<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997.
REGISTRATION FILE NO. 333-
----------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
BIG LAKE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
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<S> <C> <C>
FLORIDA 6711 59-2613321
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organizat on) Classification Code Number) Identification No.)
</TABLE>
1409 S. PARROTT AVENUE
OKEECHOBEE, FL 34974
(941) 467-4663
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------
EDWIN E. WALPOLE III CURTIS S. FRY
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER CHAIRMAN OF THE BOARD
BIG LAKE FINANCIAL CORPORATION CNB FINANCIAL CORPORATION
1409 S. PARROTT AVENUE 950 WEST VENTURA AVENUE
OKEECHOBEE, FL 34974 CLEWISTON, FL 33440
(941) 467-4663 (941) 983-9113
(Name, address, including zip code, and telephone number,
including area code, of agent for service.)
--------------
Copy to:
JOHN P. GREELEY, ESQUIRE GAREY F. BUTLER, ESQUIRE
SMITH, MACKINNON, GREELEY, HUMPHREY & KNOTT
BOWDOIN & EDWARDS, P.A. 1625 HENDRY STREET
255 SOUTH ORANGE AVENUE, SUITE 800 FORT MYERS, FLORIDA 33901
ORLANDO, FLORIDA 32801
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
The date of mailing the Proxy Statement-Prospectus included herein to the
shareholders of CNB Financial Corporation
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
======================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT (2) PRICE (2) FEE (2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, 166,512 SHARES (1) $ 25.579466 $4,259,288 $1,290.70
$.01 PAR VALUE
======================================================================================================================
</TABLE>
(1) The maximum number of full shares issuable upon consummation of the
transaction described herein.
(2) Computed in accordance with Rule 457(f)(2) solely for the purpose of
calculating the registration fee based upon the book value at June 30,
1997, of the securities to be received by the Registrant if the proposed
merger described herein is consummated.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE> 2
, 1997
----------
Dear Shareholders:
You are cordially invited to attend a Special Meeting of the Shareholders
of CNB Financial Corporation ("CNB") to be held at ____ p.m., local time, on
__________, 1997, at CNB's office located at 950 West Ventura Avenue, Clewiston,
Florida 33440 (the "Special Meeting").
At the Special Meeting you will be asked to consider and vote upon
approval of an Amended and Restated Agreement and Plan of Reorganization (the
"Agreement"), between CNB, Big Lake Financial Corporation ("BLF"), Clewiston
National Bank and Big Lake National Bank. The Agreement will bring together the
Clewiston National Bank and Big Lake National Bank organizations. Your Board of
Directors believes that the combination of Clewiston National Bank and Big Lake
National Bank organizations is a unique opportunity to build on the strengths of
two fine institutions.
The shareholders of BLF are not required to approve the Agreement. The
Boards of Directors of CNB and BLF have each unanimously approved the Agreement
and the Board of Directors of CNB has recommended that the Agreement also be
approved by CNB shareholders.
The Agreement provides for CNB to merge with and into BLF, and Clewiston
National Bank to become a subsidiary of BLF. In the merger, the shares of BLF
common stock will continue to remain outstanding as shares of the combined
corporation. Each share of CNB common stock outstanding (other than shares held
by CNB shareholders who have perfected dissenters' rights) will be converted
into .40 of a share of BLF. The firm of William R. Hough & Co., which has served
as CNB's financial advisor in the transaction, has advised the CNB Board of
Directors that in its opinion the Agreement and related merger are fair to CNB
shareholders from a financial point of view.
Consummation of the transaction is subject to several conditions,
including approval of the Agreement by the shareholders of CNB. Information
concerning the Special Meeting of CNB shareholders, the merger, and other
matters concerning CNB and BLF is set forth in the accompanying proxy material.
Because of the importance of the transaction to CNB and its shareholders, I urge
you to read this material carefully.
<PAGE> 3
Your Board of Directors unanimously recommends that you vote FOR the
Agreement. It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. The affirmative
vote of a majority of the outstanding shares of CNB common stock is required to
approve the Agreement. CONSEQUENTLY, FAILURE TO VOTE WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE AGREEMENT. THEREFORE, I URGE YOU TO EXECUTE, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL MEETING.
On behalf of your Board of Directors, I urge you to vote FOR approval of
the Agreement.
Sincerely,
Curtis S. Fry
Chairman of the Board
2
<PAGE> 4
CNB FINANCIAL CORPORATION
950 West Ventura Avenue
Clewiston, Florida 33440
(941) 983-9113
--------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1997
----------
--------------------------------------------------------
To the Shareholders of CNB FINANCIAL CORPORATION
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of CNB
Financial Corporation, a registered bank holding company ("CNB"), will be held
at _____ p.m., local time, on __________, 1997 at 950 West Ventura Avenue,
Clewiston, Florida 33440 (the "Special Meeting"), for the following purposes, as
more fully described in the accompanying Proxy Statement.
