 $158,856,291
============ ============
LIABILITIES
Deposits (Note 13)
Demand $ 17,100,436 $ 13,565,089
Money market and NOW accounts 33,653,457 33,459,658
Savings 5,504,444 5,162,956
Time ($100,000 and over) 21,165,754 22,260,745
Other time 64,191,404 64,010,552
------------ ------------
Total Deposits 141,615,495 138,459,000
Short-term borrowings (Note 7) 1,001,742 1,259,424
Other borrowings (Note 7) 1,500,000 2,500,000
Accrued interest payable 1,000,104 951,050
Other liabilities 359,056 140,511
------------ ------------
TOTAL LIABILITIES 145,476,397 143,309,985
------------ ------------
SHAREHOLDERS' EQUITY (Notes 9 and 13)
Common stock, $2.50 par value, 1,000,000 shares
authorized; 350,000 shares issued 875,000 875,000
Additional paid-in capital 3,321,028 3,300,000
Retained earnings 13,110,034 11,584,709
Unrealized gain (loss) on investment securities
available for sale (1,013,344) 325,184
Treasury stock, at cost (442,131) (538,587)
------------ ------------
SHAREHOLDERS' EQUITY - NET 15,850,587 15,546,306
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $161,326,984 $158,856,291
============ ============
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 2
HABERSHAM BANCORP
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
INTEREST INCOME
<S> <C> <C> <C>
Loans $ 9,580,514 $10,043,542 $10,705,048
Investments:
U. S. Treasury and Government agencies 1,531,470 1,031,171 1,788,165
States and political subdivisions
(exempt from Federal income tax) 1,056,133 1,010,857 1,024,803
Other investment securities 136,920 172,818 200,273
Federal funds sold 129,640 71,705 104,641
----------- ----------- -----------
TOTAL INTEREST INCOME 12,434,677 12,330,093 13,822,930
----------- ----------- -----------
INTEREST EXPENSE
Time deposits, $100,000 and over 947,826 1,027,779 1,949,457
Other deposits 3,750,020 3,591,770 4,548,754
Short-term and other borrowings 103,086 58,058 29,847
----------- ----------- -----------
TOTAL INTEREST EXPENSE 4,800,932 4,677,607 6,528,058
----------- ----------- -----------
NET INTEREST INCOME 7,633,745 7,652,486 7,294,872
Provision for loan losses (Note 5) 208,096 249,765 566,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,425,649 7,402,721 6,728,872
----------- ----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 430,211 426,088 393,787
Other service charges and commissions 232,887 224,532 261,669
Securities gains, net 25,128 205,551
Other income 518,889 267,207 187,732
----------- ----------- -----------
TOTAL NON-INTEREST INCOME 1,207,115 917,827 1,048,739
----------- ----------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits (Note 10) 3,152,261 3,053,726 2,992,255
Occupancy expenses 460,268 447,818 499,639
Furniture and equipment expenses 447,983 466,997 403,311
Data processing 179,421 226,285 204,312
Other operating expenses (Note 11) 2,379,972 2,135,118 1,981,309
----------- ----------- -----------
TOTAL NON-INTEREST EXPENSE 6,619,905 6,329,944 6,080,826
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,012,859 1,990,604 1,696,785
Provision for income taxes (Note 8) 354,474 345,886 286,288
INCOME BEFORE CUMULATIVE EFFECT OF ----------- ----------- -----------
CHANGE IN ACCOUNTING PRINCIPLE 1,658,385 1,644,718 1,410,497
Cumulative effect of change in
accounting principle (Note 8) (87,000)
----------- ----------- -----------
NET INCOME $ 1,658,385 $ 1,557,718 $ 1,410,497
=========== =========== ===========
PER COMMON AND COMMON EQUIVALENT SHARE:
Income before cumulative effect of
change in accounting principle $4.91 $4.92 $4.24
Cumulative effect of change in accounting
principle (Note 8) (.26)
----------- ----------- -----------
NET INCOME PER SHARE (Note 9) $4.91 $4.66 $4.24
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING (Note 9) 337,959 334,413 332,734
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 3
HABERSHAM BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ----------- -----------
<S> <C> <C> <C>
Net income $ 1,658,385 $ 1,557,718 $ 1,410,497
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 208,096 249,765 566,000
Provision for other real estate 120,000 19,988 31,281
Depreciation and amortization 509,334 540,635 465,824
Cumulative effect of change in
accounting principle 87,000
Loss (gain) on sale of premises and equipment 1,040 (195)
Gain on sale of securities (25,128) (205,551)
Gain on sale of other real estate (103,830)
Changes in assets and liabilities:
(Increase) decrease in interest receivable (10,368) 66,226 309,162
(Increase) decrease in other assets (182,201) 46,355 (100,931)
Increase (decrease) in interest payable 49,054 (206,707) (554,524)
Increase (decrease) in other liabilities 218,545 (111,820) (786,957)
----------- ----------- -----------
Net cash provided by operating activities 2,442,927 2,249,160 1,134,606
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale
Proceeds from maturity 6,440,949 9,299,503 16,063,258
Proceeds from sales 4,212,461 14,383,467
Purchases (17,232,821) (18,394,548) (19,992,301)
Investment securities held to maturity
Proceeds from maturity 2,522,864
Purchases (5,981,582)
Net decrease (increase) in loans 3,045,041 1,214,619 (864,751)
Purchases of premises and equipment (143,525) (430,546) (615,999)
Proceeds from sale of premises and equipment 47,767 17,275
Proceeds from sale of other real estate 163,633 228,449 16,888
----------- ----------- -----------
Net cash used in investing activities (6,925,213) (8,082,523) 9,007,837
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 3,156,495 4,008,441 (9,780,987)
Net increase (decrease) in short-term borrowings (257,682) 190,875 306,063
Advances from Federal Home Loan Bank (1,000,000) 2,500,000
Purchase of treasury stock (606,548)
Proceeds from sale of treasury stock 117,484 86,047 69,843
Cash dividends (133,060) (132,520) (122,953)
----------- ----------- -----------
Net cash provided by financing activities 1,883,237 6,652,843 (10,134,582)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (2,599,049) 819,480 7,861
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,069,961 7,250,481 7,242,620
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,470,912 $ 8,069,961 $ 7,250,481
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,659,814 $ 4,884,605 $ 7,082,582
Income taxes 367,089 343,697 468,376
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Other real estate acquired through loan
foreclosures $ 290,495 $ 30,989
Loans granted to facilitate the sale of
other real estate 125,204 $ 600,100 351,000
Unrealized gain (loss) on investment
securities available for sale, net of tax effect (1,338,528) 325,184
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 4
HABERSHAM BANCORP
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
UNREALIZED GAIN (LOSS)
ADDITIONAL ON INVESTMENT
COMMON PAID IN RETAINED SECURITIES TREASURY
STOCK CAPITAL EARNINGS AVAILABLE FOR SALE STOCK
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $875,000 $3,300,000 $8,873,859 $ (89,821)
Net income 1,410,497
Cash dividends, $.375 per share (122,953)
Purchase of 20,396 shares of Treasury Stock (606,548)
Sale of 2,423 shares of Treasury Stock (1,892) 71,735
-------- ---------- ------------ --------------------- ----------
Balance at December 31, 1992 875,000 3,300,000 10,159,511 (624,634)
Net income 1,557,718
Cash dividends, $.40 per share (132,520)
Sale of 2,330 shares of Treasury Stock 86,047
Unrealized gain on investment securities
available for sale 325,184
-------- ---------- ------------ --------------------- ----------
Balance at December 31, 1993 875,000 3,300,000 11,584,709 325,184 (538,587)
Net income 1,658,385
Cash dividends, $.40 per share (133,060)
Sale of 3,348 shares of Treasury Stock 21,028 96,456
Unrealized loss on investment
securities available for sale (1,338,528)
-------- ---------- ------------ --------------------- ----------
Balance at December 31, 1994 $875,000 $3,321,028 $13,110,034 $(1,013,344) $ (442,131)
======== ========== ============ ===================== ==========
</TABLE>
See notes to consolidated financial statements.
