SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
Commission File No. 2-94292
FNB Banking Company
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(Exact name of Small Business Issuer as specified in its charter)
Georgia 58-1479370
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
318 South Hill Street, P.O. Drawer F, Griffin, Georgia 30224
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (770) 227-2251
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
Check whether there the Issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No___
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B not contained in this form, 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. Not Applicable. Registrant is
not required to be registered under the Securities Exchange Act
of 1934.
State the Issuer's revenue for its most recent fiscal year:
$16,588,188.
State the aggregate market value of the voting stock held by non-
affiliates: as of March 15, 1997, 566,504 Shares of common
stock, $1.00 par value (the "Common Stock"), with an aggregate
value of $17,844,876 (based upon approximate market value of
$31.50/share) (the last sale price known to the Registrant for
the Common Stock, for which there is no established trading
market).
State the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date: As of
March 15, 1997, there were 807,800 outstanding shares of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report (the "Annual Report")
to Shareholders for the year ended December 31, 1996 are
incorporated by reference into Part II.
Transitional Small Business Issuer Disclosure Format. Yes / /
No /x/
<PAGE>
FNB BANKING COMPANY
FORM 10-KSB
INDEX
PAGE
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . 1
Item 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . 9
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . .10
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . 10
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . 11
Item 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . 26
Item 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . . . 27
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS . . . . . . . . . . . . . . . 28
Item 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . 29
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . 29
Item 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . 32
Item 13. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . 32
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE REGISTRANT
FNB Banking Company, a Georgia corporation, (the "Company"
or "FNB") was organized on July 13, 1982. Effective on March 1,
1983, FNB Banking Company acquired all of the 200,000 issued and
outstanding shares of common stock, $10.00 par value, of First
National Bank of Griffin (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.
The Company operates a full-service commercial banking
business based in Griffin, Georgia, providing such customary
banking services as checking and savings accounts, various types
of time deposits, safe deposit facilities, money transfers and
individual retirement accounts. The Company also finances
commercial transactions, makes secured and unsecured loans and
provides other financial services to its customers. The Company
performs corporate, pension and personal trust services through
the Bank. Through its subsidiary, Griffin Loans, Inc., a consumer
finance company, the Company engages in the business of small making
loans to individuals.
SERVICES
The Bank is community oriented, with an emphasis on retail
banking, and offers such customary banking services as consumer
and commercial checking accounts, NOW accounts, savings accounts,
certificates of deposit, lines of credit, Mastercard and Visa
accounts and money transfers. The Bank finances commercial and
consumer transactions, makes secured and unsecured loans, and
provides a variety of other banking services.
DEPOSITS
The Bank offers a full range of depository accounts and
services to both consumers and businesses. At December 31, 1996
the Bank's deposit base, totaling approximately $145 million,
consisted of approximately $25 million in non-interest bearing
demand deposits (18% of total deposits), approximately $37
million in interest bearing demand deposits (including money
market accounts) (26% of total deposits), approximately $15
million in savings deposits (10% of total deposits),
approximately $55 million in time deposits in amounts less than
$100,000 (38% of total deposits), and approximately $11 million
in time deposits of $100,000 or more (8% of total deposits).
Management of the Bank is of the opinion that its time deposits
of $100,000 or more are customer relationship-oriented and
represent a reasonably stable source of funds.
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LOANS
The Bank makes both secured and unsecured loans to
individuals, firms and corporations, and both its consumer and
commercial lending operations include various types of credit for
the Bank's customers. Secured loans include first and second
real estate mortgage loans. The Bank also makes direct
installment loans to consumers on both a secured and unsecured
basis. At December 31, 1996, consumer, real estate (including
mortgage and construction loans) and commercial loans represented
approximately 21%, 38%, and 41%, respectively, of the Bank's
total loan portfolio. On October 13, 1994, the Bank purchased
the assets of Griffin Loans, Inc., a consumer finance company,
and on January 17, 1996, Griffin Loans, Inc. purchased
substantially all of the assets of another consumer finance
company, Zebulon Finance Corporation. Most loans made by the
finance company are for less than $1,000, but Griffin Loans, Inc.
also makes real estate loans for larger amounts.
LENDING POLICY
The current lending strategy of the Bank is to make loans
only to persons who reside, work or own property in its primary
trade area which consists of Spalding and Henry County, Georgia.
On February 25, 1997 the Bank opened a branch in Henry County and
began to serve that market. Unsecured loans normally are made
only to persons who maintain depository relationships with the
Bank. Secured loans are made to persons who are well established
and have net worth, collateral and cash flow to support the loan.
Real estate loans are only made when such loans are secured by
real property located in the Bank's primary trade area.
The Bank provides each lending officer with written
guidelines for lending activities. Lending authority is
delegated by the Board of Directors of the Bank to loan officers,
each of whom is limited in the amount of secured and unsecured
loans which they can make to a single borrower or related group
of borrowers. All unsecured loans in excess of $50,000 must have
the approval of the loan committee.
Making loans to businesses to fund working capital is a
traditional function of commercial banks. Such loans are
expected to be repaid out of the current earnings of the
commercial entity, and the ability of the borrower to service its
debt is dependent upon the success of the commercial enterprise.
It is the Bank's policy to secure these loans with collateral.
Many of the Bank's commercial loans are secured by real estate
collateral because such collateral is superior to other types of
collateral available to small businesses. Loans secured by
commercial real estate, however, particularly if collateral
dependent, are subject to certain inherent risks. Commercial
real estate may be substantially illiquid, and commercial real
estate values are difficult to ascertain and subject to wide
fluctuation depending upon economic conditions.
Effective March 19, 1993, inter-agency guidelines adopted by
federal bank regulators including the Office of the Comptroller
of the Currency went into effect mandating that financial
institutions establish real estate lending policies and
establishing certain minimum real estate loan-to-value standards.
The Bank has adopted these federal standards as its minimum
standards. These standards require maximum loan-to-value ratios
for various types of real estate loans as set forth below,
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<PAGE>
although the bank may make exceptions to the minimum standards,
which exceptions must be accounted for and tracked:
<TABLE>
<CAPTION>
Loan-to-
Value Limit
Loan category (percent)
------------- ------------
<S> <C>
Raw land 65
Land development 75
Construction:
Commercial, multifamily <F1> and
other nonresidential 80
1- to 4-family residential 85
Improved Property 85
Owner-occupied 1- to 4-family and
home equity <F2>
<FN>
<F1> Multifamily construction includes condominiums and
cooperatives.
<F2> A loan-to-value limit has not been established for
permanent mortgage or home equity loans on owner-occupied, 1-
to 4-family residential property. However, for any such
loan with a loan-to-value ratio that equals or exceeds 90
percent at origination, appropriate credit enhancement in
the form of either mortgage insurance or readily marketable
collateral is required.
</FN>
</TABLE>
LOAN REVIEW AND NON-PERFORMING ASSETS
The loan review officer of the Company reviews the Bank's
loan portfolio to determine deficiencies and corrective action to
be taken. The results of the reviews by the loan review officer
are presented to the President of the Bank and the Executive
Committee of the Bank. On at least an annual basis, reviews are
conducted for all loans over $50,000. Past due loans are
reviewed at least weekly by lending officers and by the chief
credit officer, and a summary report is reviewed monthly by the
Board of Directors. The Board of Directors reviews all loans
over $25,000 whether current or past due each month.
ASSET/LIABILITY MANAGEMENT
A committee composed of officers of the Bank is charged with
managing the Bank's assets and liabilities. The committee
attempts to manage asset growth, liquidity and capital in order
to maximize income and reduce interest rate risk. The committee
directs the Bank's overall acquisition and allocation of funds.
At monthly meetings, the committee reviews and discusses the
monthly asset and liability funds budget in relation to the
actual flow of funds, as well as peer group comparisons; the
ratio of the amount of rate-sensitive assets to the amount of
rate-sensitive liabilities; the ratio of the allowance for loan
losses to outstanding and non-performing loans; and other
variables, such as expected loan demand, investment
opportunities, core deposit growth within specified categories,
regulatory changes, monetary policy adjustments and the overall
state of the economy.
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<PAGE>
COMPETITION
The banking business is highly competitive. The Company's
primary market area consists of Spalding County, Georgia, with a
population of approximately 55,000. On February 25, 1997 the
Company opened a branch in the town of Hampton, Henry County,
Georgia. Henry County has a population of approximately 76,000.
The Company competes in Spalding County with four other
commercial banks and one thrift institution and in Henry County
with seven commercial banks and one thrift institution. The
deposit range of its competitors in Spalding County is $38
million to $127 million and $2 million to $336 million in Henry
County. The Bank is the largest bank in Spalding County in terms
of assets and deposit size, with assets and deposits at
December 31, 1996 of approximately $169 million and $145 million,
respectively, and the smallest in Henry County in terms of
deposits located in that county.
In addition to the Company's competitors in Spalding and
Henry County, the Company competes with commercial banks,
thrifts, various other financial institutions and brokerage
houses located outside the market area. To a lesser extent, the
Company also competes for loans with insurance companies,
regulated small loan companies, credit unions and certain
governmental agencies. In addition, the Company and any non-
banking subsidiaries it may establish in the future compete and
will compete with numerous other companies and financial
institutions engaged in similar lines of business, such as other
bank holding companies, leasing companies and insurance
companies.
EMPLOYEES
As of December 31, 1996, the Company and the Bank had 100
full-time and 25 part-time employees. The Company is not a party
to any collective bargaining agreement. Management believes the
Company enjoys satisfactory relations with its employees.
SUPERVISION AND REGULATION
GENERAL. The Company is a registered bank holding company
subject to regulation by the Board of Governors of the Federal
Reserve (the "Federal Reserve") under the Bank Holding Company
Act of 1956, as amended (the "Act"). The Company is required to
file financial information with the Federal Reserve periodically
and is subject to periodic examination by the Federal Reserve.
The Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before (i) it may acquire
direct or indirect ownership or control of more than 5% of the
voting shares of any bank that it does not already control; (ii)
it or any of its subsidiaries, other than a bank, may acquire all
or substantially all of the assets of a bank; and (iii) it may
merge or consolidate with any other bank holding company. In
addition, a bank holding company is generally prohibited from
engaging in, or acquiring, direct or indirect control of the
voting shares of any company engaged in non-banking activities.
This prohibition does not apply to activities found by the
Federal Reserve, by order or regulation, to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal
Reserve has determined by regulation or order to be closely
related to banking are: making or servicing loans and certain
types of leases; performing certain data processing services;
acting as fiduciary or investment or financial advisor; providing
discount brokerage services; underwriting bank eligible
securities; underwriting debt and equity securities on a limited
basis through separately capitalized subsidiaries; and making
investments in corporations or projects designed primarily to
promote community welfare.
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<PAGE>
The laws of Georgia require annual registration with the
Department of Banking and Finance (the "DBF") by all Georgia bank
holding companies. Such registration includes information with
respect to the financial condition, operations, management and
intercompany relationships of a bank holding company and its
subsidiaries and related matters. The DBF may also require such
other information as is necessary to keep itself informed as to
whether the provisions of Georgia law and the regulations and
orders issued thereunder by the DBF have been complied with, and
the DBF may make examinations of each bank holding company and
each bank subsidiary thereof, other than a national bank.
The Bank is a national bank chartered under the National
Bank Act and is subject to the supervision of, and is regularly
examined by, the Office of the Comptroller of the Currency (the
"OCC"). The OCC regulates or monitors all areas of the Bank's
operations and activities, including reserves, loans, mergers,
issuance of securities, payments of dividends, interest rates and
establishment of branches. Interest and certain other charges
collected or contracted for by the Bank are also subject to state
usury laws or certain federal laws concerning interest rates.
The Bank is insured 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 if an insured bank is closed without adequate
provisions having been made to pay claims of depositors, acting
as a receiver of state banks placed in receivership when
appointed receiver by state authorities and preventing the
development or continuance of unsound and unsafe banking
practices.
The Company is an "affiliate" of the Bank under the Federal
Reserve Act, which imposes certain restrictions on (i) loans by
the Bank to the Company, (ii) investments in the stock or
securities of the Company by the Bank, (iii) the Bank's taking
the stock or securities of an "affiliate" as collateral for loans
by the Bank to a borrower and (iv) the purchase of assets from
the Company by the Bank. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.
PAYMENT OF DIVIDENDS. The Company is a legal entity
separate and distinct from the Bank. Most of the revenues of the
Company result from dividends paid to it by the Bank. There are
statutory and regulatory requirements applicable to the payment
of dividends by the Bank, as well as by the Company to its
shareholders.