1. To consider and vote upon a proposal to authorize, adopt and approve an
Amended and Restated Agreement and Plan of Reorganization (the "Agreement"),
between CNB, Big Lake Financial Corporation, Clewiston National Bank and Big
Lake National Bank. A copy of the Agreement is attached as Appendix A to the
accompanying Proxy Statement.
2. To transact such other business as may properly come before the Special
Meeting and at any adjournment or postponement thereof.
Only shareholders of record at the close of business on __________, 1997
are entitled to notice of, and to vote at, the Special Meeting and at any
adjournment or postponement thereof. CNB shareholders are entitled to assert
dissenters' rights pursuant to the Florida Business Corporation Act. A copy of
the dissenters' rights provisions is attached to the enclosed Proxy Statement as
Appendix B.
By Order of the Board of Directors of
CNB Financial Corporation
Curtis S. Fry
Chairman of the Board
Clewiston, Florida
, 1997
- ----------
PLEASE FILL IN, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE MEETING IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION DATED JULY 3, 1997
BIG LAKE FINANCIAL CORPORATION
SHARES OF COMMON STOCK
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
OF
CNB FINANCIAL CORPORATION
TO BE HELD ON
, 1997
-----------
This Proxy Statement is being furnished to the shareholders of CNB
Financial Corporation, a registered bank holding company ("CNB"), in connection
with the solicitation of proxies by its Board of Directors for use at a Special
Meeting of Shareholders of CNB to be held on __________, 1997 and at any
adjournments or postponements thereof. At the Special Meeting, the shareholders
of CNB will consider and vote upon an Amended and Restated Agreement and Plan of
Reorganization (the "Agreement"), between Big Lake Financial Corporation, a
registered bank holding company ("BLF"), CNB, Clewiston National Bank, a
national banking association and wholly-owned subsidiary of CNB, and Big Lake
National Bank, a national banking association and a wholly-owned subsidiary of
BLF.
Pursuant to the Agreement, BLF and CNB will be combined through the merger
(the "Merger") of CNB into BLF, and Clewiston National Bank will become a
wholly-owned subsidiary of BLF. The name of the combined holding company will be
Big Lake Financial Corporation (the "Combined Corporation"). CNB shareholders
also will transact at the Special Meeting such other business as may properly
come before the meeting or any and all adjournments or postponements thereof.
After the Merger, each outstanding share of BLF Common Stock, par value
$.01 per share ("BLF Common Stock"), will remain outstanding. Also in the
Merger, each outstanding share of CNB common stock, par value $.01 per share
("CNB Common Stock"), other than shares held by CNB shareholders who have
perfected dissenters' rights, will be converted into the right to receive .40 of
a share of BLF Common Stock. The shares of BLF Common Stock after the Merger are
collectively referred to in this Proxy Statement as "Combined Corporation
Stock."
For additional information on the shares of BLF Common Stock issuable in
the Merger and the shares of CNB Common Stock, see "Market and Dividend
Information." For additional information on the Merger, see "The Merger."
BLF has filed a Registration Statement (the "Registration Statement") on
Form S-4 pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), with the Securities and Exchange Commission (the "Commission") with
respect to the shares issuable in the Merger. This Proxy Statement also
constitutes the Prospectus of BLF filed as a part of the Registration Statement.
Any reference to this document as a Proxy Statement also constitutes a reference
to it as such Prospectus.
The information contained herein with respect to BLF, CNB, Big Lake
National Bank, and Clewiston National Bank has been supplied by the respective
corporation or bank. The information contained herein with respect to the Merger
is qualified by reference to the Agreement attached hereto as Appendix A and
incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and the accompanying form of proxy are first being
mailed to the shareholders of CNB on or about __________, 1997.
The date of this Proxy Statement is__________,1997.
<PAGE> 6
AVAILABLE INFORMATION
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF BLF, BIG LAKE NATIONAL BANK, CNB, OR CLEWISTON NATIONAL BANK OR THE
INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PROXY STATEMENT. HOWEVER,
DURING THE PERIOD IN WHICH OFFERS OR SALES ARE BEING MADE HEREUNDER, BLF IS
REQUIRED TO UPDATE THE PROXY STATEMENT TO REFLECT ANY FACTS OR EVENTS ARISING
AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WHICH REPRESENT A FUNDAMENTAL CHANGE IN THE INFORMATION
SET FORTH IN THE REGISTRATION STATEMENT.