35
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1994, 1993 and 1992
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements of Habersham Bancorp (the "Company")
include the financial statements of Habersham Bank (the "Bank") and The
Advantage Group, Inc., which are wholly-owned subsidiaries of the Company.
All intercompany transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and with general practice within the banking
industry. The following is a summary of the more significant accounting
policies:
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds sold.
Investment Securities Available for Sale
At December 31, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Accordingly, the Company classified certain additional
investments as available for sale. Investment securities available for sale
are carried at market value. The related unrealized gain (loss), net of
tax, is included as a separate component of shareholders' equity. Gains and
losses from dispositions are based on the net proceeds and the adjusted
carrying amounts of the securities sold, using the specific identification
method.
Investment Securities Held to Maturity
Investment securities held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts which are recognized as
adjustments to interest income. The Company has the intent and ability to
hold these investment securities to maturity.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate
to provide for potential losses in the loan portfolio. Management
determines the adequacy of the allowance based upon reviews of individual
loans, recent loss experience, current economic conditions, the risk
characteristics of the various
36
<PAGE> 6
categories of loans and other pertinent factors. Loans deemed uncollectible
are charged to the allowance. Provisions for loan losses and recoveries on
loans previously charged off are added to the allowance.
Other Real Estate Owned
Other real estate owned includes real estate acquired through foreclosure.
Other real estate owned is carried at the lower of its recorded amount at
date of foreclosure or fair value. Any expense incurred in connection with
holding such real estate or resulting from any writedowns subsequent to
foreclosure is included in other non-interest expense.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using primarily the straight-line method over the
estimated useful lives of the assets.
Interest Income on Loans
Interest on loans is recorded generally over the term of the loan based on
the unpaid principal balance. Accrual of interest is discontinued when
either principal or interest becomes 90 days past due, or when in
management's opinion, collectibility of such interest is doubtful.
Loan Origination Fees and Costs
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield on the related loan.
Income Taxes
Provisions for income taxes are based upon amounts reported in the
statements of income (after exclusion of non-taxable income such as
interest on state and municipal securities) and include deferred taxes on
temporary differences between financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Earnings Per Share
Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding during the year.
Accounting Pronouncement
Statement of Financial Accounting Standards ("SFAS") No. 114, entitled
"Accounting by Creditors for Impairment of a Loan" as amended by SFAS No.
118 is not expected to have a significant effect on the consolidated
financial statements when the statement is adopted as of January 1, 1995.
37
<PAGE> 7
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform to the 1994 presentation.
3. INVESTMENT SECURITIES AVAILABLE FOR SALE
Amortized cost, estimated market values and gross unrealized gains and
losses of investment securities available for sale are as follows:
<TABLE>
<CAPTION>
Estimated
Amortized Gross Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1994:
U.S. Treasuries ................. $ 5,833,003 $ 161,323 $ 5,671,680
U.S. Government
agencies ...................... 18,399,626 $ 47 1,378,571 17,021,102
States and political
subdivisions.................. 5,082,420 124,952 15,203 5,192,169
Other Investments ............... 750,000 105,272 644,728
----------- -------- ---------- -----------
$30,065,049 $124,999 $1,660,369 $28,529,679
=========== ======== ========== ===========
December 31, 1993:
U.S. Treasuries ................. $ 2,646,674 $ 11,319 $ 2,657,993
U.S. Government
agencies ...................... 14,050,692 150,338 $ 83,977 14,117,053
States and political
subdivisions................... 5,263,750 439,018 5,702,768
Other Investments ............... 1,499,394 11,984 35,979 1,475,399
----------- -------- ---------- -----------
$23,460,510 $612,659 $ 119,956 $23,953,213
=========== ======== ========== ===========
</TABLE>
During 1994, there were realized gains of $37,664 and realized losses of
$12,536 from sales of securities. During 1993, there were no sales of
securities.
The amortized cost and estimated market values of securities available for
sale at December 31, 1994, by contractual maturity, are shown as follows.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties. Callable securities and mortgage-backed
securities are included in the year of their final original maturity. Equity
investments are included in the due after ten years category.
38
<PAGE> 8
<TABLE>
<CAPTION>
Estimated
Amortized Cost Market Value
<S> <C> <C>
Due in one year or less................. $ 2,310,830 $ 2,274,426
Due after one year through five years... 18,274,026 17,459,614
Due after five years through ten years.. 6,353,103 5,721,890
Due after ten years..................... 3,127,090 3,073,749
----------- -----------
Total................................... $30,065,049 $28,529,679
=========== ===========
</TABLE>
Securities available for sale with market value of approximately $10,689,270
were pledged as collateral at December 31, 1994 for public deposits and
other deposits, as required by law.
4. INVESTMENT SECURITIES HELD TO MATURITY
Amortized cost, estimated market values and gross unrealized gains and
losses of investment securities held to maturity are as follows:
<TABLE>
<CAPTION>
Estimated
Amortized Gross Unrealized Market
December 31, 1994: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury .......... $ 198,698 $ 3,760 $ 194,938
U.S. Government
agencies .............. 5,724,080 $ 8,215 344,909 5,387,386
States and political
subdivisions .......... 13,176,349 158,482 344,763 12,990,068
Other investments ...... 2,520,377 2,520,377
----------- ---------- -------- -----------
Total ................ $21,619,504 $ 166,697 $693,432 $21,092,769
=========== ========== ======== ===========
December 31, 1993:
U.S. Government
agencies .............. $ 4,660,364 $ 26,165 $ 52,614 $ 4,633,915
States and political
subdivisions .......... 11,890,243 653,175 10,159 12,533,259
Other investments ...... 1,610,179 1,610,179
----------- ---------- -------- -----------
Total ................ $18,160,786 $ 679,340 $ 62,773 $18,777,353
=========== ========== ======== ===========
</TABLE>
The amortized cost and estimated market values of securities held to maturity
at December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Callable securities and mortgage-backed securities are included in
the year of their final original maturity. Equity investments are included in
the due after ten years category.
39
<PAGE> 9
<TABLE>
<CAPTION>
Estimated
Amortized Cost Market Value
<S> <C> <C>
Due in one year or less................. $ 3,482,904 $ 3,438,992
Due after one year through five years... 11,704,209 11,400,033
Due after five years through ten years.. 4,139,733 3,977,565
Due after ten years..................... 2,292,658 2,276,179
----------- -----------
Total................................... $21,619,504 $21,092,769
=========== ===========
</TABLE>
Securities held to maturity with market value of approximately $7,855,621 were
pledged as collateral at December 31, 1994 for public deposits and other
deposits, as required by law.