As a national bank, the Bank is required by federal law to
obtain the prior approval of the OCC for payments of dividends if
the total of all dividends declared by the Board of Directors in
any year will exceed the total of the Bank's net profits (as
defined and interpreted by regulation) for that year, plus (ii)
the Bank's retained net profits (as defined and interpreted by
regulation) of the preceding two years, less any required
transfers to surplus.
The payment of dividends by the Company and the Bank may
also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory
guidelines. In addition, if, in the opinion of the applicable
regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound practice (which,
depending upon the financial condition of the bank, could include
the payment of dividends), such authority may require, after
notice and hearing, that such bank cease and desist from such
practice. The FDIC and the OCC have issued policy statements
providing that insured banks should generally only pay dividends
out of current operating earnings. At December 31, 1996,
retained earnings available from the Bank to pay dividends
-5-<PAGE>
totaled approximately $3,000,000. For 1996, the Company's cash
dividend payout to stockholders was 29% of net income.
MONETARY POLICY. The results of operations of the Bank, and
therefore the Company, are affected by credit policies of
monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve
include open market operations in U.S. government securities,
changes in the discount rate on bank borrowings and changes in
reserve requirements against bank deposits. In view of changing
conditions in the national economy and in the money markets, as
well as the effect of actions by monetary and fiscal authorities,
including the Federal Reserve, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of the Bank.
CAPITAL ADEQUACY. The Federal Reserve and the OCC have
implemented substantially identical risk-based rules for
assessing bank and bank holding company capital adequacy. These
regulations establish minimum capital standards in relation to
assets and off-balance sheet exposures as adjusted for credit
risk. Banks and bank holding companies are required to have (1)
a minimum level of total capital (as defined) to risk-weighted
assets of eight percent (8%); (2) a minimum Tier One Capital (as
defined) to risk-weighted assets of four percent (4%); and (3) a
minimum stockholders' equity to risk-weighted assets of four
percent (4%). In addition, the Federal Reserve and the OCC have
established a minimum three percent (3%) leverage ratio of Tier
One Capital to total assets for the most highly-rated banks and
bank holding companies. "Tier One Capital" generally consists of
common equity not including unrecognized gains and losses on
securities, minority interests in equity accounts of consolidated
subsidiaries and certain perpetual preferred stock less certain
intangibles. The Federal Reserve and the OCC will require a bank
holding company and a bank, respectively, to maintain a leverage
ratio greater than three percent (3%) if either is experiencing
or anticipating significant growth or is operating with less than
well-diversified risks in the opinion of the Federal Reserve.
The Federal Reserve and the OCC use the leverage ratio in tandem
with the risk-based ratio to assess the capital adequacy of banks
and bank holding companies. The FDIC, the OCC and the Federal
Reserve have amended effective January 1, 1997 the capital
adequacy standards to provide for the consideration of interest
rate risk in the overall determination of a bank's capital ratio,
requiring banks with greater interest rate risk to maintain
adequate capital for the risk. The revised standards are not
expected to have a significant effect on the Company's capital
requirements.
In addition, effective December 19, 1992, a new Section 38
to the Federal Deposit Insurance Act implemented the prompt
corrective action provisions that Congress enacted as a part of
the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "1991 Act"). The "prompt corrective action" provisions set
forth five regulatory zones in which all banks are placed largely
based on their capital positions. Regulators are permitted to
take increasingly harsh action as a bank's financial condition
declines. Regulators are also empowered to place in receivership
or require the sale of a bank to another depository institution
when a bank's capital leverage ratio reaches two percent. Better
capitalized institutions are generally subject to less onerous
regulation and supervision than banks with lesser amounts of
capital.
The OCC has adopted regulations implementing the prompt
corrective action provisions of the 1991 Act, which place
financial institutions in the following five categories based
upon capitalization ratios: (1) a "well capitalized" institution
has a total risk-based capital ratio of at least 10%, a Tier One
risk-based ratio of at least 6% and a leverage ratio of at least
5%; (2) an "adequately capitalized" institution has a total risk-
based capital ratio of at least 8%, a Tier One risk-based ratio
of at least 4% and a leverage ratio of at least 4%; (3) an
"undercapitalized" institution has a total risk-based capital
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ratio of under 8%, a Tier One risk-based ratio of under 4% or a
leverage ratio of under 4%; (4) a "significantly
undercapitalized" institution has a total risk-based capital
ratio of under 6%, a Tier One risk-based ratio of under 3% or a
leverage ratio of under 3%; and (5) a "critically
undercapitalized" institution has a leverage ratio of 2% or less.
Institutions in any of the three undercapitalized categories
would be prohibited from declaring dividends or making capital
distributions. The OCC regulations also establish procedures for
"downgrading" an institution to a lower capital category based on
supervisory factors other than capital. Under the OCC's
regulations, the Bank was a "well capitalized" institution at
December 31, 1996.
CAPITAL ADEQUACY
Set forth below are pertinent capital ratios for FNB and the
Bank as of December 31, 1996.
<TABLE>
<CAPTION>
Minimum Capital Requirements FNB Bank
- ----------------------------- --- ----
<S> <C> <C>
Tier 1 Capital to Risk-based 15.0% 14.4% <F1>
Assets: 4.00%
Total Capital to Risk-based 16.2% 15.5% <F2>
Assets: 8.00%
Leverage Ratio (Tier 1 Capital 11.6% 11.1% <F3>
to Total Assets): 3.00%
<FN>
<F1> Minimum for "Well Capitalized" Banks = 6%
<F2> Minimum for "Well Capitalized" Banks = 10%
<F3> Minimum for "Well Capitalized" Banks = 5%
</FN>
RECENT LEGISLATIVE AND REGULATORY ACTION. On April 19,
1995, the four federal bank regulatory agencies adopted revisions
to the regulations promulgated pursuant to the Community
Reinvestment Act (the "CRA"), which are intended to set distinct
assessment standards for financial institutions. The revised
regulation contains three evaluation tests: (i) a lending test,
which compares an institution's market share of loans in low- and
moderate-income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low-
and moderate-income areas or individuals, (ii) a services test,
which evaluates the provisions of services that promote the
availability of credit to low- and moderate-income areas, and
(iii) an investment test, which evaluates an institution's record
of investments in organizations designed to foster community
development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or
revenue bonds. The regulations are designed to reduce some
paperwork requirements of the current regulations and provide
regulators, institutions and community groups with a more
objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective
on January 1, 1996, at which time evaluation under streamlined
procedures began for institutions with assets of less than $250
million that are owned by a holding company with total assets of
less than $1 billion. It is not expected that these regulations
will have any appreciable impact upon the Company and the Bank.
Congress and various federal agencies (including, in
addition to the bank regulatory agencies, the Department of
Housing and Urban Development, the Federal Trade Commission and
the Department of Justice) (collectively the "Federal Agencies")
responsible for implementing the nation's fair lending laws have
been increasingly concerned that prospective home buyers and
other borrowers are experiencing discrimination in their efforts
to obtain loans. In recent years, the Department of Justice has
filed suit against financial institutions, which it determined
had discriminated, seeking fines and restitution for borrowers
-7-<PAGE>
who allegedly suffered from discriminatory practices. Most, if
not all, of these suits have been settled (some for substantial
sums) without a full adjudication on the merits.
On March 8, 1994 the Federal Agencies, in an effort to
clarify what constitutes lending discrimination and specify the
factors the agencies will consider in determining if lending
discrimination exists, announced a joint policy statement
detailing specific discriminatory practices prohibited under the
Equal Credit Opportunity Act and the Fair Housing Act. In the
policy statement, three methods of proving lending discrimination
were identified: (1) overt evidence of discrimination, when a
lender blatantly discriminates on a prohibited basis, (2)
evidence of disparate treatment, when a lender treats applicants
differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a
conscious intention to discriminate against a person, and (3)
evidence of disparate impact, when a lender applies a practice
uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral on
their face and are applied equally, unless the practice can be
justified on the basis of business necessity.
On September 23, 1994, President Clinton signed the Reigle
Community Development and Regulatory Improvement Act of 1994 (the
"Regulatory Improvement Act"). The Regulatory Improvement Act
contains funding for community development projects through banks
and community development financial institutions and also
numerous regulatory relief provisions designed to eliminate
certain duplicative regulations and paperwork requirements.
On September 29, 1994, President Clinton signed the Reigle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Federal Interstate Bill") which amends federal law to permit
bank holding companies to acquire existing banks in any state
effective September 29, 1995, and any interstate bank holding
company is permitted to merge its various bank subsidiaries into
a single bank with interstate branches after May 31, 1997.
States have the authority to authorize interstate branching prior
to June 1, 1997, or alternatively, to opt out of interstate
branching prior to that date. The Georgia Financial Institutions
Code was amended in 1994 to permit the acquisition of a Georgia
bank or bank holding company by out-of-state bank holding
companies beginning July 1, 1995. On September 29, 1995, the
interstate banking provisions of the Georgia Financial
Institutions Code were superseded by the Federal Interstate Bill.
In 1996, the Georgia legislature adopted a bill (the
"Georgia Intrastate Bill") to permit, effective July 1, 1996, any
bank located in Georgia or group of affiliated banks under one
holding company to establish new or additional branch banks in up
to three additional counties anywhere within the State of Georgia
where the bank does not currently have operations. After July 1,
1998, all restrictions on state-wide branching are removed.
Prior to adoption of the Georgia Intrastate Bill, Georgia only
permitted branching of banks within a county, via merger or
consolidation with an existing bank or in certain other limited
circumstances.
FDIC Insurance Assessments for the Bank. The Bank is
subject to FDIC deposit insurance assessments for the Bank
Insurance Fund (the "BIF"). In the first six months of 1995, the
Bank was assessed $.23 per $100 of deposits based upon a risk-
based system whereby banks are assessed on a sliding scale
depending upon their placement in nine separate supervisory
categories, from $.23 per $100 of deposits for the healthiest
banks (those with the highest capital, best management and best
overall condition) to as much as $.31 per $100 of deposits for
the less-healthy institutions, for an average $.259 per $100 of
deposits.
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On August 8, 1995, the FDIC lowered the BIF premium for
healthy banks 83% from $.23 per $100 in deposits to $.04 per $100
in deposits, while retaining the $.31 level for the riskiest
banks. The average assessment rate was therefore reduced from
$.232 to $.044 per $100 of deposits. The new rate took effect on
September 29, 1995. On September 15, 1995, the FDIC refunded
$80,081 to the Bank for premium overpayments in the second and
third quarter of 1995. On November 14, 1995, the FDIC again
lowered the BIF premium for healthy banks from $.04 per $100 of
deposits to zero for the highest rated institutions (92% of the
industry). As a result, the Bank paid only the legally required
annual minimum payment of $2,000 per year for insurance beginning
in January 1996. Had the current rates been in effect for all of
1994 and 1995, the annual FDIC insurance premiums paid by the
Bank would have been reduced by approximately $284,000.
On September 29, 1996, the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 was enacted (the "1996 Act").
The 1996 Act's chief accomplishment was to provide for the
recapitalization of the Savings Association Insurance Fund
("SAIF") by levying a one-time special assessment on SAIF
deposits to bring the fund to a reserve ratio equal to $.25 per
$100 of insured deposits and to provide that beginning in 1997,
BIF assessments would be used to help pay off the $780 million in
annual interest payments on the $8 billion Financing Corporation
("FICO") bonds issued in the late 1980s as part of the government
rescue of the thrift industry. The law provides that BIF
assessments for FICO bond payments must be set at a rate equal to
20% of the SAIF rates for such assessments in for 1997, 1998 and
1999. After 1999, all FDIC insured institutions will pay the
same assessment rates. For the first six months of 1997, the
assessment for the FICO bond payments will be $.0132 per $100 of
deposits for BIF deposits and $.0648 per $100 of deposits for
SAIF deposits. The FDIC announced on November 26, 1996 that the
premium for the first six months of 1997 for deposit insurance
assessments would range from zero to $.27 per $100 of deposits
with 94% of banks paying nothing for deposit insurance. One of
the provisions of the 1996 Act was to eliminate the minimum
$2,000 per year charge for deposit insurance. As a result, the
Bank will pay no premium for deposit insurance in the first six
months of 1997 and a first quarter FICO bond assessment of
$4,419.55. The Bill also provided for certain limited regulatory
relief and modifications to certain out-of-date regulations.
Item 2. DESCRIPTION OF PROPERTY
The Company's main office is located at 318 South Hill
Street, Griffin, Georgia, 30224, and its telephone number at that
office is (770) 227-2251.