BLF has filed a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), with the Securities and Exchange Commission (the
"Commission") relating to the shares of BLF Common Stock to be issued in
connection with the Merger. For further information pertaining to the shares of
BLF Common Stock to which this Proxy Statement relates, reference is made to
such Registration Statement, including the exhibits and schedules filed as a
part thereof. As permitted by the rules and regulations of the Commission, this
Proxy Statement omits certain information, exhibits and undertakings contained
in the Registration Statement. For further information pertaining to the
securities offered hereby, reference should be made to the Registration
Statement, including the exhibits filed as a part thereof. The Registration
Statement is available for inspection at no charge at the Securities and
Exchange Commission's Public Reference Room, Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The Commission maintains an Internet
web site that contains reports, proxy and information statements and other
information regarding issuers who file electronically with the Commission. The
address of that site is http://www.sec.gov. In addition, copies of such material
are available for inspection and reproduction at the public reference facilities
of the Commission at its New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and at its Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of materials contained in the Registration Statement may be obtained from
the Commission upon payment of the fees prescribed in its rules and regulations.
BLF is not subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended.
----------------------
REPORTS TO SHAREHOLDERS
If the Merger described in this Proxy Statement is consummated, BLF intends
to furnish annual reports to shareholders containing financial statements that
have been examined by a firm of certified public accountants, and such financial
statements will be accompanied by an opinion of such firm with respect to such
financial statements.
i
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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Summary of Proxy Statement.............................................................................. 1
The Parties........................................................................................ 1
Meeting of Shareholders............................................................................ 2
The Merger......................................................................................... 2
BLF Selected Consolidated Financial Data for the Three Months Ended March 31, 1997
and 1996........................................................................................... 6
BLF Selected Consolidated Financial Data for the Year Ended December 31, 1996,
1995, 1994, 1993, and 1992..................................................................... 7
CNB Selected Consolidated Financial Data for the Three Months Ended March 31, 1997
and 1996....................................................................................... 8
CNB Selected Consolidated Financial Data for the Year Ended December 31, 1996,
1995, 1994, 1993, and 1992..................................................................... 9
Pro Forma Combined Selected Financial Data for the Three Months Ended March 31, 1997
and 1996....................................................................................... 10
Pro Forma Combined Selected Financial Data for the Year Ended December 31, 1996,
1995, 1994, 1993, and 1992..................................................................... 11
Unaudited Condensed Pro Forma Combined Financial Information............................................ 12
Pro Forma Combined Capital Information (Unaudited)................................................. 13
Pro Forma Condensed Combined Balance Sheet ........................................................
at March 31, 1997 (Unaudited).................................................................. 14
Pro Forma Condensed Combined Per Share Information (Unaudited).................................... 15
Pro Forma Condensed Combined Statements of Earnings (Unaudited)................................... 16
Pro Forma Condensed Combined Statements of Earnings and Selected
Financial Data for the Three-Month Periods Ended March 31, 1997,
and for the Years Ended December 31, 1996 and 1995............................................. 17-19
Notes to Pro Forma Condensed Combined Balance Sheet and Statements of Earnings..................... 20
Special Meeting of CNB Shareholders..................................................................... 21
General............................................................................................ 21
Record Date; Quorum; Voting Rights and Required Vote............................................... 21
Revocability and Solicitation of Proxies........................................................... 21
Other Business..................................................................................... 22
The Merger.............................................................................................. 22
General............................................................................................ 22
Background of the Merger........................................................................... 23
Recommendation of Board of Directors............................................................... 25
Opinion of Financial Advisor....................................................................... 25
Management and Operations after the Merger......................................................... 27
Interests of Certain Persons; Compensation and Employee Benefit Plans.............................. 28
Conversion Ratio................................................................................... 28
Effective Time..................................................................................... 29
Distribution of Combined Corporation Certificates.................................................. 29
Resale of Combined Corporation Stock Received in the Merger........................................ 30
Certain Federal Income Tax Considerations.......................................................... 30
Conditions to Consummation......................................................................... 31
Regulatory Approvals............................................................................... 32
</TABLE>
ii
<PAGE> 8
<TABLE>
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PAGE
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Conduct of Business Pending the Merger............................................................. 32
Representations and Warranties..................................................................... 33
Expenses and Fees.................................................................................. 33
Amendment, Waiver and Termination.................................................................. 34
Accounting Treatment............................................................................... 34
Dissenters' Rights................................................................................. 35
Effect of the Merger on Rights of Shareholders.......................................................... 36
Authorized Capital Stock; Par Value................................................................ 36
Directors; Removal................................................................................. 37
Shareholder Meetings............................................................................... 37
Market and Dividend Information......................................................................... 38
Stock Trading Information.......................................................................... 38
Dividends.......................................................................................... 39
BLF Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................. 40
General............................................................................................ 40
Liquidity and Capital Resources.................................................................... 40