5. LOANS
At December 31, 1994 and 1993, loans are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Real Estate:
Construction......................... $ 5,564,753 $ 5,112,344
Other................................ 68,992,708 68,830,196
Commercial........................... 13,170,219 17,044,658
Installment.......................... 12,637,913 11,204,998
Other................................ 482,890 1,961,903
------------ ------------
Total............................. $100,848,483 $104,154,099
</TABLE> ============ ============
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance, January 1.............. $1,601,902 $1,703,592 $1,265,939
Provision for loan losses....... 208,096 249,765 566,000
Loans charged off............... (125,144) (376,427) (157,328)
Recoveries...................... 59,481 24,972 28,981
---------- ---------- ----------
Balance, December 1............ $1,744,335 $1,601,902 $1,703,592
========== ========== ==========
</TABLE>
40
<PAGE> 10
Nonaccrual loans and restructured loans totaled $1,887,612 and $1,933,412
at December 31, 1994 and 1993, respectively. Interest income that would
have been recorded on nonaccrual loans and restructured loans in
accordance with their original terms totaled $181,640 in 1994 and $170,235
in 1993, compared with amounts recognized of $132,884 and $99,244,
respectively.
At December 31, 1993, the outstanding principal balance of loans sold with
recourse totaled $255,811. There were no loans sold with recourse at
December 31, 1994.
7. The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of its lending activities to meet the financing
needs of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. The Company's exposure to
credit loss in the event of non-performance by the other party to the
financial instrument for commitments to extend credit and standby letters
of credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making these commitments as
it does for on-balance-sheet instruments and evaluates each customer's
creditworthiness on a case-by-case basis. At December 31, 1994, the
Company had outstanding loan commitments of $10,614,313 and standby
letters of credit of $4,580,341. The amount of collateral obtained, if
deemed necessary, for these commitments by the Company, upon extension of
credit, is based on management's credit evaluation of the customer.
Collateral held, if any, varies but may include inventory, equipment, real
estate, or other property. As of December 31, 1994, the Bank's loans to
customers for agribusiness purposes in the poultry industry were
approximately $22 million.
6. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land............................. $ 233,750 $ 233,750
Buildings........................ 2,956,097 2,956,097
Furniture and equipment.......... 2,799,730 3,548,658
---------- ----------
Total.......................... 5,989,577 6,738,505
Less accumulated depreciation.... 3,041,688 3,376,000
---------- ----------
Premises and equipment, net...... $2,947,889 $3,362,505
</TABLE> ========== ==========
41
<PAGE> 11
Bank has entered into lease agreements for equipment through 1999.
Approximate minimum rentals under noncancellable operating leases are as
follows:
<TABLE>
<S> <C>
1995 $93,128
1996 81,547
1997 59,841
1998 8,093
1999 1,018
</TABLE>
Rental expense was approximately $85,939 in 1994, $108,000 in 1993 and
$55,000 in 1992.
7. SHORT-TERM AND OTHER BORROWINGS
Short-term borrowings of $1,001,742 and $1,259,424 at December 31, 1994
and 1993, respectively, consist of customers' deposits of withholding
taxes held for the U. S. Treasury on a note option basis and bear interest
at 1/4 of 1% less than the Federal funds rate.
Other borrowings at December 31, 1994 consist of a $1,500,000 Federal Home
Loan Bank advance with an adjustable rate using three months LIBOR minus
eleven basis points. Other borrowings at December 31, 1993 consist of a
$1,000,000 Federal Home Loan Bank advance bearing interest at 3.65% and
$1,500,000 with an adjustable rate using three months LIBOR minus eleven
basis points.
The average interest rates for other borrowings during 1994 and 1993 were
4.13% and 3.48%, respectively. The advance at December 31, 1994 matures in
1996.
8. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." Previously, the Company had accounted for its income
tax expense in accordance with Accounting Principles Board Opinion No. 11.
SFAS No. 109 requires the Company to provide deferred income taxes based
on temporary differences between financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the year in
which the temporary differences are expected to reverse. The cumulative
effect of the adoption of this pronouncement on the Company's financial
statements was to decrease net income by $87,000 ($.26 per share) for the
year ended December 31, 1993.
42
<PAGE> 12
The provision for income taxes for the years ended December 31, 1994,
1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Current.................... $445,818 $302,036 $521,428
Deferred................... (91,344) 43,850 (235,140)
-------- -------- --------
Total.................... $354,474 $345,886 $286,288
======== ======== ========
</TABLE>
At December 31, 1994 and 1993 the significant components of the Company's
net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets: 1994 1993
<S> <C> <C>
Unrealized loss on investment
securities available for sale $ 522,000
Allowance for possible loan losses 424,000 $ 376,000
Deferred Loan Fees 57,000 35,000
Other 28,000 27,000
---------- ---------
1,031,000 438,000
---------- ---------
Deferred Tax Liabilities:
Unrealized gain on investment
securities available for sale (168,000)
Accumulated Depreciation (52,000) (71,000)
Other Assets (41,000) (42,000)
---------- ---------
(93,000) (281,000)
---------- ---------
Net Deferred Tax Asset Before
Valuation Allowance 938,000 157,000
Valuation Allowance
---------- ---------
Net Deferred Tax Asset $ 938,000 $ 157,000
========== =========
</TABLE>
The provision for income taxes is less than that computed by applying the
federal statutory rate of 34% to income before income taxes as indicated
by the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income tax at statutory rate... $ 684,372 $ 676,805 $ 576,907
Effect of tax exempt income.... (317,126) (300,195) (291,747)
Other.......................... (12,772) (30,724) 1,128
--------- --------- ---------
Provision for income taxes..... $ 354,474 $ 345,886 $ 286,288
========= ========= =========
</TABLE>
43
<PAGE> 13
9. SHAREHOLDERS' EQUITY
Effective November 1, 1992, the Company declared a 2 for 1 stock split
recorded in the form of a stock dividend. Retroactively, common stock was
credited and undivided profits were charged for the amount of par value of
the additional shares issued of $437,500. All references to the number of
common shares and per common share amounts have been restated to reflect
the stock split.
The approval of the Georgia Department of Banking and Finance is required
if dividends declared by the Bank to the Company in any year will exceed
50% of the net income of the Bank for the previous calendar year. The Bank
is also required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. At December 31,
1994, the Bank is required to have minimum Tier 1 and Total Capital ratios
of 4% and 8%, respectively. The Bank's actual ratios at that date were
12.07% and 13.32%, respectively. Additionally, the Bank is required to
maintain a leverage ratio (Tier 1 Capital to total assets) of at least 4%.
The Bank's leverage ratio at December 31, 1994 was 9.37%.
At December 31, 1994 and 1993, the Company held 15,349 shares and 18,697
shares, respectively, in Treasury Stock.
10. EMPLOYEE BENEFIT AND STOCK OPTION PLANS
The Company has a contributory profit sharing plan under Internal Revenue
Code Section 401(k) (the "401K Plan"). The 401K Plan covers substantially
all employees. Employees may contribute up to 15% of their annual salaries
up to the amount allowed by the IRS. The Company will contribute amounts
as specified in the plan agreement. The Company's contribution to the plan
totaled $67,938 in 1994, $70,925 in 1993 and $68,079 in 1992.
44
<PAGE> 14
The Company's Incentive Stock Option Plan provides that officers and
certain employees of the Company and its subsidiaries may be granted
options to purchase shares of common stock of the Company at an amount
equal to the fair market value of the stock at the date of grant. The
options, which may be exercised immediately, expire five years from the
date of grant. The Plan limits the total number of shares which may be
purchased under the Plan to 35,000, which have been reserved for the Plan.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Number of Option Price
Options per Share
--------- ------------
<S> <C> <C>
Balance outstanding, December 31, 1991 18,000 $25.00 to $37.35
Granted 8,000 41.68
Exercised (400) 25.00
------
Balance outstanding, December 31, 1992 25,600 31.26 to 41.68
Granted 8,000 45.94
------
Balance outstanding, December 31, 1993 33,600 31.26 to 45.94
Granted 2,400 50.39
Exercised (2,000) 31.26
------
Balance outstanding, December 31, 1994 34,000 33.98 to 50.39
======
</TABLE>
Effective January 21, 1995, the Company's Board of Directors adopted,
subject to shareholder approval, an Outside Director Stock Option Plan.