The Company distributes its services through three full-
service banking offices, and one limited-service banking office
as follows:
Main Office
-----------
318 South Hill Street
Griffin, Georgia 30224
Northside Bank Branch
---------------------
1475 West McIntosh Road
Griffin, Georgia 30223
-9-<PAGE>
Southside Bank Branch
---------------------
1103 Zebulon Road
Griffin, Georgia 30224
Kroger Griffin Branch
---------------------
Limited Service Office
----------------------
100 Spalding Village
Griffin, Georgia 30223
Henry County Branch
-------------------
996 Bear Creek Boulevard
Hampton, Georgia 30228
The executive offices of the Company and the main office of
the Bank are located in a 33,000 square-foot facility, 318 South
Hill Street, Griffin, Georgia. The Company's main office is
subject to a mortgage in the principal amount of $777,779 at
December 31, 1996. None of the other properties of the Company
are subject to encumbrances. The Company owns a building
adjacent to its main office in Griffin which is used for storage
of bulk supplies. The Company or the Bank owns these properties,
except the Kroger Griffin Branch Limited Office, which is leased.
In addition, the Bank leases offices at 114 West Solomon,
Griffin, Georgia and 509 B2 Highway 19 South, Zebulon, Georgia in
which Griffin Loans, Inc. conducts its operations. The Bank owns
the Henry County Branch property. During 1990, the Bank acquired
property at 1453 West McIntosh Road, adjacent to its Northside
Branch. The property was acquired for possible expansion
purposes.
Item 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal
proceedings to which the Company or the Bank is a party or to
which any of their property is subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of
the Company during the fourth quarter of its fiscal year.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Stock. There is no established public trading market for
the Company's Stock. As of March 20, 1997, the Company had 425
shareholders of record.
Dividends. In 1995 and 1996, the Company declared cash
dividends of $686,630 ($.85 per share) and $807,800 ($1.00 per
share), respectively. The Company intends to continue paying
cash dividends on a semi-annual basis. However, the amount and
frequency of dividends will be determined by the Company's Board
of Directors in light of earnings, capital requirements and the
financial condition of the Company, and no assurances can be
-10-<PAGE>
given that dividends will be paid in the future. Information on
restrictions on the amount of dividends payable by the Company
appears in Note 10 to the Company's consolidated financial
statements for the three years ended December 31, 1996 set forth
in Item 7 hereof.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION - 1996 VS. 1995
During 1996, average total assets increased $11,802,000 (8%)
over 1995. Average deposits increased $7,744,000 (6%) in 1996
over 1995. Average loans increased $12,909,000 (12%) in 1996 over
1995.
Year-end balances at both December 31, 1996 and 1995 show
increases in total assets of $20,203,000 (13%) from 1995 to 1996.
Total deposits increased $16,124,000 (12%) from 1995 to 1996
while total gross loans increased $19,776,000 (18%) during 1996.
Time deposits increased $10,946,000 from 1996 to 1995 while all
other deposit accounts increased $5,178,000 from 1995 to 1996. As
the local economy remains strong, loan demand increased and the
Bank showed increases in each lending category at year end except
real estate - mortgage. These loan increases were funded
partially by the proceeds of sales, calls, and paydowns of
investment securities along with borrowings from the FHLB.
Non-performing assets at December 31, 1996 were $783,000 compared
to $825,000 at December 31, 1995. The majority of the decrease is
attributable to a reduction of non-accrual loans. There were no
related party loans which were considered nonperforming at
December 31, 1996.
The Company's subsidiary bank was most recently examined by
its primary regulatory authority in June of 1996. There were no
recommendations by the regulatory authority that, in management's
opinion, will have material effects on the Company's liquidity,
capital resources or operations.
RESULTS OF OPERATIONS - 1996 VS. 1995
The Company's operational results primarily depend on the
earnings of the Bank. Its earnings depend to a large degree on
net interest income, which is the difference between the interest
income received from its investments (such as loans, investment
securities, federal funds sold, etc.) and the interest expense
which is paid on deposit liabilities.
Net interest income in 1996, which was $9,398,000, increased
by $1,003,000 or 12% over 1995. The increase is primarily
attributable to the increase in interest and fees on loans offset
by increases in interest expense on time deposits. Net yield (tax
equivalent) on interest earning assets (6.52% in 1996 and 6.44%
in 1995) increased approximately 1% in 1996 over 1995. This
increase was associated with a $1,586,000 or 12% increase in
interest earned and a $582,000 or 13% increase in interest paid
in 1996 as compared to 1995.
The provision for loan losses in 1996 was $365,000 as compared
to $31,000 in 1995. The significant increase in the provision for
loan losses was primarily attributable to the increase in the
loan portfolio and a increase in net charge-offs of $213,000 as
compared to 1995. The provision for loan losses continues to
reflect management's estimate of potential loan losses inherent
in the portfolio and the creation of an allowance for loan losses
adequate to absorb such losses. The allowance for loan losses
represented approximately 1.1% and 1.2% of total loans
outstanding at December 31, 1996 and 1995, respectively. Net
charge-offs were $216,000 and $3,000 during 1996 and 1995,
respectively. A dedicated loan review function is utilized by the
-11-
<PAGE>
Bank. All loans of $50,000 or more are reviewed annually and
placed into various loan grading categories which assists in
developing lists of potential problem loans. These loans are
regularly monitored by the loan review process to ensure early
identification of repayment problems so that adequate allowances
can be made through the provision for loan losses. Management
believes that these levels of allowance are appropriate based
upon the Company's loan portfolio and the current economic
conditions.
Other operating income in 1996 of $2,229,000 increased over
1995 levels by $39,000 or 2%. Other operating expenses in 1996 of
$7,242,000 increased by $343,000 or 5% over 1995 levels.
Income taxes expressed as a percentage of earnings before
income taxes increased from 30% in 1995 to 32% in 1996. The
increase relates to a decrease in tax-exempt income as a
percentage of earnings before income taxes.
RESULTS OF OPERATIONS - 1995 VS. 1994
Net interest income in 1995, which was $8,395,000, increased
by $735,000 or 10% over 1994. The increase is primarily
attributable to the increase in interest and fees on loans offset
by increases in interest expense on time deposits. Net yield
(tax equivalent) on interest earning assets (6.44% in 1995 and
6.05% in 1994) increased approximately 7% in 1995 over 1994. This
increase was associated with a $1,395,000 or 12% increase in
interest earned and a $679,000 or 18% increase in interest paid
in 1995 as compared to 1994.
The provision for loan losses in 1995 was $31,000 compared
to $85,000 in 1994. The decrease in the provision for loan losses
was primarily attributable to a decrease in net charge-offs of
$279,000 as compared to 1994 and a general increase in the loan
portfolio's overall credit quality. The provision for loan losses
continues to reflect management's estimate of potential loan
losses inherent in the portfolio and the creation of an allowance
for loan losses adequate to absorb such losses. The allowance for
loan losses represented approximately 1.2% of total loans
outstanding at December 31, 1995 and 1994. Net charge-offs were
$3,000 and $282,000 during 1995 and 1994, respectively.
Other operating income in 1995 of $2,124,000 increased over
1994 levels by $247,000 or 13%. The increase is primarily
attributable to the increase of service charges on deposits of
$140,000 in 1995 as compared to 1994 along with an increase over
the same period in credit card fee income of $90,000.
Other operating expenses in 1995 of $6,834,000 decreased by
$112,000 or 2% over 1994 levels.
Income taxes expressed as a percentage of earnings before
income taxes increased from 27% in 1994 to 30% in 1995. The
increase relates to the decrease in tax-exempt income as a
percentage of earnings before income taxes.
INVESTMENTS
The investment portfolio consists of debt securities which
provide the Company with a source of liquidity and a long-term,
-12-
<PAGE>
relatively stable source of income. Additionally, the investment
portfolio provides a balance to interest rate and credit risk in
other categories of the balance sheet while providing a vehicle
for the investment of available funds, furnishing liquidity, and
supplying securities to pledge as required collateral for certain
deposits.
LIQUIDITY
The Bank must maintain, on a daily basis, sufficient funds
to cover the withdrawals from depositors' accounts and to supply
new borrowers with funds. To meet these obligations, the Bank
keeps cash on hand, maintains account balances with its
correspondent banks, and purchases and sells federal funds and
other short term investments. Asset and liability maturities are
monitored in an attempt to match these to meet liquidity needs.
It is the policy of the Bank to monitor its liquidity to meet
regulatory requirements and their local funding requirements.
The Bank maintains relationships with correspondent banks
that can provide funds to it on short notice, if needed.
Presently, the Bank has arrangements with a commercial bank for
short term unsecured advances up to $5,000,000.
Cash and cash equivalents decreased $171,000 to a total
$12,462,000 at year end 1996 as cash used in investing activities
outpaced amounts provided by operating and financing purposes.
Cash inflows from operations totaled $2,479,000 in 1996, while
inflows from financing activities totaled $17,364,000, most of
which were net deposit increases during 1996 of $16,124,000 and
FHLB advances of $2,500,000. Included in financing activities
were note payable repayments of $167,000.
Investing activities used $20,015,000 of cash and cash
equivalents, principally composed of net advances of loans to
customers of $19,984,000 during 1996 offset by proceeds, net of
investment security purchases, from sales, calls, and paydowns of
investment securities totaling $606,000.
CAPITAL RESOURCES
The Company continues to maintain adequate capital ratios.
The following tables present the Company's regulatory capital
position at December 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Risk-Based Capital Ratios
-------------------------
Actual as of December 31, 1996
------------------------------
<S> <C>
Tier 1 Capital 15.0%
Tier 1 Capital minimum requirement 4.0%
-----
Excess 11.0%
=====
Total Capital 16.2%
Total Capital minimum requirement 8.0%
-----
Excess 8.2%
=====
</TABLE>
-13-<PAGE>
Leverage Ratio
--------------
As of December 31, 1996
Tier 1 Capital to adjusted total assets
("Leverage Ratio") 11.6%
Minimum leverage requirement 3.0%
----
Excess 8.6%
====
For a more complete discussion of the actual and required ratios
of the Company and its Bank subsidiary, see note 15 to the
consolidated financial statements.
Asset/Liability Management
It is the Company's objective to manage assets and
liabilities to provide a satisfactory, consistent level of
profitability within the framework of established cash, loan,
investment, borrowing and capital policies. Certain officers are
charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of
the asset/liability mix. It is the overall philosophy of
management to support asset growth primarily through growth of
core deposits, which include deposits of all categories made by
local individuals, partnerships and corporations. The objective
of the policy is to control interest sensitive assets and
liabilities so as to minimize the impact of substantial movements
in interest rates on earnings.
The asset/liability mix is monitored on a regular basis. A
report reflecting the interest sensitive assets and interest
sensitive liabilities is prepared and presented to the Board of
Directors on a monthly basis.
One method to measure a bank's interest rate exposure is
through its repricing gap. The gap is calculated by taking all
assets that reprice or mature within a given timeframe and
subtracting all liabilities that reprice or mature within that
timeframe. The difference between these two amounts is called the
"gap", the amount of either liabilities or assets that will
reprice without a corresponding asset or liability repricing.
A negative gap (more liabilities repricing than assets)
generally indicates that the bank's net interest income will
decrease if interest rates rise and will increase if interest
rates fall. A positive gap generally indicates that the bank's
net interest income will decrease if rates fall and will increase
if rates rise.
The following table summarizes the amounts of
interest-earning assets and interest-bearing liabilities
outstanding at December 31, 1996 that are expected to mature,
prepay or reprice in each of the future time periods shown.
Except as stated below, the amount of assets or liabilities that
mature or reprice during a particular period was determined in
accordance with the contractual terms of the asset or liability.
Adjustable rate loans are included in the period in which
interest rates are next scheduled to adjust rather than in the
period in which they are due, and fixed rate loans and
mortgage-backed securities are included in the periods in which
they are anticipated to be repaid based on scheduled maturities.
The Company's savings accounts and interest-bearing demand
accounts (NOW and money market deposit accounts), which are
generally subject to immediate withdrawal, are included in the
"Three Months or Less" category, although historical experience
has proven these deposits to be more stable over the course of a
year.
-14-
<PAGE>
<TABLE>
<CAPTION>
At December 31, 1996
Maturing or Repricing in
(dollars in thousands)
Three Four
Months or Months to 1 to 5 Over 5
Less 12 Months Years Years Total
---- --------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Investment securities $ 10 4,054 9,317 8,827 22,208
Mortgage loans held for sale 972 - - - 972
Loans 41,156 18,361 63,892 4,622 128,031
Other investments - - - 1,155 1,155
------ ------- ------- ----- -------
Total interest-bearing assets $ 42,138 22,415 73,209 14,604 152,366
====== ====== ====== ====== =======
Interest-bearing liabilities:
FHLB advances $ 2,500 286 1,144 284 4,214
Deposits:
Savings and demand 52,682 - - - 52,682
Time deposits 21,249 32,669 12,565 1,119 67,602
Notes payable 778 - - - 778
------ ------ ------- ------ ------
Total interest-bearing liabilities $ 77,209 32,955 13,709 1,403 125,276
====== ====== ====== ===== =======
Interest sensitive difference
per period (35,071) (10,540) 59,500 13,201 27,090
======= ======= ====== ====== ======
Cumulative interest sensitivity
difference (35,071) (45,611) 13,889 27,090
======= ======= ====== ======
Cumulative difference to total
assets (21%) (27%) 8% 16%
===== ===== == ===
</TABLE>
At December 31, 1996, the difference between the Company's
liabilities and assets repricing or maturing within one year was
$45,611,000. Due to an excess of liabilities repricing or maturing within
one year, a rise in interest rates would cause the Company's net interest
income to decline.