Results of Operations.............................................................................. 41
Comparison of Three Months Ended March 31, 1997 and 1996........................................... 46
Comparison of Years Ended December 31, 1996 and 1995............................................... 47
Asset/Liability Management......................................................................... 48
Financial Condition................................................................................ 50
Impact of Inflation and Changing Prices............................................................ 61
Future Accounting Requirements..................................................................... 61
Business of BLF........................................................................................ 62
General........................................................................................... 62
Lending Activities................................................................................ 63
Deposit Activities................................................................................ 64
Employees......................................................................................... 64
Properties........................................................................................ 64
Litigation........................................................................................ 64
Management........................................................................................ 65
Compensation and Benefits......................................................................... 66
Certain Transactions.............................................................................. 66
Management and Principal Stock Ownership.......................................................... 67
CNB Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................................. 69
General............................................................................................ 69
Liquidity and Capital Resources.................................................................... 69
Results of Operations.............................................................................. 70
Comparison of Three Months Ended March 31, 1997 and 1996........................................... 75
Comparison of Years Ended December 1996 and 1995................................................... 76
Asset/Liability Management......................................................................... 77
Financial Condition................................................................................ 79
Impact of Inflation and Changing Prices............................................................ 92
Future Accounting Requirements..................................................................... 92
Business of CNB......................................................................................... 93
</TABLE>
iii
<PAGE> 9
<TABLE>
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PAGE
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<S> <C>
General............................................................................................ 93
Lending Activities................................................................................. 93
Deposit Activities................................................................................. 94
Employees.......................................................................................... 94
Properties......................................................................................... 95
Litigation......................................................................................... 95
Management......................................................................................... 95
Compensation and Benefits.......................................................................... 97
Certain Transactions............................................................................... 97
Management and Principal Stock Ownership........................................................... 97
Competition............................................................................................. 98
Supervision, Regulation and Governmental Policy......................................................... 99
Description of Capital Stock............................................................................ 104
General............................................................................................ 104
Common Stock....................................................................................... 104
Preferred Stock.................................................................................... 104
Indemnification of Officers, Directors and Employees............................................... 105
Legal Matters........................................................................................... 105
Experts................................................................................................. 105
Index to Financial Statements........................................................................... 106
APPENDICES:
Appendix A Amended and Restated Agreement and Plan of Reorganization between Big
Lake Financial Corporation, CNB Financial Corporation, Big Lake National
Bank, and Clewiston National Bank...................................................
Appendix B Sections 607.1301, 607.1302, and 607.1320 of the Florida Business
Corporation Act.....................................................................
Appendix C Opinion of William R. Hough & Co....................................................
</TABLE>
iv
<PAGE> 10
SUMMARY OF PROXY STATEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROXY
STATEMENT. THIS SUMMARY DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE
MATTERS COVERED IN THIS PROXY STATEMENT AND IS SUBJECT TO AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT, INCLUDING THE APPENDICES HERETO.
SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS PROXY STATEMENT AND THE
ACCOMPANYING APPENDICES IN THEIR ENTIRETY.
THE PARTIES
BLF AND BIG LAKE NATIONAL BANK
BLF is a one bank holding company organized in 1985 under the laws of the
State of Florida. BLF owns all of the outstanding shares of Big Lake National
Bank. Big Lake National Bank commenced operations in 1986. BLF is subject to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). Big Lake National Bank is a national banking association subject to
regulation by the Office of the Comptroller of the Currency (the "OCC"). Big
Lake National Bank's operations are conducted from its main office and a branch
office, each located in Okeechobee, Florida, and a branch office located in Lake
Placid, Florida. At March 31, 1997, BLF had total consolidated assets of
approximately $62.8 million, total consolidated deposits of approximately $57.4
million, and total consolidated stockholders' equity of approximately $5.0
million. BLF's and Big Lake National Bank's principal executive offices are
located at 1409 S. Parrott Avenue, Okeechobee, Florida 34974. The telephone
number at such office is (941) 467-4663. For additional information concerning
BLF and Big Lake National Bank, see "Business of BLF."
CNB AND CLEWISTON NATIONAL BANK
CNB is a one bank holding company organized in 1990 under the laws of the
State of Florida. CNB is subject to regulation by the Federal Reserve and owns
all of the outstanding shares of Clewiston National Bank, which is a national
banking association subject to regulation by the OCC. Clewiston National Bank
commenced operations in 1974. Clewiston National Bank's operations are conducted
from its main office and a branch office, each located in Clewiston, Florida, a
branch office located in Moore Haven, Florida and a branch office located in
LaBelle, Florida. At March 31, 1997, CNB had total consolidated assets of
approximately $49.1 million, total consolidated deposits of approximately $44.2
million and total consolidated stockholders' equity of approximately $4.2
million. CNB's and Clewiston National Bank's principal executive offices are
located at 950 West Ventura Avenue, Clewiston, Florida 33440. The telephone
number at such office is (941) 983-9113. For additional information concerning
CNB and Clewiston National Bank, see "Business of CNB."