Under the plan, 70,000 shares of common stock have been reserved for
issuance. The plan initially granted as of January 21, 1995 the option to
purchase 5,000 shares of common stock to outside directors who were
Company board members on April 16, 1994 at an amount equal to the fair
market value of the stock at that date. The options are fully vested on
the date of grant and exercisable six months from date of grant.
11. OTHER OPERATING EXPENSES
Items comprising other operating expenses for the years ended December 31,
1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Outside services................. $714,538 $ 627,931 $ 678,921
Advertising and public relations. 489,952 471,758 389,011
Office supplies.................. 287,565 286,524 271,459
Other............................ 887,917 748,905 641,918
---------- ---------- ----------
Total......................... $2,379,972 $2,135,118 $1,981,309
========== ========== ==========
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated
fair value amounts have been determined by the Company
45
<PAGE> 15
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
<TABLE>
<CAPTION> 1994
-----------------------------
Carrying Fair
Amount Value
------------- -------------
Assets:
<S> <C> <C>
Cash and due from banks.................. $ 4,450,912 $ 4,450,912
Federal funds sold....................... 1,020,000 1,020,000
Investment securities available for sale. 28,529,679 28,529,679
Investment securities held to maturity... 21,619,504 21,092,769
Loans.................................... 99,058,810 99,780,771
Liabilities:
Deposits.................................. $141,615,495 $140,741,928
Short-term borrowings..................... 1,001,742 1,001,742
Other borrowings.......................... 1,500,000 1,500,000
<CAPTION>
1993
------------------------------
Carrying Fair
Amount Value
------------- --------------
Assets:
<S> <C> <C>
Cash and due from banks.................. $ 4,125,961 $ 4,125,961
Federal funds sold....................... 3,944,000 3,944,000
Investment securities available for sale. 23,953,213 23,953,213
Investment securities held to maturity... 18,160,786 18,777,353
Loans.................................... 102,477,238 103,846,464
Liabilities:
Deposits................................. $138,459,000 $139,330,059
Short-term borrowings.................... 1,259,424 1,259,424
Other borrowings......................... 2,500,000 2,500,000
</TABLE>
The carrying amounts of cash and due from banks, federal funds sold, and
short-term borrowings are a reasonable estimate of their fair value due to
the short term nature of these financial instruments. The fair value of
investment securities available for sale and investment securities held to
maturity is based on quoted market prices and dealer quotes. The fair
value of loans and deposits is estimated by discounting the future cash
flows using interest rates currently charged/paid by the Bank for such
financial instruments.
As required by the Statement, demand deposits are shown at their face
value. No value has been ascribed to core deposits, which generally bear a
low rate of or no interest and do not fluctuate in response to changes in
interest rates.
46
<PAGE> 16
The fair value of commitments to extend credit and standby letters of
credit is estimated to approximate the amount outstanding (see Note 5).
The fair value has been estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the counterparties.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1994. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date and,
therefore, current estimates of fair value may differ significantly from
the amounts presented herein.
13. RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Company, including their
associates, were loan customers of the Bank. Total loans to these persons
at December 31, 1994, 1993, and 1992 totaled $4,162,599, $4,868,492, and
$4,440,957, respectively.
An analysis of the activity during 1994, 1993, and 1992 of loans to
executive officers, directors and principal shareholders is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance, January 1, .......... $ 4,868,492 $ 4,440,957 $ 2,607,749
Amounts advanced.............. 7,726,038 5,423,152 10,495,275
Repayments.................... (8,431,931) (4,995,617) (8,662,067)
----------- ----------- -----------
Balance, December 31, ........ $ 4,162,599 $ 4,868,492 $ 4,440,957
=========== =========== ===========
</TABLE>
During February 1992, the Company purchased 20,000 shares of its common
stock from a related party at a cost of approximately $594,000.
At December 31, 1994, time deposits of $1,160,000 of a business controlled
by the principal shareholders of the Company were pledged as collateral
for loans of $1,160,000 made to unrelated parties.
47
<PAGE> 17
14. SUBSEQUENT EVENT
On January 21, 1995, the Company's Board of Directors signed an agreement
to acquire all of the outstanding stock of Security Bancorp, Inc.
("Security"). The approximate purchase price of Security is expected to be
$9.4 million, which is payable in cash and the issuance of shares of
common stock of the Company.
The acquisition will be accounted for using the purchase method of
accounting. At December 31, 1994, Security's total assets were
approximately $40.0 million and shareholders' equity was approximately
$5.4 million. Security's net income for the year ended December 31, 1994
was approximately $468,000.
15. CONDENSED FINANCIAL STATEMENTS OF COMPANY (PARENT ONLY)
The condensed financial statements of the Company (parent only) are
presented below:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
ASSETS: 1994 1993
<S> <C> <C>
Cash................................ $ 938,523 $ 198,234
Investment in subsidiaries.......... 14,633,519 15,069,527
Other investments................... 275,649 275,649
Other assets........................ 2,896 2,896
----------- -----------
Total assets........................ $15,850,587 $15,546,306
=========== ===========
SHAREHOLDERS' EQUITY:
Common stock........................ $ 875,000 $ 875,000
Additional paid in Capital.......... 3,321,028 3,300,000
Retained earnings................... 13,110,034 11,584,709
Unrealized gain (loss) on investment
securities available for sale...... (1,013,344) 325,184
Treasury stock, at cost............. (442,131) (538,587)
----------- -----------
Shareholders' equity - net.......... $15,850,587 $15,546,306
=========== ===========
</TABLE>
48
<PAGE> 18
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
INCOME
<S> <C> <C> <C>
Dividends from subsidiary....... $ 760,000 $ 140,000 $ 657,500
Other income - management fees
from subsidiary................ 321,533 293,334 326,411
----------- ----------- -----------
Total Income.................... 1,081,533 433,334 983,911
EXPENSES - General and
administrative................. 327,074 299,558 331,720
----------- ----------- -----------
Income before income taxes and
equity in undistributed earnings
of subsidiaries................ 754,459 133,776 652,191
Income tax credit............... 1,406 1,579 1,347
Income before equity
in undistributed
earnings....................... 755,865 135,355 653,538
----------- ----------- -----------
Equity in undistributed earnings
of subsidiaries................ 902,520 1,422,363 756,959
----------- ----------- -----------
Net Income...................... 1,658,385 1,557,718 1,410,497
RETAINED EARNINGS AT
BEGINNING OF YEAR .............. 11,584,709 10,159,511 8,873,859
Cash dividends on common stock.. (133,060) (132,520) (122,953)
Loss on Treasury Stock......... (1,892)
----------- ----------- -----------
RETAINED EARNINGS AT
END OF YEAR..................... $13,110,034 $11,584,709 $10,159,511
=========== =========== ===========
</TABLE>
49
<PAGE> 19
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993 1992
<S> <C> <C> <C>
Net Income...................... $ 1,658,385 $ 1,557,718 $1,410,497
Equity in undistributed
earnings of subsidiaries...... ( 902,520) (1,422,362) (756,959)
----------- ----------- ----------
Net cash provided by
operating activities.......... 755,865 135,356 653,538
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends....... (133,060) (132,520) (122,953)
Purchase of treasury stock...... (606,548)
Proceeds from sale of
treasury stock................ 117,484 86,047 69,843
----------- ----------- ----------
Net cash used by
financing activities........... (15,576) ( 46,473) (659,658)
----------- ----------- ----------