Certain shortcomings are inherent in the method of analysis
presented in the foregoing table. For example, although certain assets
and liabilities may have similar maturities or periods to repricing, they
may react in different degrees or at different points in time to changes
in market interest rates. Additionally, certain assets, such as
adjustable-rate mortgages, have features that restrict changes in
interest rates, both on a short-term basis and over the life of the
asset. Changes in interest rates, prepayment rates, early withdrawal
levels and the ability of borrowers to service their debt, among other
factors, may change significantly from the assumptions made in the table.
INFLATION
Inflation impacts the growth in total assets in the banking industry
and causes a need to increase equity capital at higher than normal rates
to meet capital adequacy requirements. The Company copes with the effects
of inflation through the management of its interest rate sensitivity gap
-15-<PAGE>
position, by periodically reviewing and adjusting its pricing of services
to consider current costs, and through managing its level of net earnings
relative to its dividend payout policy.
SELECTED STATISTICAL INFORMATION
The following section presents consolidated statistical information
for FNB Banking Company which supplements the financial data
discussed elsewhere herein.
Index to Selected Statistical Information
Table 1 Average Balances and Interest Rates
Table 2 Volume-Rate Analysis
Table 3 Investment Portfolio
Table 4 Loan Portfolio
Table 5 Allowance for Loan Losses
Table 6 Deposits
Table 7 Selected Ratios
Average balances contained in the following selected statistical
information generally represent average daily balances for all
periods.
-16-<PAGE>
Table 1
Average Balances and Interest Rates
The table below shows the month-end average balance outstanding for
each category of interest earning assets and interest-bearing liabilities
for the indicated periods, and the average rate of interest earned or
paid thereon.
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
(Amounts are presented in thousands)
1996 1995
--------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Loans (including loan fees) $ 120,356 12,543 10.42% 107,447 11,017 10.25%
Investment securities:
Taxable 15,957 1,101 6.90% 16,399 1,118 6.82%
Non-taxable 7,822 692 8.85% 8,746 786 8.98%
Federal funds sold 4,505 258 5.73% 2,013 120 5.96%
------- ------ ---- ------- ------ ----
Total interest earning assets 148,640 14,594 9.82% 134,605 13,041 9.69%
Other non-interest earnings assets 10,656 12,106
------- -------
Total assets $ 159,296 146,711
======= =======
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and savings $ 50,517 1,299 2.57% 49,623 1,329 2.68%
Time 60,438 3,441 5.69% 53,918 2,928 5.43%
FHLB 3,108 145 4.67% 380 26 6.84%
Long-term debt 840 62 7.38% 1,021 78 7.64%
Federal funds purchased and securities
sold under repurchase 212 13 6.13% 279 17 6.10%
------- ----- ---- ------- ----- ----
Total interest-bearing liabilities 115,115 4,960 4.31% 105,221 4,378 4.16%
Other non-interest bearing liabilities 26,977 26,118
Stockholders' equity 17,204 15,372
Total liabilities and ------- -------
stockholders' equity $ 159,296 146,711
Excess of interest-earning assets over ======= =======
interest bearing liabilities $ 33,525 29,384
Ratio of interest-earning assets to ======= =======
interest-bearing liabilities 129.12% 127.93%
Net interest income 9,634 8,663
Net interest spread 5.51% 5.53%
Net interest yield on interest earning
assets 6.48% 6.44%
</TABLE>
-17-<PAGE>
<TABLE>
<CAPTION>
1994
---------------------------
Average Yield/
Balance Interest Rate
------- -------- ------
<S> <C> <C> <C>
Assets:
Interest earning assets:
Loans (including loan fees) $ 100,946 9,550 9.46%
Investment securities:
Taxable 16,384 1,050 6.41%
Non-taxable 9,516 844 8.87%
Federal funds sold 4,582 202 4.41%
------- ------ ------
Total interest earning assets 131,428 11,646 8.86%
Other non-interest earnings assets 12,310
-------
Total assets $ 143,738
=======
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and savings $ 52,462 1,412 2.69%
Time 51,948 2,214 4.26%
FHLB - - -
Long-term debt 1,188 71 5.98%
Federal funds purchased and securities
sold under repurchase 40 2 5.00%
------- ----- ----
Total interest-bearing liabilities 105,638 3,699 3.50%
Other non-interest bearing liabilities 23,960
Stockholders' equity 14,140
Total liabilities and -------
stockholders' equity $ 143,738
Excess of interest-earning assets over =======
interest bearing liabilities $ 25,790
Ratio of interest-earning assets to =======
interest-bearing liabilities 124.41%
Net interest income 7,947
Net interest spread 5.36%
Net interest yield on interest earning
assets 6.05%
</TABLE>
Non-accrual loans and the interest income which was recorded on these loans,
if any, are included in the yield calculation for loans in all
periods reported.
Tax exempt income is calculated on a tax equivalent basis.
-18-
<PAGE>
Table 2
Volume-Rate Analysis
The following table shows a summary of the changes in interest
income and interest expense on a tax equivalent basis resulting from
changes in volume and changes in rates for each major category of
interest earning assets and interest-bearing liabilities for 1996
over 1995, and 1995 over 1994.
1996 over 1995
Increase (decrease) due to changes in:
(Amounts are presented in thousands)
<TABLE>
<CAPTION>
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Interest income on:
Loans (including loan fees) $ 1,325 201 1,526
Investment securities:
Taxable (29) 12 (17)
Non-taxable (84) (10) (94)
Federal funds sold 149 (11) 138
----- --- -----
Total interest earning assets $ 1,361 192 1,553
===== === =====
Interest expense on:
Deposits:
Interest-bearing demand and savings $ 21 (51) (30)
Time 360 153 513
FHLB 213 (94) 119
Long-term debt (14) (2) (16)
Federal funds purchased (4) - (4)
----- ---- ----
Total interest-bearing liabilities $ 576 6 582
===== ==== ====
</TABLE>
Note: Rate/volume variances were allocated between rate variances and
volume variances using a weighted average allocation method.
-19-<PAGE>
Table 2
Volume-Rate Analysis (continued)
1995 over 1994
Increase (decrease) due to change in:
(Amounts are presented in thousands)
<TABLE>
<CAPTION>
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Interest income on:
Loans (including loan fees) $ 641 826 1,467
Investment securities:
Taxable 1 67 68
Non-taxable (67) 9 (58)
Federal funds sold (103) 21 (82)
----- ----- -----
Total interest earning assets $ 472 923 1,395
===== ===== =====
Interest expense on:
Deposits:
Interest-bearing demand and savings $ (78) (5) (83)
Time 104 610 714
FHLB 13 13 26
Long-term debt (21) 28 7
Federal funds purchased 12 3 15
----- ----- -----
Total interest-bearing liabilities $ 30 649 679
===== ===== =====
</TABLE>
Note: Rate/volume variances were allocated between rate variances and
volume variances using a weighted average allocation method.
-20-<PAGE>
Table 3
Investment Portfolio
The following table presents the investments by category at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
(Amounts are presented in thousands)
1996 1995
---- ----
<S> <C> <C>
Held to maturity (at amortized cost)
United States treasury and agencies $ 2,779 4,710
State, county and municipal 7,344 8,062
Mortgage-backed 2,074 2,849
------ ------
Totals $ 12,197 15,621
====== ======
</TABLE>
<TABLE>
<CAPTION>
(Amounts are presented in thousands)
1996 1995
---- ----
Available for Sale Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
United States treasury and agencies $ 4,540 4,530 1,995 2,015
Mortgage-backed 5,521 5,481 5,092 5,048
----- ----- ----- -----
$ 10,061 10,011 7,087 7,063
====== ====== ===== =====
</TABLE>
1996 1995
---- ----
Other investments $ 1,155 1,121
===== =====
The following table presents the maturities of all investment securities
at carrying value and the weighted average yields for each range of
maturities presented. (Amounts are presented in thousands)
<TABLE>
<CAPTION>
United States Mortgage- Weighted
Maturities at Treasury and Backed State, County Average
December 31, 1996 Agencies Securities and Municipal Yields
- ----------------- ------------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Within 1 year $ 3,004 - 1,060 6.11%
After 1 through 5 years 4,005 4,057 1,255 6.28%
After 5 through 10 year 300 2,261 4,523 6.27%
After 10 years - 1,237 506 6.00%
------ ----- -----
Totals $ 7,309 7,555 7,344
===== ===== =====
</TABLE>
Mortgage backed securities are included in the maturities categories in
which they are anticipated to be repaid based on scheduled maturities.
Other investments included Federal Reserve Bank stock, Federal Home Loan
Bank stock and common stock in two companies for which no readily
determinable market value exists. These securities are not included in
the maturity analysis above.
Yields on tax exempt securities are calculated on a tax equivalent basis.
-21-<PAGE>
Table 4
Loan Portfolio
The following table presents loans by type at the end of each of the last
five years.
<TABLE>
<CAPTION>
December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Amounts are presented in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 52,437 35,761 36,950 35,184 34,799
Real estate - construction 3,604 2,334 2,136 734 1,082
Real estate-mortgage 44,688 45,273 40,692 43,054 38,897
Installment loans to
individuals 27,302 24,887 21,507 19,303 17,198
------- ------- ------- ------ ------
128,031 108,255 101,285 98,275 91,976
Less: Unearned income (330) (287) (180) (41) (67)
Allowance for loan losses (1,422) (1,273) (1,245) (1,442) (1,756)
------- ------- ------- ------ ------
Loans, net $ 126,279 106,695 99,860 96,792 90,153
======= ======= ======= ====== ======
</TABLE>
As of December 31, 1996 maturities of loans in the indicated classifications
were as follows (amounts are presented in thousands):
<TABLE>
<CAPTION>
Commercial, Real
Financial and Estate
Maturity Agricultural Construction Total
-------- ------------- ------------ -----
<S> <C> <C> <C>
Within 1 year $ 16,734 3,604 20,338
1 to 5 years 34,537 - 34,537
Over 5 years 1,166 - 1,166
------ ----- ------
Totals $ 52,437 3,604 56,041
====== ===== ======
</TABLE>
-22-<PAGE>
Table 4
Loan Portfolio, continued
As of December 31, 1996, the interest terms of loans in the indicated
classifications for the indicated maturity ranges are as follows (amounts
are presented in thousands):
<TABLE>
<CAPTION>
Fixed Variable
Interest Interest
Rates Rates Total
----- ----- -----
<S> <C> <C> <C>
Commercial, financial and agricultural:
1 to 5 years $ 30,662 3,875 34,537
Over 5 years 1,166 - 1,166
------ ----- ------
Total 31,828 3,875 35,703
====== ===== ======
</TABLE>
The following summarizes past due and non-accrual loans, other real estate
and repossessions, and income that would have been reported on non-accrual
loans as of December 31, 1996, 1995, 1994, 1993 and 1992 (amounts are
presented in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Other real estate and repossessions $ 90 - - 524 142
Accruing loans 90 days or more
past due 216 148 144 165 80
Non-accrual loans 477 677 1,640 2,502 2,274
Interest on non-accrual loans which
would have been reported 38 67 158 175 275
</TABLE>
A loan is placed on non-accrual status when, in management's judgement,
the collection of interest appears doubtful. As a result of management's
ongoing review of the loan portfolio, loans are classified as non-accrual
generally when they are past due in principal or interest payments for
more than 90 days or it is otherwise not reasonable to expect collection
of principal and interest under the original terms. Exceptions are
allowed for 90 day past due loans when such loans are well secured and in
process of collection. Generally, payments received on non-accrual loans
are applied directly to principal.