1
<PAGE> 11
MEETING OF SHAREHOLDERS
The Special Meeting of CNB shareholders will be held at _____ p.m., local
time, on __________, 1997 at 950 West Ventura Avenue, Clewiston, Florida 33440.
Only CNB shareholders of record at the close of business on __________, 1997
(the "CNB Record Date"), will be entitled to vote at the Special Meeting. The
affirmative vote of the holders of a majority of the shares outstanding on such
date will be required to approve the Agreement. As of the CNB Record Date, there
were ______ shares of CNB Common Stock outstanding and entitled to vote, each
with one vote per share. As of the CNB Record Date, CNB's directors beneficially
owned _______ shares (or ____%) of the outstanding CNB Common Stock. CNB's
directors have advised CNB that they intend to vote all of the shares of CNB
Common Stock owned by them for approval of the Agreement.
THE MERGER
GENERAL
Shareholders of CNB are being asked to consider and vote upon the
Agreement, which provides for the Merger. At the time the Merger is consummated
(the "Effective Time"), each share of CNB Common Stock (other than shares held
by CNB shareholders who have perfected dissenters' rights under the Florida
Business Corporation Act (the "Florida Act")) will be converted into the right
to receive .40 of a share of Combined Corporation Stock. For purposes of this
Proxy Statement, the number of shares of Combined Corporation Stock issuable in
the Merger for each share of CNB Common Stock is referred to as the Conversion
Ratio. A fractional share otherwise issuable to a CNB shareholder in the Merger
will be rounded up to the next whole share if the fraction is .500 or greater
and rounded down to the next whole share if the fraction is .499 or less. The
shares of BLF Common Stock outstanding at the Effective Time will remain
outstanding as shares of Combined Corporation Stock as a result of the Merger.
2
<PAGE> 12
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF CNB
The combination of BLF and CNB will permit CNB shareholders to participate
in the ownership of a bank holding company and bank with greater financial
resources than either CNB or Clewiston National Bank. The Combined Corporation,
Big Lake National Bank, and Clewiston National Bank will be able to use
collectively the resources and capital of BLF, CNB, Big Lake National Bank and
Clewiston National Bank to expand lending and service capacities and to increase
the ability to compete with other banks and financial service institutions. The
CNB Board of Directors believes that the Merger is fair to and in the best
interests of CNB shareholders. Accordingly, the Board has approved the Agreement
and unanimously recommends that CNB shareholders vote to approve the Agreement.
Among the factors considered by the Board in approving the Agreement were the
terms of the proposed Merger, the compatibility of the operations of Big Lake
National Bank and Clewiston National Bank, and the respective business,
operations, earnings, financial condition, and capital position of BLF and CNB,
as well as of the Combined Corporation on a prospective basis. The Board of
Directors of CNB also took into account the opinion of its financial advisor
that the terms of the Agreement are fair to its shareholders from a financial
point of view. For additional information regarding the factors considered by
the CNB Board of Directors, see "The Merger -- Recommendation of Board of
Directors" and " -- Opinion of Financial Advisor."
OPINION OF FINANCIAL ADVISOR
CNB retained William R. Hough & Co. ("Hough") to issue a written opinion to
the CNB Board of Directors. Hough has issued an opinion that the Merger is fair
to CNB shareholders from a financial point of view. See "The Merger -- Opinion
of Financial Advisor." The opinion issued by Hough was addressed to the Board of
Directors of CNB for use by such Board in its consideration of the financial
terms of the Merger. Such opinion was not addressed to the shareholders of CNB
and does not constitute a recommendation to any CNB shareholder as to how the
shareholder should vote at the CNB Special Meeting.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
After the Merger, the businesses of BLF and CNB will be conducted through
the Combined Corporation. The directors of the Combined Corporation will consist
of the seven individuals currently serving as directors of BLF plus John Boy,
Jr., Curtis S. Fry, and Thomas A. Smith. Messrs. Boy, Fry and Smith currently
serve as directors of CNB and Clewiston National Bank. The executive officers of
BLF after the Merger will consist of Edwin E. Walpole III (Chairman, President
and Chief Executive Officer), and Joe G. Mullins (Executive Vice President and
Chief Administrative Officer). Upon consummation of the Merger, the directors of
Clewiston National Bank will consist of the eight individuals currently serving
as directors of Clewiston National Bank, plus Edwin E. Walpole III and Joe G.
Mullins. Messrs. Walpole and Mullins currently serve as directors of BLF and Big
Lake National Bank. See "The Merger -- Management and Operations After the
Merger."