Increase (decrease) in cash..... 740,289 88,883 (6,120)
CASH AT BEGINNING OF YEAR....... 198,234 109,351 115,471
----------- ----------- ----------
CASH AT END OF YEAR............ $ 938,523 $ 198,234 $ 109,351
=========== =========== ==========
</TABLE>
50
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
Habersham Bancorp,
Its Shareholders and Directors:
We have audited the accompanying consolidated balance sheets of Habersham
Bancorp and its subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, 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 Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries
at 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 discussed in the notes to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for income taxes and investment
securities.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
January 27, 1995
51
<PAGE> 21
SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the years ended December 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income $ 12,435 $ 12,330 $ 13,823 $ 15,601 $ 15,515
Interest Expense 4,801 4,678 6,528 8,654 9,157
Other Income 1,207 918 1,049 897 923
Other Expense 6,620 6,330 6,081 5,655 5,043
Income before
cumulative effect of
change in accounting
principle 1,658 1,645 1,410 1,293 1,104
Net Income 1,658 1,558 1,410 1,293 1,104
PER SHARE AMOUNTS
Income before
cumulative effect of
change in accounting
principle $ 4.91 $ 4.92 $ 4.24 $ 3.71 $ 3.18
Cumulative effect of
change in accounting
principle (.26)
Net income $ 4.91 $ 4.66 $ 4.24 $ 3.71 $ 3.18
Dividends .40 .40 .38 .35 .35
Weighted average number
of common and common
equivalent shares
outstanding 337,959 334,413 332,734 349,126 347,480
AT DECEMBER 31
Total Assets $161,327 $158,856 $150,639 $160,705 $152,976
Earning Assets 152,018 150,212 140,726 149,953 141,790
Loans 100,848 104,154 105,104 104,052 104,614
Deposits 141,615 138,459 134,451 144,232 137,285
Shareholders' Equity 15,851 15,546 13,710 12,959 11,803
RATIOS
Return on average assets 1.02% 1.01% .89% .83% .75%
Return on average equity 10.50% 10.66% 10.70% 10.36% 9.65%
Dividend payout ratio 8.02% 8.51% 8.84% 9.46% 11.02%
Average equity to average
assets ratio 9.76% 9.50% 8.31% 8.03% 7.74%
</TABLE>
52
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion sets forth the major factors that affect the Company's
results of operations and financial condition. These comments should be read
in conjunction with the consolidated financial statements.
ORGANIZATION
Habersham Bancorp (the "Company"), owns all of the outstanding stock of
Habersham Bank (the "Bank") and The Advantage Group, Inc. The Advantage Group,
Inc. is a non-bank subsidiary which engages in the business of certain
management consulting advice to depository institutions. The Advantage Group,
Inc. did not comprise a significant portion of the financial position, results
of operations, or cash flows of the Company. Management's discussion and
analysis, which follows, relates primarily to the Bank.
RESULTS OF OPERATIONS
The Company's net income was $1,658,385, $1,557,718 and $1,410,497 for the
years ended December 31, 1994, 1993 and 1992, respectively, with related
earnings per common and common equivalent share of $4.91, $4.66 and $4.24,
respectively. Net income represents a return on average equity of 10.50% for
1994, 10.66% for 1993 and 10.70% for 1992. The Company's net income per share
of common stock rose 5.4% in 1994 to $4.91, up from $4.66 per share of common
stock in 1993.
NET INTEREST INCOME
Net interest income is the largest single source of income for the Company.
Management strives to develop a level of earning asset growth while maintaining
and developing a net yield on earning assets which will cover overhead and
other costs and provide a reasonable return to our shareholders. Net interest
income for 1994 and 1993 was approximately $7.6 million compared to $7.3
million in 1992.
While average assets rose 5.23% in 1994 over 1993, net interest income for 1994
and 1993 remained relatively constant. The increase in interest income for
1994 of $104,584 over 1993 was offset by an increase in interest expense in
1994 over 1993 of $123,325. The increase in interest income for 1994 resulted
from a net increase in interest income on investment securities and federal
funds sold of approximately $568,000 offset by a decrease in interest income on
loans of approximately $463,000. The average balance of loans for 1994
decreased by $5,604,363 from 1993 with the average interest rate on loans of
9.8% in 1994 and 9.7% in 1993. The average balance on investment securities
and federal funds sold for 1994 increased 37.27% over 1993 with the average
interest rate decreasing to 5.43% in 1994 from 5.95% in 1993.
The increase in interest expense for 1994 of $123,325 over 1993 resulted from
an increase in interest on deposits and short-term and other borrowings. The
average balance of deposits for 1994 increased 5.02% over 1993 with the average
rate paid decreasing to 3.18% in 1994 from 3.27% in 1993. The average balance
for short-term and other borrowings in 1994 increased 4.62% over 1993 as a
result of the Company's decision to use Federal Home Bank Advances beginning in
1993.
Average assets for 1993 decreased $4.7 million or 3% from 1992 while net
interest income increased $348,000 or 5% in 1993 over 1992.
The increase in net interest income for 1993 over 1992 resulted from a decrease
in interest income of approximately $1,492,000 and a decrease in interest
expense of approximately $1,850,000 between 1993 and 1992. A decrease in the
average rates earned on loans and investment securities caused the decrease in
total interest income between 1993 and 1992. A decrease in average rates paid
on deposits created the decrease in total interest expense between 1993 and
1992.
53
<PAGE> 23
The interest margin of the Company, the spread between interest income and
interest expense, was 5.08% in 1994, 5.39% in 1993 and 5.01% in 1992. Careful
management of deposit and loan growth and pricing has allowed the Company to
average a net interest margin of approximately 5.2% over the last three years.
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, AND AVERAGE YIELDS
EARNED AND RATES PAID
The following table sets forth the consolidated average balance sheets for the
Company, average rates paid on deposits, average rates earned on earning
assets, and total interest paid on deposits and earned on earning assets. This
information is presented for the years ended December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993 1994 1993 1994 1993
AVERAGE AVERAGE YIELD/ YIELD/ INCOME INCOME
BALANCE BALANCE RATES RATES (EXPENSE) (EXPENSE)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 5,113,163 $ 4,742,654
Interest bearing balances
with other banks 631,012 804,679 6.27% 4.82% $ 39,561 $ 38,746
Investment securities:
Taxable 30,554,176 19,628,106 5.33% 6.13% 1,628,829 1,165,243
Non-taxable 18,275,423 15,956,180 5.78% 6.33% 1,056,133 1,010,857
------------ ------------
Total investment securities 48,829,599 35,584,286
Federal funds sold 2,999,167 2,173,667 4.32% 3.30% 129,640 71,705
Loans, net (taxable)(1)(2) 97,732,297 103,336,660 9.80% 9.72% 9,580,514 10,043,542
Premises & equipment 3,138,724 3,471,295
Other assets 3,372,902 3,658,429
------------ ------------ ----------- -----------
TOTAL $161,816,864 $153,771,670 8.28% 8.72% $12,434,677 $12,330,093
============ ============ ----------- -----------
LIABILITIES
Demand deposit accounts $ 14,067,454 $ 14,808,391
Money market & NOW 36,267,136 28,660,269 2.52% 2.68% (913,911) (769,086)
Savings accounts 5,247,192 4,927,940 2.82% 2.85% (148,197) (140,600)
Certificates of deposit 86,130,065 86,639,094 4.22% 4.28% (3,635,738) (3,709,863)
Treasury tax and short-term
and other borrowings 3,039,712 2,796,799 3.39% 2.08% (103,086) (58,058)
Other liabilities 1,276,447 1,328,921
------------ ------------ ----------- -----------
TOTAL 146,028,006 139,161,414 3.67% 3.80% 4,800,932 4,677,607
----------- -----------
Shareholders' Equity 15,788,858 14,610,256
------------ ------------
TOTAL LIABILITIES & EQUITY $161,816,864 $153,771,670
============ ============
NET YIELD ON INTEREST EARNING ASSETS 5.08% 5.39% $ 7,633,745 $ 7,652,486
=========== ===========
</TABLE>
(1) Interest earnings on nonaccrual loans are included in the foregoing
analysis to the extent that such interest earnings had been recorded
during 1994 and 1993.