-23-<PAGE>
Table 5
Allowance for Loan Losses
The following table summarizes information concerning the allowance for
loan losses:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Amounts are presented in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 1,273 1,245 1,442 1,756 2,291
Charge-offs:
Commercial, financial and agricultural 67 62 81 760 772
Real estate-construction - - - - -
Real estate-mortgage 64 - - -
Installment loans to individuals 342 348 371 146 187
----- ----- ----- ----- -----
473 410 452 906 959
----- ----- ----- ----- -----
Recoveries:
Commercial, financial and agricultural 96 223 97 17 137
Real estate-construction - - - - -
Real estate-mortgage 7 - - - -
Installment loans to individuals 154 184 73 50 136
----- ----- ----- ----- -----
257 407 170 67 273
----- ----- ----- ----- -----
Net charge-offs 216 3 282 839 686
Split-off of subsidiary - - - - (592)
Additions charged to operations 365 31 85 525 743
----- ----- ----- ----- -----
Balance at end of year $ 1,422 1,273 1,245 1,442 1,756
===== ===== ===== ===== =====
Ratio of net charge-offs during the period
to average loans outstanding during
the period .18% .00% .28% .92% .55%
=== === === === ===
</TABLE>
The Company has a dedicated loan review function. All loans $50,000 or
more are reviewed annually and placed into various loan grading
categories which assist in developing lists of potential problem loans.
These loans are constantly monitored by the loan review function to
ensure early identification of deterioration. The formal allowance for
loss adequacy test is performed the month end before each calendar
quarter end. Specific amounts of loss are estimated on problem loans and
historical loss percentages are applied to the balance of the portfolio
using certain portfolio stratifications. Additionally, the evaluation
takes into consideration such factors as changes in the nature and volume
of the loan portfolio, current economic conditions, regulatory
examination results, and the existence of loan concentrations.
-24-<PAGE>
Table 6
Deposits
The average balance of deposits and the average rates paid on such
deposits are summarized for the periods indicated in the following table.
<TABLE>
<CAPTION>
December 31,
(Amounts are presented in thousands)
1996 1995 1994
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
Non-interest bearing $ 24,152 - 23,822 - 23,807 -
Interest-bearing demand
and savings 50,517 2.57% 49,623 2.68% 52,462 2.69%
Time deposits 60,438 5.69% 53,918 5.43% 51,948 4.26%
------- ------- -------
Totals $135,107 127,363 128,217
======= ======= =======
</TABLE>
Maturities of time certificates of deposit of $100,000 or more outstanding
at December 31, 1996 are summarized as follows (amounts are presented
in thousands):
<TABLE>
<CAPTION>
<S> <C>
Within 3 months $ 3,375
After 3 through 6 months 2,619
After 6 through 12 months 4,204
After 12 months 1,565
-----
Total $ 11,763
======
</TABLE>
Table 7
Selected Ratios
The following table sets out certain ratios of the consolidated entity for
the years indicated.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income to:
Average stockholders' equity 15.87% 16.59% 12.89%
Average assets 1.72% 1.73% 1.27%
Dividends to net income 29.59% 26.92% 33.23%
Average equity to average assets 10.85% 10.47% 9.84%
</TABLE>
-25-<PAGE>
Item 7. FINANCIAL STATEMENTS
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(with Independent Accountants' Report thereon)
-26-<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
FNB Banking Company and Subsidiary
We have audited the accompanying consolidated balance sheets of
FNB Banking Company and subsidiary as of December 31, 1996 and
1995, and the related statements of earnings, changes in
stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of FNB Banking Company and subsidiary as of December 31,
1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting
principles.
PORTER KEADLE MOORE, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
January 16, 1997
1<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets
------
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks, including reserve
requirements of $1,196,000 and $1,073,000 $ 12,461,860 12,633,327
Investment securities available for sale (note 2) 10,010,949 7,063,760
Investment securities held to maturity (market value,
$12,679,015 and $16,208,545) (note 2) 12,197,132 15,621,241
Other investments 1,154,910 1,120,510
Mortgage loans held for sale 972,276 -
Loans, net (note 3) 126,278,521 106,694,884
Premises and equipment (notes 4 and 6) 6,079,942 5,871,757
Accrued interest receivable and other assets 1,620,806 1,567,716
----------- -----------
$ 170,776,396 150,573,195
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Demand $ 25,522,071 23,383,705
Interest-bearing demand 37,663,754 34,839,943
Savings 15,017,853 14,802,508
Time (note 5) 67,601,606 56,655,209
----------- -----------
Total deposits 145,805,284 129,681,365
FHLB advances (note 7) 4,214,286 2,000,000
Note payable (note 6) 777,779 944,445
Accounts payable and accrued liabilities 1,300,617 1,173,329
----------- -----------
Total liabilities 152,097,966 133,799,139
----------- -----------
Commitments (note 9)
Stockholders' equity (notes 10 and 15):
Common stock, par value $1; 5,000,000 shares
authorized; 807,800 shares issued and outstanding 807,800 807,800
Retained earnings 17,903,934 15,981,567
Net unrealized loss on investment securities
available for sale, net of tax (33,304) (15,311)
----------- -----------
Total stockholders' equity 18,678,430 16,774,056
----------- -----------
$ 170,776,396 150,573,195
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 12,543,160 11,016,657 9,549,840
Interest on federal funds sold 257,845 119,788 202,323
Interest-bearing deposits in other banks 5,696 6,012 3,858
Interest on investment securities:
Tax-exempt 457,159 518,758 556,618
Taxable 1,036,878 1,068,633 1,034,598
Dividends on other investments 57,993 43,016 11,791
---------- ---------- ----------
Total interest income 14,358,731 12,772,864 11,359,028
---------- ---------- ----------
Interest expense:
Deposits 4,740,619 4,257,069 3,623,676
Notes payable 61,784 77,907 70,887
Other 157,958 43,004 4,673
---------- ---------- ----------
Total interest expense 4,960,361 4,377,980 3,699,236
---------- ---------- ----------
Net interest income 9,398,370 8,394,884 7,659,792
Provision for loan losses (note 3) 365,240 31,000 85,000
---------- ---------- ----------
Net interest income after provision for loan losses 9,033,130 8,363,884 7,574,792
---------- ---------- ----------
Other operating income:
Service charges 1,507,821 1,576,045 1,435,566
Fees for trust services 180,000 180,000 185,000
Securities gains, net 104,183 65,550 92,282
Other 437,453 368,221 256,911
---------- ---------- ----------
Total other operating income 2,229,457 2,189,816 1,969,759
---------- ---------- ----------
Other operating expenses:
Salaries and employee benefits 4,179,287 3,917,042 3,972,917
Occupancy and equipment 1,128,910 1,009,844 867,538
Miscellaneous (note 13) 1,933,462 1,972,181 2,197,657
---------- ---------- ----------
Total other operating expenses 7,241,659 6,899,067 7,038,112
---------- ---------- ----------
Earnings before income taxes 4,020,928 3,654,633 2,506,439
Income taxes (note 11) 1,290,761 1,103,782 683,433
---------- ---------- ----------
Net earnings $ 2,730,167 2,550,851 1,823,006
========= ========= =========
Earnings per common share based on
average outstanding shares of 807,800
in 1996, 1995 and 1994:
Net earnings per share $ 3.38 3.16 2.26
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Net
Unrealized
Gain
(Loss) On
Investment
Securities
Available
Common Retained for Sale,
Stock Earnings Net of Tax Total
----- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 807,800 12,900,190 - 13,707,990
Cumulative effect of accounting change for
certain investment securities, net of
income taxes of $13,415 - - 26,041 26,041
Net earnings - 1,823,006 - 1,823,006
Cash dividends declared of $.75 per share - (605,850) - (605,850)
Change in unrealized loss on investment
securities available for sale, net of tax - - (379,577) (379,577)
------- ---------- -------- ----------
Balance, December 31, 1994 807,800 14,117,346 (353,536) 14,571,610
Net earnings - 2,550,851 - 2,550,851
Cash dividends declared of $.85 per share - (686,630) - (686,630)
Change in unrealized loss on investment
securities available for sale, net of tax - - 338,225 338,225
------- ---------- -------- ----------
Balance, December 31, 1995 807,800 15,981,567 (15,311) 16,774,056
Net earnings - 2,730,167 - 2,730,167
Cash dividends declared of $1.00 per share - (807,800) - (807,800)
Change in unrealized loss on investment
securities available for sale, net of tax - - (17,993) (17,993)
------- ---------- -------- ----------
Balance, December 31, 1996 $ 807,800 17,903,934 (33,304) 18,678,430
======= ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,730,167 2,550,851 1,823,006
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation, amortization and accretion 345,094 368,991 352,816
Provision for loan losses 365,240 31,000 85,000
Provision for losses on sales of other real estate
owned and repossessed collateral 3,798 11,986 126,906
Provision for deferred income taxes (47,032) 74,845 84,614
Gains on investment securities (104,183) (65,550) (92,282)
(Gains)losses on disposals of premises and equipment (3,150) 1,574 40,113
Change in:
Mortgage loans held for sale (972,276) 42,638 173,642
Interest receivable (69,901) (69,619) (140,914)
Interest payable 530 76,020 2,004
Other, net 230,870 (258,839) 132,396
--------- --------- ---------
Net cash provided by operating activities 2,479,157 2,763,897 2,587,301
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales of investment securities
available for sale 990,000 976,250 2,024,967
Proceeds from sales of other investments - 9,800 -
Proceeds from calls and maturities of investment securities
held to maturity 3,597,249 3,967,100 5,831,057
Proceeds from calls and maturities of investment securities
available for sale 1,561,897 173,766 689,622
Purchase of investment securities held to maturity - (698,370) (6,776,361)
Purchase of investment securities available for sale (5,543,379) (1,000,000) (992,500)
Purchase of other investments (34,400) - (484,300)
Net change in loans (19,983,675) (7,192,952) (2,964,659)
Proceeds from disposals of premises and equipment 3,150 1,800 -
Additions to premises and equipment (605,205) (624,289) (334,425)
Proceeds from sales of other real estate and
repossessed collateral - 315,232 496,428
Purchase of Griffin Loans, Inc. net of cash acquired - (386,500)
----------- ---------- ----------
Net cash used by investing activities $ (20,014,363) (4,071,663) (2,896,671)
----------- ---------- ----------
</TABLE>
5<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows, continued
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net change in demand and savings deposits $ 5,177,522 (3,911,166) 7,433,094
Net change in time deposits 10,946,397 5,135,638 (1,021,615)
Net change in federal funds purchased - (1,500,000) 700,000
Proceeds from FHLB advances 2,500,000 2,000,000 -
Repayments of FHLB advances (285,714) - -
Repayments of notes payable (166,666) (166,667) (166,667)
Payment of cash dividends (807,800) (686,630) (565,460)
---------- --------- ---------
Net cash provided by financing activities 17,363,739 871,175 6,379,352
---------- --------- ---------
Net increase (decrease) in cash and cash equivalents (171,467) (436,591) 6,069,982
Cash and cash equivalents at beginning of year 12,633,327 13,069,918 6,999,936
---------- --------- ---------
Cash and cash equivalents at end of year $ 12,461,860 12,633,327 13,069,918
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,959,831 4,301,960 3,697,232
Income taxes $ 1,222,500 1,141,000 534,000
Noncash investing and financing activities:
Transfer of investment securities
available for sale upon adoption of
SFAS 115 (note 1) $ - - 9,018,824
Transfers of other investment securities
upon adoption of SFAS 115 (note 1) $ - - 646,010
Change in net unrealized losses on
investment securities available for sale,
net of tax $ 17,993 (338,225) 353,536
Transfers of loans to other real estate $ 128,176 348,597 99,671
Financed sales of other real estate $ 93,378 21,379 -
Change in dividends payable to stockholders $ - - 40,390
</TABLE>
See accompanying notes to consolidated financial statements.
6<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of FNB Banking Company (the
"Company") and subsidiary, and the methods of applying those
principles, conform with generally accepted accounting principles
(GAAP) and with general practice within the banking industry. The
following is a summary of the significant policies and procedures.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, First National Bank of
Griffin ("Bank"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The Bank commenced business in 1933 upon receipt of its charter from
the Georgia Department of Banking and Finance. This state charter was
converted to a national charter in 1965. The Bank is primarily
regulated by the Office of the Comptroller of the Currency ("OCC") and
the Company is regulated by the Federal Reserve System and both
undergo periodic examinations by these regulatory authorities. The
Bank provides a full range of customary banking services throughout
Spalding County in Georgia.
In preparing financial statements in conformity with GAAP, management
is required to make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could differ
significantly from these estimates. Material estimates common to the
banking industry that are particularly susceptible to significant
change in the near term include, but are not limited to, the
determination of the allowance for loan losses, the valuation of real
estate acquired in connection with or in lieu of foreclosure on loans,
and valuation allowances associated with the realization of deferred
tax assets which are based on future taxable income.
Investment Securities
---------------------
Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Under SFAS No. 115, the Company classifies its securities in one of
three categories: trading, available for sale, or held to maturity.