3
<PAGE> 13
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management of BLF and CNB have interests in the Merger
in addition to their interests as shareholders of BLF and CNB generally. These
include, among other things, provisions in the Agreement for the indemnification
of CNB's present and former officers, directors and employees. For additional
information regarding the indemnification of CNB officers, directors and
employees, see "The Merger -- Interests of Certain Persons; Compensation and
Employee Benefit Plans."
EFFECTIVE TIME OF THE MERGER
Subject to the satisfaction of the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time set forth in the Articles of Merger to be filed by the Florida
Secretary of State in connection with the Merger. Assuming the satisfaction of
the conditions to the Merger, the parties anticipate that the Merger will become
effective in the fourth quarter of 1997, although there can be no assurance as
to whether or when the Merger will become effective.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
CNB and BLF have received an opinion from Stevens, Thomas, Schemer &
Sparks, P.A., certified public accountants, to the effect that the Merger will
constitute a "reorganization" under the Internal Revenue Code of 1986, as
amended (the "Code"), and that, for federal income tax purposes, the
shareholders of BLF and CNB will not recognize gain or loss upon consummation of
the Merger (except to the extent of any cash paid to any CNB shareholder
exercising dissenters' rights in the Merger and any shareholder of CNB owning
less than 1.25 shares of CNB Common Stock). For additional discussion of certain
federal income tax consequences of the Merger, see "The Merger -- Certain
Federal Income Tax Considerations."
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger is subject to the satisfaction or written waiver (where
permissible) of several conditions including receipt of CNB shareholder approval
of the Agreement, receipt of all federal regulatory approvals of the Merger, and
the fulfillment of certain closing and other conditions set forth in the
Agreement. All applications for regulatory approval for consummation of the
Merger have been filed. Consummation of the Merger also is subject to the
holders of no more than 5% of the outstanding CNB Common Stock electing to
exercise their dissenters' rights. See "The Merger -- Conditions to
Consummation," "-- Regulatory Approvals," and "-- Amendment, Waiver and
Termination."
4
<PAGE> 14
AMENDMENT, WAIVER AND TERMINATION
Notwithstanding the approval of the Agreement by the CNB shareholders, the
Agreement may be terminated, and the Merger abandoned, at any time prior to the
Effective Time by (i) mutual consent of BLF and CNB, or (ii) BLF or CNB if (A)
the Merger has not been consummated by March 31, 1998, (B) there is a material
breach of the Agreement by the other party (which has not been cured during the
period of time set forth in the Agreement), (C) a material adverse development
shall have occurred affecting a party, (D) the shareholders of CNB fail to
approve the Agreement, or (E) the approval of a bank regulatory agency necessary
to consummate the Merger is not received, or includes certain conditions or
restrictions. The Agreement also can be terminated by a party under certain
circumstances in the event it or its shareholders receive or approve another
acquisition proposal prior to the Effective Time and, as to CNB, its
shareholders fail to approve the Agreement (provided the terminating party pays
to the other party a termination fee equal to 10% of the shareholders' equity of
the party required to make such payment as of the end of the month preceding
such payment, as liquidated damages). Any termination and abandonment described
above would not require the approval of CNB shareholders.
The Agreement may be amended at any time prior to the Effective Time upon
written agreement of all of the parties, except that after approval of the
Agreement by CNB's shareholders, no amendment may be made in the Conversion
Ratio in a manner that adversely affects the economic value of the Merger to
such shareholders without their further approval. In addition, substantially all
of the conditions to consummation of the Merger may be waived, in whole or in
part, to the extent permissible under applicable law, by the party for whose
benefit the condition has been imposed, without the approval of CNB
shareholders. See "The Merger--Amendment, Waiver and Termination."
DISSENTERS' RIGHTS
Shareholders of CNB who deliver to CNB a notice of intent to demand payment
for their shares of CNB Common Stock before the vote of CNB shareholders is
taken at the CNB Special Meeting and not vote in favor of the Merger, and
further comply with the other provisions of the Florida Act regarding the rights
of dissenting shareholders, will be paid the fair value for their shares of CNB
Common Stock. Consummation of the Merger is subject to, among other things, the
holders of no more than 5% of the outstanding CNB Common Stock electing to
exercise their dissenters' rights. For information regarding the procedures to
be followed by CNB shareholders to dissent from the Merger, see "The Merger
- --Dissenters' Rights" and the Florida Dissent Provisions included as Appendix B
to this Proxy Statement.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a purchase under
Generally Accepted Accounting Principles ("GAAP"). See "The Merger -- Accounting
Treatment."