(2) Loan fees of $275,541 and $324,406 are included in interest income for the
years ended December 31, 1994 and 1993, respectively.
54
<PAGE> 24
The following table sets forth a summary of the changes in interest income and
interest expense resulting from changes in volume and rates for the periods
indicated:
<TABLE>
<CAPTION>
1994 as compared to 1993 1993 as compared to 1992
Increase (Decrease) due to Increase (Decrease) due to
Net Rate(1) Volume(1) Net Rate(1) Volume(1)
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST BEARING ASSETS
Interest bearing balances
with other banks $ 815 $ 9,186 $ (8,371) $ (4,060) $ (22,573) $ 18,513
Investment securities:
Taxable 463,586 (206,182) 669,768 (780,389) (294,393) (485,996)
Non-taxable 45,276 (101,532) 146,808 (13,946) (34,053) 20,107
--------- --------- --------- ----------- ----------- ---------
Total investment securities 508,862 (307,714) 816,576 (794,335) (328,446) (465,889)
Federal funds sold 57,935 30,693 27,242 (32,936) (35,335) 2,399
Loans, gross (taxable) (463,028) 81,716 (544,744) (661,506) (889,512) 228,006
--------- --------- --------- ----------- ----------- ---------
TOTAL INTEREST INCOME 104,584 (186,119) 290,703 (1,492,837) (1,275,866) (216,971)
--------- --------- --------- ----------- ----------- ---------
INTEREST BEARING LIABILITIES
Money market & NOW 144,825 (59,039) 203,864 (5,848) (140,224) 134,376
Savings accounts 7,597 (1,502) 9,099 2,929 (5,589) 8,518
Certificates of deposit (74,125) (52,339) (21,786) (1,875,743) (1,233,528) (642,215)
Short-term and
other borrowings 45,028 39,975 5,053 28,211 (30,850) 59,061
--------- --------- --------- ----------- ----------- ---------
TOTAL INTEREST EXPENSE 123,325 (72,905) 196,230 (1,850,451) (1,410,191) (440,260)
--------- --------- --------- ----------- ----------- ---------
NET INTEREST INCOME $ (18,741) $(113,214) $ 94,473 $ 357,614 $ 134,325 $ 223,289
========= ========= ========= =========== =========== =========
</TABLE>
(1) The changes in interest income and/or expense not due solely to rate or
volume have been allocated to the rate component.
OTHER INCOME AND OTHER EXPENSE
Non-interest income in 1994 increased approximately $290,000 or 31.52% as
compared to 1993 and decreased approximately $131,000 or 12.48% as compared to
1992. The 1994 increase in other income results primarily from the gain on
sale of other real estate of $104,000, gains on sale of securities of $25,000
and approximately $89,000 of income relating to sales of the guaranteed portion
of loans guaranteed by the U.S. Small Business Administration. The 1993
decline in other income results primarily from the decrease in gains on
securities of $206,000 offset somewhat by increases in service charges on
deposit accounts and other income.
Other expenses increased by approximately $289,961 or 4.6% in 1994 as compared
to 1993 and increased by approximately $249,000 or 4.1% in 1993. These
increases are generally attributable to normal salary increases and higher
occupancy expenses for each year.
PROVISION FOR LOAN LOSSES
The Bank's provision for loan losses is intended to create an allowance for
potential losses on outstanding loans at the end of each reporting period. The
provision for loan losses was $208,096 in 1994 as compared to $249,765 in 1993
and $566,000 in 1992. The Company's allowance for loan losses totaled
$1,744,355 at December 31, 1994, which was 1.73% of year-end loans and 92% of
total nonperforming loans.
55
<PAGE> 25
At December 31, 1994, loans over 90 days past due and nonaccrual loans totaled
$764,839 or .76% of gross outstanding loans, as compared to $960,289 or .92% at
December 31, 1993.
As a result of the decline in nonaccrual loans and other factors management
uses in determining its provision for loan losses, the provision for loan
losses provided in 1994 was approximately $42,000 less than the amount provided
in 1993 and the amount provided in 1993 was approximately $316,000 less than
the amount provided in 1992.
Net charge-offs amounted to $65,663 in 1994, representing .07% of average
loans, as compared to $351,455 in 1993, representing .34% of average loans in
1993.
The following table summarizes, for the years ended December 31, 1994 and 1993,
selected information related to the allowance for loan losses:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Balance of allowance for
loan losses at beginning of period $ 1,601,902 $ 1,703,592
----------- ------------
Loans charged-off:
Commercial, financial & agricultural (37,146) (250,732)
Real Estate - construction
Real Estate - mortgage (17,011)
Installment loans to individuals (49,962) (45,433)
Other (21,025) (80,262)
----------- ------------
Total charged-off loans (125,144) (376,427)
----------- ------------
Recoveries:
Commercial, financial & agricultural 1,893
Real Estate - construction
Real Estate - mortgage 4,772
Installment loans to individuals 15,387 11,917
Other 37,429 13,055
----------- ------------
Total recoveries 59,481 24,972
----------- ------------
Net charge-offs (65,663) (351,455)
Additions to allowance 208,096 249,765
----------- ------------
Balance of allowance for
loan losses at end of period $ 1,744,335 $ 1,601,902
=========== ============
Average amount of loans $97,723,297 $103,336,660
=========== ============
Ratio of net charge-offs during the
period to average loans outstanding
during the period .07% .34%
Ratio of allowance to year-end loans 1.70% 1.50%
</TABLE>
56
<PAGE> 26
The Company's provision for loan losses is based upon management's continuing
review and evaluation of the loan portfolio and is intended to create an
allowance adequate to absorb losses on loans outstanding as of the end of each
reporting period. For individually significant amounts, management's review
consists of evaluations of the borrowers' strength, value of the related
collateral, and other factors. This evaluation is made by classifying loans
based on values assigned to each of the aforementioned variables. These
classifications are assigned by the loan review area and are reviewed by the
Board of Directors. Totals by loan classification, along with related
historical loss ratios, are used to determine the allowance required to provide
for potential losses. The review of groups of loans, which are individually
insignificant, is based upon delinquency status of the group, lending policies
and previous collection experience of each category. The effects of current
conditions on specific industries or classes of borrowers are also considered
in determining allowance for loan loss requirements. Management believes such
allowance is adequate to absorb future losses on loans outstanding at December
31, 1994.
The risk associated with loans varies with the creditworthiness of the
borrower, the type of loan (consumer, commercial, or real estate) and its
maturity. Cash flows adequate to support a repayment schedule is an element
considered for all types of loans. Real estate loans are impacted by market
conditions regarding the value of the underlying property used as collateral.