Trading securities are bought and held principally for the purpose of
selling them in the near term. Held to maturity securities are those
securities for which the Company has the ability and intent to hold
the security until maturity. All other securities not included in
trading or held to maturity are classified as available for sale. At
December 31, 1996 and 1995 the Company had no trading securities.
Available for sale securities are recorded at fair value. Held to
maturity securities are recorded at cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding
gains and losses, net of the related tax effect, on securities
available for sale are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Transfers
of securities between categories are recorded at fair value at the
date of transfer. Unrealized holding gains or losses associated with
transfers of securities from held to maturity to available for sale
are recorded as a separate component of stockholders' equity. The
unrealized holding gains or losses included in the separate component
of stockholders' equity for securities transferred from available for
sale to held to maturity are maintained and amortized into earnings
over the remaining life of the security as an adjustment to yield in a
manner consistent with the amortization or accretion of premium or
discount on the associated security.
A decline in the market value of any available for sale or held to
maturity investment below cost that is deemed other than temporary is
charged to earnings and establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and
losses for securities classified as available for sale and held to
maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
7<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Other Investments
-----------------
Other investments include equity securities with no readily
determinable fair value. These investment securities are carried at
cost.
Mortgage Loans Held for Sale
----------------------------
Mortgage loans held for sale are carried at the lower of aggregate
cost or market value. The amount by which cost exceeds market value is
accounted for as a valuation allowance. Changes in the valuation
allowance are included in the determination of net earnings of the
period in which the change occurs.
Loans, Loan Fees and Interest Income
------------------------------------
Loans are stated at principal amount outstanding, net of the allowance
for loan losses. Interest on loans is calculated by using the simple
interest method on daily balances of the principal amount outstanding.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such
that collection of interest is doubtful. When a loan is placed on
nonaccrual status, previously accrued and uncollected interest is
charged to interest income on loans. Generally, payments on nonaccrual
loans are applied to principal.
Loan fees, net of certain origination costs, have been deferred and
are being amortized over the lives of the respective loans in
accordance with generally accepted accounting principles set forth in
Statement of Financial Accounting Standards No. 91, "Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases".
Allowance For Loan Losses
-------------------------
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance represents
an amount which, in management's judgement, will be adequate to absorb
probable losses on existing loans that may become uncollectible.
Management's judgement in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations
take into consideration such factors as changes in the nature and
volume of the loan portfolio, current economic conditions that may
affect the borrower's ability to pay, overall portfolio quality, and
review of specific problem loans.
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, regulators, as an
integral part of their examination process, periodically review the
Company's allowance for loan losses. Such regulators may require the
Company to recognize additions to the allowance based on their
judgements of information available to them at the time of their
examination.
Effective January 1, 1995, the Company accounts for impaired loans in
accordance with Statement of Financial Accounting Standards (SFAS) No.
114, "Accounting by Creditors for Impairment of a Loan" amended for
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure." A loan is impaired when, based on
current information and events, it is probable that all amounts due
according to the contractual terms of the loan agreement will not be
collected. SFAS No. 114 requires that impaired loans be measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate, which is the contractual interest rate
adjusted for any deferred loan fees or cost, premium or discount
existing at the inception or acquisition of the loan, or at the loan's
observable market price, or at the fair value of the
8<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Allowance For Loan Losses, continued
------------------------------------
collateral of the loan if the loan is collateral dependent. SFAS No.
118 amends SFAS No. 114 to require information about the recorded
investment in certain impaired loans and eliminates its provisions
regarding how a creditor should report income on an impaired loan.
SFAS No. 118 allows creditors to use existing methods for recognizing
income on impaired loans, including methods used by certain industry
regulators. The adoption of these standards had no material effect on
the consolidated financial statements.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets. When assets are retired
or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any gain or loss is
reflected in income for the period. Costs incurred for maintenance and
repairs are expensed currently. The range of estimated useful lives
for premises and equipment are:
Buildings and improvements 3 - 40 Years
Furniture and equipment 3 - 10 Years
Income Taxes
------------
The Company accounts for income taxes using the asset and liability
method and recognizes deferred tax assets and liabilities for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Additionally, future tax
benefits, such as net operating loss carryforwards, are recognized to
the extent that realization of such benefits is more likely than not.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
assets and liabilities are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income tax expense in the period that includes the
enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets
and liabilities results in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by
such asset is required. A valuation allowance is provided for the
portion of the deferred tax asset when it is more likely than not that
some portion or all of the deferred tax asset will not be realized. In
assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities,
projected future taxable income, and tax planning strategies.
Net Earnings Per Common Share
-----------------------------
Net earnings per share is determined by dividing net earnings by the
weighted average number of shares outstanding.
Other
-----
Certain reclassifications of the 1995 and 1994 amounts have been made
to conform to the presentation used in the 1996 financial statements.
Property (other than cash deposits) held by the Bank in a fiduciary or
agency capacity for customers is not included in the balance sheets
since such items are not assets of the Bank.
9<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(2) INVESTMENT SECURITIES
Investment securities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY: December 31, 1996
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and Government
agencies $ 2,778,965 25,873 - 2,804,838
State, county and municipal 7,343,954 414,621 920 7,757,655
Mortgage-backed securities 2,074,213 43,935 1,626 2,116,522
---------- ------- ----- ----------
Total $ 12,197,132 484,429 2,546 12,679,015
========== ======= ===== ==========
December 31, 1995
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury and Government
agencies $ 4,710,393 147,080 - 4,857,473
State, county and municipal 8,061,787 402,278 20,304 8,443,761
Mortgage-backed securities 2,849,061 58,250 - 2,907,311
---------- ------- ------ ----------
Total $ 15,621,241 607,608 20,304 16,208,545
========== ======= ====== ==========
Securities Available for Sale: December 31, 1996
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ ------
U.S. Treasury and Government
agencies $ 4,540,165 3,623 13,788 4,530,000
Mortgage-backed securities 5,521,245 20,537 60,833 5,480,949
---------- ------- ------ ----------
Total $ 10,061,410 24,160 74,621 10,010,949
========== ======= ====== ==========
December 31, 1995
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury and Government
agencies $ 1,994,923 20,557 - 2,015,480
Mortgage-backed securities 5,092,036 5,591 49,347 5,048,280
---------- ------- ------ ----------
Total $ 7,086,959 26,148 49,347 7,063,760
========== ======= ====== ==========
</TABLE>
10<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(2) INVESTMENT SECURITIES, CONTINUED
The amortized cost and fair value of investment securities at
December 31, 1996, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Held Securities Available
to Maturity for Sale
----------- --------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and Government
agencies:
Within 1 year $ 1,000,516 1,006,560 2,000,000 2,003,122
1 to 5 years 1,478,654 1,495,935 2,540,165 2,526,878
5 to 10 years 299,795 302,343 - -
--------- --------- ---------- ---------
$ 2,778,965 2,804,838 4,540,165 4,530,000
========= ========= ========= =========
State, county and municipal:
Within 1 year 1,060,000 1,074,817 - -
1 to 5 years 1,255,000 1,292,636 - -
5 to 10 years 4,523,240 4,844,767 - -
More than 10 years 505,714 545,435 - -
--------- ---------- -------- --------
$ 7,343,954 7,757,655 - -
========= ========= ========= =========
Total securities other than mortgage-
backed securities:
Within 1 year 2,060,516 2,081,377 2,000,000 2,003,122
1 to 5 years 2,733,654 2,788,571 2,540,165 2,526,878
5 to 10 years 4,823,035 5,147,110 - -
More than 10 years 505,714 545,435 - -
Mortgage-backed securities 2,074,213 2,116,522 5,521,245 5,480,949
---------- ---------- ---------- ----------
$ 12,197,132 12,679,015 10,061,410 10,010,949
========== ========== ========== ==========
</TABLE>
Call premiums amounting to $2,200 were received on two called
securities during 1995 and are included with securities gains in the
1995 statement of earnings. There were no sales of investment
securities held to maturity during 1996, 1995 and 1994.
Proceeds from sales of securities available for sale during 1996,
1995 and 1994 were $990,000, $976,250 and $2,024,967, respectively.
Gross gains of $9,177 for 1994, along with gross losses of $3,317,
$23,750 and $2,500 for 1996, 1995 and 1994, respectively, were
realized on those sales.
11<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(2) INVESTMENT SECURITIES, CONTINUED
Certain investment securities were written down to their estimated
realizable values because, in the opinion of management, the decline
in value was considered other than temporary. During 1996, 1995 and
1994, the Company received $17,500, $87,100 and $195,605,
respectively, on an investment security that was in default and
written down prior to 1992. The amounts received in excess of the
remaining cost basis resulted in recoveries of $17,500, $87,100 and
$85,605 in 1996, 1995, and 1994, respectively. During 1996, the
Company received $250,000 on another investment security that was
written down in 1993 which resulted in a recovery of $90,000. These
recoveries are included with securities gains in the statements of
earnings.
Securities with a carrying value of $12,772,000 and $5,914,000 at
December 31, 1996 and 1995, respectively, were pledged to secure
public deposits as required by law.
(3) LOANS
Major classifications of loans at December 31, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commercial, financial and agricultural $ 52,437,173 35,760,795
Real estate - construction 3,604,322 2,333,745
Real estate - mortgage 44,687,988 45,273,648
Consumer 27,301,406 24,886,667
----------- -----------
Total loans 128,030,889 108,254,855
Less: Allowance for loan losses 1,422,603 1,273,267
Unearned interest and fees 329,765 286,704
----------- -----------
Net loans $ 126,278,521 106,694,884
=========== ===========
</TABLE>
The Company grants loans and extensions of credit to individuals and a
variety of firms and corporations located in its trade area, primarily
Spalding County, Georgia and surrounding counties. Although the Company
has a diversified loan portfolio, a substantial portion of the loan
portfolio is collateralized by improved and unimproved real estate and is
dependent upon the real estate market in this geographical area.
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of year $ 1,273,267 1,245,314 1,441,964
Amounts charged off (473,420) (409,863) (452,464)
Recoveries on amounts previously charged off 257,516 406,816 170,814
Provision charged to operating expenses 365,240 31,000 85,000
--------- --------- ---------
Balance at end of year $ 1,422,603 1,273,267 1,245,314
========= ========= =========
</TABLE>
The Company was servicing approximately $30,900,000 and $31,200,000 of
mortgage loans for the Federal Home Loan Mortgage Corporation at December
31, 1996 and 1995, respectively.
12<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(4) PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1996 and 1995, are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and improvements $ 1,390,125 1,113,634
Buildings and improvements 5,476,295 5,465,706
Furniture and equipment 3,191,228 3,022,762
---------- ---------
10,057,648 9,602,102
Less: Accumulated depreciation 3,977,706 3,730,345
---------- ---------
$ 6,079,942 5,871,757
========== =========
</TABLE>
Depreciation expense was $397,020, $321,560 and $292,271 for the years
ended December 31, 1996, 1995 and 1994, respectively.
(5) DEPOSITS
The aggregate amount of time deposit accounts with a minimum
denomination of $100,000, was approximately $11,763,500 and $7,701,600
at December 31, 1996 and 1995, respectively. Deposits from related
parties totaled approximately $2,900,000 and $1,903,000 at December
31, 1996 and 1995, respectively.
At December 31, 1996, the scheduled maturities of time deposits are as
follows:
1997 $ 53,917,491
1998 8,550,435
1999 2,436,321
2000 1,578,123
2001 and thereafter 1,119,236
----------
$ 67,601,606
==========
(6) NOTE PAYABLE
Note payable at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Note payable, due in monthly installments of $13,889
plus interest at 70% of the prime interest rate
through August 1, 2001, collateralized by certain
land and buildings $ 777,779 944,445
</TABLE>
Aggregate maturities required on the note payable at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
<C> <C>
1997 $ 166,668
1998 166,668
1999 166,668
2000 166,668
2001 111,107
-------
$ 777,779
=======
</TABLE>
13<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(7) FEDERAL HOME LOAN BANK ADVANCES
The Bank has an agreement with the Federal Home Loan Bank (FHLB)
whereby the FHLB agreed to provide the Bank credit facilities under
the Agreement for Advances and Security Agreement. Any amounts
advanced by the FHLB are secured under a Blanket Floating Lien covered
by all of the Bank's 1-4 family first mortgage loans. The Bank may
draw advances up to 75% of the outstanding balance of these loans
based on the agreement with the FHLB.
At December 31, 1996, the Bank has advances payable of $1,714,286 with
a fixed interest rate of 6.72% and interest payable monthly with equal
principal payments due semi-annually until maturity in 2002 and an
advance payable of $2,500,000 with a fixed interest rate of 5.76% and
interest payable monthly with principal due on March 26, 1997.