5
<PAGE> 15
BIG LAKE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED MARCH 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Interest income $ 1,157 $ 1,006
Interest expense 442 450
-------- --------
Net interest income 715 556
Provision for credit losses 24 36
-------- --------
Net interest income after provision for credit losses 691 520
Noninterest income 180 139
Noninterest expenses 612 509
-------- --------
Earnings before income taxes 259 150
Provision for income taxes 87 51
-------- --------
Net earnings $ 172 $ 99
======== ========
Per share data:
Earnings per share $ 0.56 $ 0.32
Cash dividends declared $ -- $ --
Book value at end of period $ 16.05 $ 14.17
Common shares outstanding at end of period 308,711 308,711
Weighted average common shares outstanding
during period 308,711 308,711
Total assets at end of period $ 62,810 $ 56,372
Cash and cash equivalents $ 2,018 $ 2,048
Investment securities $ 15,672 $ 18,921
Loans, net $ 39,564 $ 30,703
Deposits $ 57,376 $ 51,376
Stockholders' equity $ 4,954 $ 4,373
Total loans before allowance for loan losses $ 40,056 $ 31,103
Allowance for credit losses $ 492 $ 400
Nonperforming loans $ 238 $ 346
Nonperforming loans and other assets $ 238 $ 472
Allowance for credit losses as a percentage
of period-end total loans 1.23% 1.29%
Allowance for credit losses as a percentage
of nonperforming loans 206.72% 115.61%
Total nonperforming loans as a percentage
of total loans 0.59% 1.11%
Total nonperforming loans as a percentage
of total assets 0.38% 0.61%
Total nonperforming loans and other real estate
owned as a percentage of total assets 0.38% 0.84%
</TABLE>
6
<PAGE> 16
BIG LAKE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income $ 4,229 $ 3,195 $ 2,548 $ 2,368 $ 2,456
Interest expense 1,736 1,211 781 669 888
-------- -------- -------- -------- --------
Net interest income 2,493 1,984 1,767 1,699 1,568
Provision for credit losses 132 70 14 160 134
-------- -------- -------- -------- --------
Net interest income after provision for credit losses 2,361 1,914 1,753 1,539 1,434
Noninterest income 589 518 385 419 369
Noninterest expenses 2,112 1,574 1,575 1,536 1,383
-------- -------- -------- -------- --------
Earnings before income taxes 838 858 563 422 420
Provision for income taxes 287 308 188 139 119
-------- -------- -------- -------- --------
Net earnings $ 551 $ 550 $ 375 $ 283 $ 301
======== ======== ======== ======== ========
Per share data (1):
Earnings per share $ 1.79 $ 1.78 $ 1.21 $ 0.90 $ 0.96
Cash dividends declared $ -- $ -- $ -- $ -- $ --
Book value at end of period $ 15.72 $ 14.21 $ 12.13 $ 11.37 $ 10.22
Common shares outstanding at end of period (1) 308,711 308,711 308,711 313,435 313,435
Weighted average common shares outstanding
during period (1) 308,711 308,711 311,034 313,435 313,435
Total assets at end of period $ 59,518 $ 55,824 $ 37,175 $ 34,787 $ 30,924
Cash and cash equivalents $ 3,410 $ 2,896 $ 2,103 $ 2,219 $ 1,536
Investment securities $ 16,016 $ 11,922 $ 6,507 $ 4,822 $ 6,525
Loans, net $ 36,262 $ 28,663 $ 24,580 $ 24,148 $ 20,264
Deposits $ 54,245 $ 50,793 $ 33,299 $ 31,032 $ 27,607
Stockholders' equity $ 4,854 $ 4,386 $ 3,744 $ 3,563 $ 3,202
Total loans before allowance for loan losses $ 36,732 $ 29,026 $ 24,904 $ 24,464 $ 20,532
Allowance for credit losses $ 470 $ 363 $ 323 $ 316 $ 268
Nonperforming loans $ 111 $ 30 $ 291 $ 335 $ 270
Nonperforming loans and other assets $ 111 $ 126 $ 299 $ 532 $ 402
Allowance for credit losses as a percentage
of period-end total loans 1.28% 1.25% 1.30% 1.29% 1.31%
Allowance for credit losses as a percentage
of nonperforming loans 423.42% 1210.00% 111.00% 94.33% 99.26%
Total nonperforming loans as a percentage
of total loans 0.30% 0.10% 1.17% 1.37% 1.32%
Total nonperforming loans as a percentage
of total assets 0.19% 0.05% 0.78% 0.96% 0.87%
Total nonperforming loans and real estate
owned as a percentage of total assets 0.19% 0.23% 0.80% 1.53% 1.30%
</TABLE>
- -----------------------
(1) Adjusted for the 2.5% stock dividends in shares of BLF Common Stock in 1992
through 1996.