Commercial loans are also impacted by the management of the business as well as
economic conditions.
The approximate anticipated amount of loan charge-offs by category during 1995
is as follows:
<TABLE>
<S> <C>
Commercial, financial & agricultural $190,000
Real estate - construction and mortgage 50,000
Installment loans to individuals 110,000
--------
Total $350,000
========
</TABLE>
LOANS
Loan demand remained constant during 1994. The decrease in loans of
approximately $3.3 million or 3.2% in 1994 when compared to 1993 is due
primarily to the sale of loans related to poultry farms. This sale of loans
was reflected in the commercial loans decline of $3.8 million in 1994 as
compared to 1993. Loan demand remained flat during 1993, resulting in a
decrease in loans of approximately $950,000 or a 1% decrease when compared to
1992. The composition of the Bank's real estate loan portfolio changed during
1993. Construction loans decreased by approximately $1.3 million, or 20.7%,
during 1993, but other real estate loans increased by approximately $2.6
million, or 3.9% as compared to 1992.
The amount of loans outstanding at December 31, 1994 and 1993 is set forth in
the following table according to type of loan. The Company had no foreign
loans at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial, financial & agricultural $ 13,653,109 $ 19,006,561
Real Estate - construction 5,564,753 5,112,344
Real Estate - mortgage 68,992,708 68,830,196
Installment loans to individuals 12,637,913 11,204,998
------------ ------------
TOTAL $100,848,483 $104,154,099
============ ============
</TABLE>
57
<PAGE> 27
The following table sets forth the maturities and sensitivities of loans to
changes in interest rates.
<TABLE>
<CAPTION>
DUE AFTER
DUE IN ONE THROUGH DUE AFTER
LOAN MATURITY: ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- -----
<S> <C> <C> <C> <C>
Commercial, financial
& agricultural $10,347,246 $1,628,937 $1,676,926 $13,653,109
Real Estate - constr. 4,875,804 635,466 53,483 5,564,753
----------- ---------- ---------- -----------
TOTAL $15,223,050 $2,264,403 $1,730,409 $19,217,862
=========== ========== ========== ===========
LOAN INTEREST RATE SENSITIVITY:
Selected loans with:
Predetermined
interest rates $ 8,689,055 $1,941,803 $1,730,409 $12,361,267
Floating or adjustable
interest rates 6,533,995 322,600 6,856,595
----------- ---------- ---------- -----------
TOTAL $15,223,050 $2,264,403 $1,730,409 $19,217,862
=========== ========== ========== ===========
</TABLE>
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets consist of nonaccrual loans, restructured loans, and other
real estate owned. Nonperforming assets decreased $60,277 at December 31, 1994
or 1.93% from December 31, 1993.
The following table sets forth the totals of nonperforming assets, selected
ratios, and accruing loans past due 90 days or more at December 31, 1994 and
1993.
<TABLE>
<CAPTION>
Nonperforming accounts: 1994 1993
---- ----
<S> <C> <C>
Nonaccrual $ 568,822 $ 763,425
Restructured loans 1,318,790 1,169,987
Other real estate owned 1,165,954 1,180,431
---------- ----------
Total Nonperforming assets $3,053,566 $3,113,843
========== ==========
Ratios:
Nonperforming assets to total loans 3.03% 2.99%
Nonperforming assets to total loans
plus other real estate owned 2.99% 2.96%
Allowance to nonperforming assets 57.12% 51.44%
Accruing loans past due 90 days or
more $ 196,017 $ 196,864
</TABLE>
Accrual of interest is discontinued when either principal or interest becomes
90 days past due, or earlier when, in management's opinion, collectibility of
such interest is doubtful unless it is both well secured and in process of
collection. Interest income that would have been recorded on these nonaccrual
and restructured loans in accordance with their original terms totaled $181,640
in 1994 and $170,235 in 1993 compared with interest income recognized of
$132,884 and $99,244, respectively.
At December 31, 1994, the Company had no significant loans which management
designated as potential problem loans which have not been disclosed above as
nonaccural or past due loans.
The Company held a concentration of loans at December 31, 1994 which totaled
approximately $22 million, and approximately 22.21% of total loans that
consisted of mortgages for agribusiness purposes in the poultry industry.
58
<PAGE> 28
INVESTMENT SECURITIES
The Company has classified all investment securities as either available for
sale or held to maturity depending upon whether the Company has the intent and
ability to hold the investment securities to maturity. The classification of
certain investment securities as available for sale is consistent with the
Company's investment philosophy of maintaining flexibility to manage the
securities portfolio. At December 31, 1994, approximately $28.5 million of
investment securities were classified as available for sale. Approximately $1
million of unrealized loss was included in Shareholders' Equity related to the
available for sale investment securities.
The following table sets forth the carrying amounts of investment securities at
December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Investment securities
available for sale:
U.S. Treasury $ 5,671,680 $ 2,657,993
U.S. Government agencies 17,021,102 14,117,053
States & political subdivisions 5,192,169 5,702,768
Other investments 644,728 1,475,399
----------- ----------
Total $28,529,679 $23,953,213
=========== ===========
Investment securities
held to maturity:
U.S. Treasury $ 198,698
U.S. Government agencies 5,724,080 $ 4,660,364
States & political subdivisions 13,176,349 11,890,243
Other investments 2,520,377 1,610,179
----------- -----------
Total $21,619,504 $18,160,786
=========== ===========
</TABLE>
The following tables set forth the maturities of investment securities at
December 31, 1994, and the weighted yields of such securities on the basis of
book yield and on a tax equivalent basis (assuming a 34% tax rate).
<TABLE>
<CAPTION>
one year 1-5 5-10 after 10
or less years years years
------ ----- ----- --------
<S> <C> <C> <C> <C>
Investment securities available for sale:
Carrying Value:
U.S. Treasury $1,428,863 $ 4,242,817
U.S. Government agencies 550,146 10,466,126 $4,011,032 $1,993,798
States & political subdivisions 295,417 2,750,671 1,710,858 435,223
Weighted average yields
U.S. Treasury 4.29% 5.30%
U.S. Government agencies 5.20% 6.03% 6.01% 5.99%
States & political subdivisions 6.25% 9.95% 9.62% 9.93%
Investment securities held to maturity:
Carrying Value:
U.S. Treasury $ 198,698
U.S. Government agencies $ 984,841 3,370,011 $ 803,429 $ 565,799
States & political subdivisions 950,069 8,135,500 3,336,304 754,476
Weighted average yields
U.S. Treasury 6.01%
U.S. Government agencies 4.41% 5.44% 6.53% 8.19%
States & political subdivisions 3.37% 7.98% 8.55% 9.80%
</TABLE>
Other investments, which are not significant, are not included in the above
maturity and weighted yields schedule. For financial reporting purposes, these
investments have been included in the after ten years category.
59
<PAGE> 29
No securities were held which represent a combined total for one issuer which
is in excess of 10% of the Company's equity capital at December 31, 1994.
At December 31, 1993, the Company adopted the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" in which an
unrealized gain on investment securities available for sale of approximately
$.3 million was recorded in shareholders' equity.
OTHER ASSETS
The majority of increase in other assets at December 31, 1994, as compared to
December 31, 1993, relates to the increase in the deferred tax asset of
$781,000. The increase in deferred tax asset and due to the tax effect of the
unrealized loss on investment securities available for sale.