(8) EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit plan covering
substantially all of its employees who have completed one year of
service. The Company's funding policy provides that payments to the
plan shall be consistent with minimum government funding requirements
plus additional amounts which may be approved by the Company.
Contributions are intended to provide not only for benefits attributed
to services to date, but also for those expected to be earned in the
future.
The following table sets forth the Plan's status and amounts
recognized in the balance sheets at December 31, 1996 and 1995. Plan
assets are stated at fair value and consist of cash, certificates of
deposit, equity securities and government securities.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 2,222,769 2,201,036
Nonvested 29,284 25,798
--------- ---------
Total accumulated benefit obligations $ 2,252,053 2,226,834
========= =========
Projected benefit obligations for services
rendered to date $ 3,330,530 3,378,244
Plan assets at fair value 3,188,262 3,123,794
--------- ---------
Assets less than projected benefit obligation (142,268) (254,450)
Unamortized net asset existing
at date of adoption of SFAS 87 206,739 225,240
Unamortized net gain from past experience different
from that assumed and effects of changes in
assumptions (102,592) 87,108
---------- -------
Prepaid (accrued) pension cost included in other liabilities $ (38,121) 57,898
========== =======
</TABLE>
14<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(8) EMPLOYEE BENEFIT PLANS, CONTINUED
The components of net pension cost for the years ended December 31,
1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned $ 143,364 115,323 133,916
Interest cost on projected benefit
obligations 222,170 200,887 188,399
Actual return on plan assets (282,114) (493,582) 56,602
Net amortization and deferral 42,580 305,372 (232,917)
-------- -------- --------
Net pension cost $ 126,000 128,000 146,000
======== ======== ========
</TABLE>
The following assumptions were used in determining the actuarial
present value of the projected benefit obligations at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Discount rate 7.0% 7.0%
Rate of increase in future compensation levels 5.0% 5.0%
Expected long-term rate of return on assets 8.25% 8.25%
</TABLE>
The Company has a profit sharing plan covering substantially all
employees. Contributions, computed as defined in the plan, amounted
to $384,000 in 1994. Effective January 1, 1995, the Company amended
the plan to comply with the requirements of Section 401(K) of the
Internal Revenue Code. The plan covers substantially all employees,
subject to certain minimum service requirements. The Company will
match up to 6% of each participants pre-tax contributions. The
Company's matching contributions amounted to $130,000 and $131,000
in 1996 and 1995, respectively.
(9) COMMITMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit, standby letters of credit and financial guarantees.
Those instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet. The contract
amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance
by the other party for commitments to extend credit, standby letters
of credit and financial guarantees written is represented by the
contractual amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as
it does for on-balance-sheet instruments.
15<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(9) COMMITMENTS, CONTINUED
In some cases, the Company does require collateral or other security
to support financial instruments with credit risk.
Approximate
Contractual
Amount
------
1996 1995
---- ----
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 24,787,000 15,687,000
Standby letters of credit and
financial guarantees written $ 932,000 798,000
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation. Collateral held varies but may include
unimproved and improved real estate, certificates of deposit, or
personal property.
Standby letters of credit and financial guarantees written are
conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. The credit risk involved
in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Letters of credit are
approximately 54% collateralized.
(10) DIVIDEND LIMITATIONS
Dividends paid by the Bank are the primary source of funds available
to the Company. Banking regulations limit the amount of dividends that
may be paid without prior approval of the regulatory authorities. The
amount of dividends the Bank may pay in 1997 without prior approval is
approximately $3,706,000 plus 1997 earnings of the Bank.
(11) INCOME TAXES
The components of income tax expense for the years ended December 31,
1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current $ 1,337,793 1,028,937 598,819
Deferred (47,032) 74,845 84,614
--------- --------- -------
$ 1,290,761 1,103,782 683,433
========= ========= =======
</TABLE>
16<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(11) INCOME TAXES, CONTINUED
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings
before taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Pretax income at statutory rates $ 1,367,116 1,242,575 852,189
Add (deduct):
Tax-exempt interest income (155,070) (174,663) (190,693)
Nondeductible interest expense 16,273 17,215 15,354
Other 62,442 18,655 6,583
--------- --------- --------
$ 1,290,761 1,103,782 683,433
========= ========= ========
</TABLE>
The following summarizes the sources and expected tax consequences of
future taxable deductions (income) which comprise the net deferred tax
asset (liability). At December 31, 1996 and 1995, the Company's net
deferred liability is included as a component of other liabilities.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred income tax assets:
Net unrealized loss in investment securities $ 17,157 7,888
Allowance for loan losses 310,348 250,580
State income tax credits - 35,000
Other 79,271 46,055
------- -------
Total gross deferred income tax assets 406,776 339,523
Less: Valuation allowance - (35,000)
-------- --------
Net deferred income tax assets 406,776 304,523
-------- --------
Deferred income tax liabilities, consisting of premises and equipment (524,386) (478,434)
-------- --------
Net deferred income tax liability $ (117,610) (173,911)
======== ========
</TABLE>
(12) Related Party Transactions
The Company conducts transactions with directors and officers,
including companies in which they have beneficial interest, in the
normal course of business. It is the policy of the Company that loan
transactions with directors and officers be made on substantially the
same terms as those prevailing at the time for comparable loans to
other persons. The following is a summary of activity for related
party loans for 1996:
<TABLE>
<CAPTION>
<S> <C>
Beginning balance $ 3,554,752
Loans advanced 4,499,245
Repayments (2,944,547)
----------
Ending balance $ 5,109,450
==========
</TABLE>
17<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(13) MISCELLANEOUS OPERATING EXPENSES
Components of other operating expenses which are greater than 1% of
interest income and other operating income are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
Deposit insurance premiums $ 2,020 146,729 280,209
Stationery and supplies $ 279,814 209,038 175,701
Postage $ 179,591 164,678 177,317
Directors fees $ 154,400 153,100 167,400
Data processing $ 321,540 192,397 134,364
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of fair value information about financial
instruments, whether or not recognized on the face of the balance
sheet, for which it is practicable to estimate that value. The
assumptions used in the estimation of the fair value of the Company's
financial instruments are detailed below. Where quoted prices are not
available, fair values are based on estimates using discounted cash
flows and other valuation techniques. The use of discounted cash flows
can be significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The following
disclosures should not be considered a surrogate of the liquidation
value of the Company, but rather a good-faith estimate of the increase
or decrease in value of financial instruments held by the Company
since purchase, origination, or issuance.
Cash and Cash Equivalents
-------------------------
For cash, due from banks and federal funds sold the carrying amount is
a reasonable estimate of fair value.
Investment Securities
---------------------
Fair values for investment securities are based on quoted market
prices.
Other Investments
-----------------
The carrying value of other investments approximates fair value.
Loans and Mortgage Loans Held for Sale
--------------------------------------
The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings. For variable rate
loans, the carrying amount is a reasonable estimate of fair value.
Deposits
--------
The fair value of demand deposits, savings accounts, NOW accounts and
certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of
deposit is estimated by discounting the future cash flows.
FHLB Advances
-------------
The fair value of the FHLB fixed rate borrowings are estimated using
discounted cash flows, based on the current incremental borrowing
rates for similar types of borrowing arrangements.
Note Payable
------------
The Company's note payable bears interest based on a percentage of the
prime rate and as such, the carrying amount approximates the
fair value.
18<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Commitments to Extend Credit, Standby Letters of Credit and Financial
---------------------------------------------------------------------
Guarantees Written
------------------
Because commitments to extend credit and standby letters of credit are
made using variable rates, the contract value is a reasonable estimate
of fair value.
Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on many judgements. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgement and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Significant assets and
liabilities that are not considered financial instruments include the
mortgage banking operation, deferred income taxes and premises and
equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in the
estimates.
The carrying amount and estimated fair values of the Company's
financial instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 12,461,860 12,461,860 12,633,327 12,633,327
Investment securities 22,208,081 22,689,964 22,685,001 23,272,305
Other investments 1,154,910 1,154,910 1,120,510 1,120,510
Loans and mortgage
loans held for sale 127,250,797 126,499,785 106,694,884 105,900,645
Liabilities:
Deposits 145,805,284 146,032,337 129,681,365 131,289,226
FHLB advances 4,214,286 4,216,204 2,000,000 2,090,980
Notes payable 777,779 777,779 944,445 944,445
Unrecognized financial instruments:
Commitments to extend credit 24,787,000 24,787,000 15,687,000 15,687,000
Standby letters of credit 932,000 932,000 798,000 798,000
</TABLE>
19<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(15) Regulatory Matters
------------------
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary action by regulators that, if undertaken,
could have a direct material effect on the Bank s financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank s capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined) to
average risk-weighted assets (as defined) and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of
December 31, 1996, the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1996 and 1995, the most recent notification from
the Office of the Comptroller of the Currency categorized the Bank as
well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the
institution s category.
The consolidated and bank only actual capital amounts and ratios for
1996 and 1995 are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Actual Adequacy Purposes Action Provisions
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <S> <C>
As of December 31, 1996:
Total Risk-Based Capital (to Risk
Weighted Assets):
Consolidated $ 20,039,698 16.2% 9,896,147 >8.0% N/A N/A
-
FNB Griffin $ 19,192,076 15.5% 9,905,588 >8.0% 12,381,985 >10.0%
- -
Tier I Capital (to Risk Weighted Assets):
Consolidated $ 18,617,095 15.0% 4,964,559 >4.0% N/A N/A
-
FNB Griffin $ 17,769,473 14.4% 4,935,965 >4.0% 7,403,947 >6.0%
- -
Tier I Capital (to Adjusted Total Assets):
Consolidated $ 18,617,095 11.6% 6,419,688 >4.0% N/A N/A
-
FNB Griffin $ 17,769,473 11.1% 6,403,414 >4.0% 8,004,267 >5.0%
- -
</TABLE>
20<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(15) REGULATORY MATTERS, CONTINUED
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Actual Adequacy Purposes Action Provisions
----- ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1995:
Total Risk-Based Capital (to Risk
Weighted Assets):
Consolidated $ 17,970,805 16.8% 8,557,526 >8.0% N/A N/A
-
FNB Griffin $ 17,176,293 16.1% 8,534,804 >8.0% 10,668,505 >10.0%
- -
Tier I Capital (to Risk Weighted Assets):
Consolidated $ 16,697,538 15.6% 4,281,420 >4.0% N/A N/A
-
FNB Griffin $ 15,903,026 14.9% 4,269,269 >4.0% 6,403,903 >6.0%
- -
Tier I Capital (to Adjusted Total Assets):
Consolidated $ 16,697,538 11.3% 5,910,633 >4.0% N/A N/A
-
FNB Griffin $ 15,903,026 10.8% 5,890,010 >4.0% 7,362,512 >5.0%
-
</TABLE>
21<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(16) FNB Banking Company (Parent Company Only) Financial Information
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1996 and 1995
Assets
1996 1995
---- ----
<S> <C> <C>
Cash $ 261,611 150,091
Investment in First National Bank of Griffin 17,830,807 15,979,544
Other assets 1,098,373 1,133,446
---------- ----------
$ 19,190,791 17,263,081
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Other liabilities $ 27,681 4,345
Dividends payable 484,680 484,680
Stockholders equity 18,678,430 16,774,056
---------- ----------
$ 19,190,791 17,263,081
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Statements of Earnings
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Interest $ 17,796 7,966 8,449
Other 240,879 288,501 251,972
Dividends from subsidiary 807,800 886,630 405,850
--------- --------- --------
1,066,475 1,183,097 666,271
--------- --------- -------
Other operating expenses 178,203 245,801 265,031
--------- --------- --------
Earnings before income taxes and equity in undistributed
earnings of bank subsidiary 888,272 937,296 401,240
Income tax benefit (expense) (27,361) (23,353) 1,567
--------- -------- --------
Earnings before equity in undistributed earnings of
bank subsidiary 860,911 913,943 402,807
Equity in undistributed earnings of bank subsidiary 1,869,256 1,636,908 1,420,199
--------- --------- ---------
Net earnings $ 2,730,167 2,550,851 1,823,006
========= ========= =========
</TABLE>
22<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, continued
(16) FNB BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION, CONTINUED
<TABLE>
<CAPTION>
Statements of Cash Flow
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,730,167 2,550,851 1,823,006
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Equity in undistributed earnings
of bank subsidiary (1,869,256) (1,636,908) (1,420,199)
Depreciation 35,073 35,528 49,138
Change in other liabilities 23,336 (413,421) 53,053
---------- ---------- ---------
Net cash provided by operating activities 919,320 536,050 504,998
---------- ---------- ---------
Cash flows from financing activities-dividends paid (807,800) (686,630) (565,460)
---------- ---------- ---------
Net increase (decrease) in cash 111,520 (150,580) (60,462)
Cash at beginning of the period 150,091 300,671 361,133
---------- --------- ---------
Cash at end of the period $ 261,611 150,091 300,671
========== ========= =========
Supplemental disclosure of cash flow information:
Net unrealized loss on investment securities
available for sale of bank subsidiary, net of tax $ 17,993 (338,225) 353,536
Change in dividends receivable from subsidiary $ - (200,000) 159,610
Change in dividends payable to stockholders $ - - 40,390
</TABLE>
23<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
For the year ended December 31, 1996, the accounting firm of Porter
Keadle Moore was the principal accountant for the Company.