The decrease in other assets of approximately $1.1 million at December 31,
1993, as compared to December 31, 1992, primarily reflects the decrease in
other real estate resulting from the sale of a portion of the property for
approximately $850,000. In connection with the sale of the other real estate
in 1993, the Bank granted loans totaling $600,100.
DEPOSITS
Average deposits increase $6.7 million and decreased $7.2 million during 1994
and 1993, respectively.
The Bank's loan to deposit ratio based on average balances during each year was
68.2%, 75.8%, and 70.6% in 1994, 1993 and 1992, respectively. Management
anticipates maintaining a loan to deposit ratio between 70% and 80% in 1995.
The following table sets forth the average amount of deposits for the Company
which exceed 10% of average total deposits for the years ended December 31,
1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
---- ----
AVG. AMT. AVG. AVG. AMT. AVG.
OUTSTANDING RATE OUTSTANDING RATE
<S> <C> <C> <C> <C>
Interest bearing demand $36,267,136 2.52% $28,660,269 2.68%
deposits
Noninterest bearing demand 14,067,454 N/A 14,808,391 N/A
deposits
Time certificates of 86,130,065 4.22% 86,639,094 4.28%
deposits
</TABLE>
At December 31,1994, time certificates of deposit of $100,000 or more totaled
$21,165,754. The maturities of all time certificates of deposit over $100,000
are as follows:
<TABLE>
<S> <C>
3 months or less $10,676,622
Over 3 through 6 months 3,101,916
Over 6 through 12 months 4,046,727
Over 12 months 3,340,489
-----------
$21,165,754
===========
</TABLE>
OTHER BORROWINGS
Other borrowings decreased $1.0 million from year-end 1994 to 1993 as a result
of repayment of borrowings from the Federal Home Loan Bank. The increase in
other borrowing of $2.5 million in 1993 resulted from borrowings from the
Federal Home Loan Bank.
60
<PAGE> 30
CAPITAL RESOURCES
The Bank has consistently maintained capital ratios well above regulatory
requirements. Banking regulators measure capital adequacy using a ratio of
shareholders' equity, excluding any unrealized gain or loss on investment
securities available for sale to total risk weighted assets, known as Tier I
capital. Also used is a ratio of shareholders' equity excluding any unrealized
gain or loss of investment securities available for sale plus the allowance for
loan losses to total risk weighted assets, known as Tier II capital.
Additionally, the regulators have also established an additional capital
adequacy guideline referred to as the Tier I leverage ratio that measures the
ratio of shareholders' equity excluding any unrealized gain or losses on
investment securities available for sale to average quarterly assets. The
following table sets forth the Bank's ratios.
<TABLE>
<CAPTION>
1994 1993 Regulatory
---- ---- Requirement
<S> <C> <C> <C>
Tier I Capital 12.07% 11.58% 4%
Tier II Capital 13.32% 12.83% 8%
Tier I Leverage Ratio 9.37% 9.10% 4%
</TABLE>
Treasury stock activity consisted of 3,348 shares sold from the treasury at a
per share price of $35.09 in 1994.
Treasury stock activity consisted of 2,330 shares sold from the treasury at a
per share price of $36.93 in 1993.
Cash dividends were paid at a rate of $.40 per share for 1994, $.40 per share
for 1993 and at $.375 per share for 1992. The Company declared a 2 for 1 stock
split recorded in the form of a stock dividend effective November 1, 1992.
While management believes that the current level of capital is sufficient for
current and foreseeable needs of the Company, capital needs are continually
evaluated by management.
Management is not aware of any required regulatory changes, or any
recommendation by any regulatory authority which will have a material effect on
the Company's liquidity, capital or results of operations.
INTEREST RATE SENSITIVITY
The objective of asset and liability management is to maintain an optimum match
of maturities and interest sensitivity between loans and investment securities
and deposits. In order to obtain this optimum match, adjustable rate loans and
maturity matched investments are used.
The Bank's historical performance in various economic climates assist
management in making long-term asset/liability decisions for the bank.
The interest rate sensitivity analysis below has a positive one year gap of
approximately $18 million (excess of earning assets repricing within one year
to interest bearing liabilities). However, the Bank's experience has shown
that NOW, IMMA, and Savings deposits of approximately $39 million are not
rate sensitive.
The time period indicated in the table represents the shorter of the time
remaining before the asset or liability either matures or can be repriced. The
principal amounts for each asset and liability are shown in the period in which
it matures or reprices. The rate indicated represents the effective yield.
Funds from loan principal payments and anticipated loan repayments are included
in the period in which they are anticipated to be received. Savings, NOW, and
IMMA accounts have been included in due in one year.
61
<PAGE> 31
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
YIELD/ DUE IN DUE AFTER DUE AFTER DUE AFTER TOTAL
RATE ONE ONE THROUGH FIVE THROUGH TEN YEARS
EARNING ASSETS: YEAR FIVE YEARS TEN YEARS
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
Taxable investment securities and
interest bearing balances with
other banks 5.80% $ 4,511,850 $18,277,652 $ 4,814,461 $ 4,176,702 $ 31,780,665
States & political subdivisions 5.80% 1,245,486 10,886,171 5,047,162 1,189,699 18,368,518
Loans 9.41% 79,715,080 19,686,973 1,446,430 100,848,483
Federal funds sold 5.62% 1,020,000 1,020,000
---- ----------- ----------- ------------ ----------- ------------
Total earning assets 8.19% 86,492,416 48,850,796 11,308,053 5,366,401 152,017,666
---- ----------- ----------- ------------ ----------- ------------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and IMMA 2.88% 33,653,457 33,653,457
Savings 2.75% 5,504,444 5,504,444
Certificates of Deposit 4.54% 28,225,245 35,542,441 21,566,871 22,601 85,357,158
Short term borrowings 3.77% 1,001,742 1,500,000 2,501,742
---- ----------- ----------- ------------ ----------- ------------
Total interest bearing
liabilities 4.01% $68,384,888 $37,042,441 $ 21,566,871 $ 22,601 $127,016,801
---- ----------- ----------- ------------ ----------- ------------
INTEREST RATE SPREAD 4.42%
====
Excess (deficiency) of earning assets
over (to) interest bearing liabilities $18,107,528 $11,808,355 $(10,258,818) $ 5,343,800 $ 25,000,865
=========== =========== ============ =========== ============
Cumulative Gap $18,107,528 $29,915,883 $19,657,065 $25,000,865
Ratio of cumulative gap to
total earning assets 11.9% 19.7% 12.9% 16.4%
Ratio of earning assets to
interest bearing liabilities 1.3% 1.3% 52.4% 237.4%
</TABLE>
INFLATION
The Company's assets and liabilities are generally monetary in nature.
Therefore, interest rates have a greater impact on the Company's performance
than the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or magnitude as the prices of goods and
services.
ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards ("SFAS") No. 114, entitled
"Accounting by Creditors for Impairment of a Loan" as amended by SFAS No. 118
is not expected to have a significant effect on the consolidated financial
statements when the statement is adopted as of January 1, 1995.
LIQUIDITY
The Bank's liquidity program is designed and intended to provide guidance in
funding the credit and investment activities of the Bank while at the same time
ensuring that the deposit obligations of the Bank are met on a timely basis.
In order to permit active and timely management of assets and liabilities,
these accounts are monitored regularly in regard to volume, mix and maturity.
The Bank's liquidity policy requires a minimum ratio of 20% of cash and certain
short-term investments to net withdrawable deposit accounts. This liquidity
ratio was 33.15% and 31.29% at December 31, 1994 and 1993 respectively.
62