The Company had no disagreements with its accountants on any matters
of accounting principle or practices or financial statement disclosure.
-27-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Board of Directors
The following table sets forth for each director (a) the person's
name, (b) his age at December 31, 1996, (c) the year he was first elected
as a director of the Company and (d) his positions with the Company and
the Bank, other than as a director, and his principal occupation and
business experience for the past five years.
<TABLE>
<CAPTION>
Year First Position with Company; Principal
Name Age Elected Occupation; Business Experience
---- --- ---------- --------------------------------
<S> <C> <C> <C>
C. A. Knowles 64 1982 President, Chief Executive Officer and Treasurer of the
Company and President of the Bank
James A. Mankin 70 1982 Merchant and Real Estate Developer
W. Cameron Mitchell 83 1993 Retired
David G. Newton 49 1993 Real Estate Developer
John T. Newton, Sr. 80 1982 Chairman of the Board of the Company; Chairman of the Board,
Dundee Mills, Inc. from 1986 through 1995.
John T. Newton, Jr. 50 1993 Chairman of the Board of the Bank; Attorney, Newton & Howell, P.C.
J. Henry Cheatham III 46 1994 Private Investor
</TABLE>
Directors are elected at each annual meeting of shareholders
and hold office until the next annual meeting and until their successors
are elected and qualified. John T. Newton, Jr. and David G. Newton, are
the sons of John T. Newton, Sr., and J. Henry Cheatham is the nephew of
John T. Newton, Sr., and the first cousin of David G. Newton and John T.
Newton, Jr. There are no other family relationships among directors and
executive officers of the Company.
EXECUTIVE OFFICERS
The following table sets forth for each executive officer of the
Company (a) the person's name, (b) his age at December 31, 1996, (c) the
year he was first elected as an executive officer of the Company and (d)
his positions with the Company and the Bank.
-28-
<PAGE>
<TABLE>
<CAPTION>
Year First Principal Occupation;
Name Age Elected Business Experience
---- --- ------- -------------------
<S> <C> <C> <S>
C. A. Knowles 64 1982 President, Chief Executive Officer and Treasurer of the Company and
President of the Bank.
John T. Newton, Sr. 80 1982 Chairman of the Board of the Company.
William K. Holmes 46 1993 Assistant Treasurer, Principal Accounting and Financial Officer.
</TABLE>
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the annual term compensation paid by
the Company and its subsidiary to C. A. Knowles, the Company's Chief
Executive Officer, the Company's only executive officer as of December
31, 1996 whose cash compensation, including salary and bonus, exceeded
$100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------
Name and Principal Position Year Salary <F1> Bonus Other
---- ----------- ----- -----
<S> <C> <C> <C> <C>
C. A. Knowles 1996 $193,043 $32,519 <F2>
President, Chief Executive 1995 $195,700 $23,000 <F2>
Officer and Treasurer 1994 $198,329 $18,500 <F2>
<FN>
<F1>Includes Director's fees
<F2>Does not meet Securities and Exchange Commission threshold for
disclosure.
</FN>
</TABLE>
DIRECTOR COMPENSATION
Each director of the Company receives a $1,600 annual retainer plus
$300 per meeting attended for their service as a director of the Company
as well as an annual retainer of $3,000 plus $300 per meeting attended
for their service as a director of the Bank and $150 for each Bank
committee meeting they attend.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL HOLDERS OF STOCK
The following table provides for each person who, to the best
information and knowledge of the Company, beneficially owned 5% or more
of the outstanding shares of common stock of the Company, $1.00 par value
(the "Company Stock"), on January 25, 1997, the following information:
(a) the owner's name and address, (b) the number of shares of Company
-29-<PAGE>
Stock owned, and (c) the percentage such number represents of the
outstanding shares of Company Stock. Unless otherwise indicated, the
listed owners are the record owners of, and have sole voting and
investment powers over, their shares.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percentage of Total
- ---------------- ------------------ -------------------
<S> <C> <C>
Newton Family Partnership 171,904 <F1> 21.3%
1076 Maple Drive
Griffin, GA 30223
John T. Newton, Sr. 185,458 <F2> 22.95%
1076 Maple Drive
Griffin, GA 30223
Harvey Cheatham 65,920 <F3> 8.2%
P.O. Box 88185
Atlanta, GA 30338
John Henry Cheatham 41,352 <F4> 5.1%
P.O. Box 1252
Griffin, GA 30224
Elizabeth M. Cheatham III 42,000 5.2%
5101 North Casablanca Road, #6
Scottsdale, AZ 85253
James Gilliam Cheatham 49,952 <F5> 6.18%
P.O. Box 506
Griffin, GA 30224
Lelia Cheatham Von Stein 45,652 <F6> 5.65%
623 Probart Street
Brevard, NC 28712
______________________________
<FN>
<F1> John T. Newton, Sr. has sole voting and investment power over the
shares owned of record by the partnership under the terms of the
partnership agreement.
<F2> Of the indicated shares, 171,904 shares are owned of record by the
Newton Family Partnership, and Mr. Newton has sole voting and
investment power with respect to these shares. Includes 7,932
shares owned by the Estate of Virginia Cheatham Newton.
<F3> Of the indicated shares, 16,000 shares are subject to voting and
investment power by Mr. Cheatham as general partner for Club
Associates, L.P., the record owner of such shares, and 49,920 are
subject to voting and investment power by Mr. Cheatham as general
partner of 435 Associates, LTD, the record owner of such shares.
Does not include 12,000 shares which are held directly by his wife,
Anne A. Cheatham, as to which shares Mr. Cheatham disclaims
beneficial ownership.
-30-<PAGE>
<F4> Of the indicated shares, Mr. Cheatham owns 34,652 shares and 6,700
shares are owned by his children.
<F5> Of the indicated shares, Mr. Cheatham owns 34,652 shares and 11,300
shares are owned by his children.
<F6> Of the indicated shares, Ms. Von Stein owns 34,952 shares and 10,700
shares are owned by her children.
</FN>
</TABLE>
STOCK OWNED BY MANAGEMENT
The following table provides for each director of the Company and
for all directors and officers of the Company as a group, as of
January 25, 1997, the following information: (a) the name of the director
or the number of persons in the group; (b) the number of shares of
Company Stock beneficially owned by the director or the group; and (c)
the percentage such number represents of the outstanding shares of
Company Stock. Unless otherwise indicated, the listed person is the
record owner of, and has sole voting and investment powers over, his
shares.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percentage of Total
- ---------------- ------------------ -------------------
<S> <C> <C>
J. Henry Cheatham III 41,352 <F1> 5.10%
C. A. Knowles 920 .11%
James A. Mankin 1,964 .24%
W. Cameron Mitchell 2,400 .30%
David G. Newton 15,290 <F2> 1.89%
John T. Newton, Sr. 185,458 <F3> 22.95%
John T. Newton, Jr. 11,693 <F4> 1.45%
All directors and executive officers
as a group (8 persons) 251,247 <F1><F2><F3> 31.10%
<FN>
<F1> Includes 6,700 shares held by Mr. Cheatham as custodian for his
children.
<F2> Includes 6,473 shares held by Mr. Newton as Trustee for his niece
and nephew.
<F3> Of the indicated shares, 171,904 shares are owned of record by the
Newton Family Partnership, and Mr. Newton has sole voting and
investment power with respect to these shares. Includes 7,932 shares
owned by the Estate of Virginia Cheatham Newton.
<F4> Includes 5,760 shares held by Mr. Newton as Trustee for his niece
and nephew.
</FN>
</TABLE>
-31-<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's directors and officers and certain companies and
individuals associated with them have been customers of, and have had
banking transactions with, the Bank and are expected to continue such
relationships in the future. Pursuant to such transactions, the
Company's directors and officers from time to time have borrowed funds
from the Bank for various business and personal reasons. In the opinion
of the management of the Company, the extensions of credit made by the
Bank to its directors and officers since January 1, 1996 (a) were made in
the ordinary course of business, (b) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and (c) did not
involve more than a normal risk of collectibility or present other
unfavorable features. See note 12 under Notes to Consolidated Financial
Statements in Item 7 hereof.
-32-<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The Company submits herewith as exhibits to this report on
Form 10-KSB the exhibits required by Item 601 of Regulation
S-B, subject to Rule 12b-32 under the Securities Exchange Act
of 1934.
Exhibit No. Document
----------- --------
3.1 Articles of Incorporation of FNB Banking
Company, as amended. (Included as Exhibit 3.1
to the Company's 1992 annual report on Form 10-
K.)
3.2 Bylaws of FNB Banking Company, as amended.
(Included as Exhibit 3.2 to the Company's 1992
annual report on Form 10-K.)
4.1 See Exhibits 3.1 and 3.2 for provisions of
Articles of Incorporation and Bylaws, as
amended, which define the rights of the holders
of Common Stock of FNB Banking Company.
21.0 Subsidiaries of FNB Banking Company.
24.0 A Power of Attorney is set forth on the
signature pages to this Form 10-KSB.
27.0 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None.
-33-<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FNB BANKING COMPANY
(Registrant)
By: /s/ C. A. Knowles
C. A. Knowles
President
Dated: 3-27 , 1997
<PAGE>
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. A. Knowles and John T. Newton,
Sr., or each of them, his attorney-in-fact, each with full power of
substitution, for him in his name, place and stead, in any and all
capacities, to sign any amendments 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 attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <S> <C>
/s/ John T. Newton, Sr. Chairman of the Board of Directors 3-27-97
John T. Newton, Sr.
/s/ C. A. Knowles President, Treasurer, and 3-27-97
C. A. Knowles Director (principal executive
officer)
/s/ William K. Holmes Assistant Treasurer (principal 3-27-97
William K. Holmes accounting and financial officer)
/s/ James A. Mankin Director and Secretary 3-27-97
James A. Mankin
/s/ W. Cameron Mitchell Director 3-27-97
W. Cameron Mitchell
/s/ David G. Newton Director 3-27-97
David G. Newton
/s/ John T. Newton, Jr. Director 3-27-97
John T. Newton, Jr.
/s/ J. Henry Cheatham, III Director 3-27-97
J. Henry Cheatham, III
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
21.0 Subsidiaries of FNB Banking Company.
24.0 A Power of Attorney is set forth on the signature
pages to this Form 10-KSB.
27.0 Financial Data Schedule
EXHIBIT 21
ORGANIZATIONAL CHART
FNB Banking Company
First National Bank of Griffin: wholly-owned subsidiary
(the "Griffin Bank") of FNB Banking Company
Griffin Loans, Inc. wholly-owned subsidiary
of First National Bank of
Griffin
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000757262
<NAME> FNB BANKING COMPANY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,461,860
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,010,949
<INVESTMENTS-CARRYING> 12,197,132
<INVESTMENTS-MARKET> 12,679,015
<LOANS> 128,030,889
<ALLOWANCE> 1,422,603
<TOTAL-ASSETS> 170,776,396
<DEPOSITS> 145,805,284
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 777,779
0
0
<COMMON> 807,800
<OTHER-SE> 17,870,630
<TOTAL-LIABILITIES-AND-EQUITY> 170,776,396
<INTEREST-LOAN> 12,543,160
<INTEREST-INVEST> 1,557,726
<INTEREST-OTHER> 257,845
<INTEREST-TOTAL> 14,358,731
<INTEREST-DEPOSIT> 4,740,619
<INTEREST-EXPENSE> 4,960,361
<INTEREST-INCOME-NET> 9,398,370
<LOAN-LOSSES> 365,240
<SECURITIES-GAINS> 104,183
<EXPENSE-OTHER> 7,241,659
<INCOME-PRETAX> 4,020,928
<INCOME-PRE-EXTRAORDINARY> 4,020,928
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,730,167
<EPS-PRIMARY> 3.38
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.48
<LOANS-NON> 477,000
<LOANS-PAST> 216,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,273,267
<CHARGE-OFFS> 473,420
<RECOVERIES> 257,516
<ALLOWANCE-CLOSE> 1,422,603
<ALLOWANCE-DOMESTIC> 1,422,603
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