7
<PAGE> 17
CNB FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Interest income $ 926 $ 928
Interest expense 420 437
-------- --------
Net interest income 506 491
Provision for credit losses 6 10
-------- --------
Net interest income after provision for credit losses 500 481
Noninterest income 116 134
Noninterest expenses 477 477
-------- --------
Earnings before income taxes and cumulative effect
of change in accounting principle 139 138
Provision for income taxes 46 48
-------- --------
Net earnings $ 93 $ 90
======== ========
Per share data:
Earnings per share $ 0.22 $ 0.22
Cash dividends declared $ -- $ --
Book value at end of period $ 10.11 $ 9.70
Common shares outstanding at end of period 416,279 416,279
Weighted average common stock and stock
equivalents outstanding during the period 416,279 416,279
Total assets at end of period $ 49,103 $ 48,208
Cash and cash equivalents $ 2,335 $ 2,089
Investment and mortgage-backed securities $ 6,377 $ 6,840
Loans, net $ 33,494 $ 31,658
Deposits $ 44,229 $ 43,588
Stockholders' equity $ 4,207 $ 4,039
Total loans before allowance for loan losses $ 33,966 $ 32,084
Allowance for credit losses $ 472 $ 426
Nonperforming loans $ 565 $ 660
Nonperforming loans and other assets $ 767 $ 1,357
Allowance for credit losses as a percentage
of period-end total loans 1.39% 1.33%
Allowance for credit losses as a percentage
of nonperforming loans 83.54% 64.55%
Total nonperforming loans as a percentage
of total loans 1.66% 2.06%
Total nonperforming loans as a percentage
of total assets 1.15% 1.37%
Total nonperforming loans and real estate owned
as a percentage of total assets 1.56% 2.81%
</TABLE>
8
<PAGE> 18
CNB FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income $ 3,629 $ 3,423 $ 3,038 $ 2,989 $ 3,488
Interest expense 1,701 1,610 1,107 1,102 1,417
-------- -------- --------- --------- --------
Net interest income 1,928 1,813 1,931 1,887 2,071
Provision for credit losses 128 94 195 228 209
-------- -------- --------- --------- --------
Net interest income after provision for credit losses 1,800 1,719 1,736 1,659 1,862
Noninterest income 540 517 577 419 536
Noninterest expenses 2,156 1,892 2,180 2,027 2,020
-------- -------- --------- --------- --------
Earnings before income taxes 184 344 133 51 378
Provision (benefit) for income taxes 15 108 (13) (37) 69
-------- -------- --------- --------- --------
Net earnings $ 169 $ 236 $ 146 $ 88 $ 309
======== ======== ========= ========= ========
Per share data: (1)
Earnings per share $ 0.41 $ 0.57 $ 0.35 $ 0.21 $ 0.74
Cash dividends declared $ -- $ -- $ -- $ -- $ --
Book value at end of period $ 9.93 $ 9.61 $ 8.85 $ 8.84 $ 8.84
Common shares outstanding at end of period(1) 416,279 416,279 416,279 416,279 416,279
Weighted average common shares outstanding
during period(1) 416,279 416,279 416,279 416,279 416,279
Total assets at end of period $ 46,800 $ 45,330 $ 42,742 $ 40,325 $ 42,680
Cash and cash equivalents $ 2,422 $ 2,850 $ 2,418 $ 2,138 $ 2,444
Investment and mortgage-backed securities $ 6,996 $ 6,439 $ 5,347 $ 6,133 $ 8,138
Loans, net $ 34,154 $ 31,396 $ 29,121 $ 28,588 $ 27,874
Deposits $ 42,002 $ 40,792 $ 38,438 $ 36,087 $ 38,634
Stockholders' equity $ 4,134 $ 4,001 $ 3,684 $ 3,681 $ 3,680
Total loans before allowance for loan losses $ 34,629 $ 31,832 $ 29,533 $ 28,799 $ 28,171
Allowance for credit losses $ 475 $ 436 $ 418 $ 211 $ 297
Nonperforming loans $ 561 $ 777 $ 1,404 $ 326 $ 522
Nonperforming loans and other assets $ 621 $ 1,006 $ 1,964 $ 795 $ 1,135
Allowance for credit losses as a percentage
of period-end total loans 1.37% 1.37% 1.42% 0.73% 1.05%
Allowance for credit losses as a percentage
of nonperforming loans 84.67% 56.11% 29.77% 64.72% 56.90%
Total nonperforming loans as a percentage
of total loans 1.62% 2.44% 4.75% 1.13% 1.85%
Total nonperforming loans as a percentage
of total assets 1.20% 1.71% 3.28% 0.81% 1.22%
Total nonperforming loans and real estate
owned as a percentage of total assets 1.33% 2.22% 4.60% 1.97% 2.66%
</TABLE>
- -----------------------------
(1) Adjusted for the 5% stock dividends in shares of CNB Common Stock in 1993
through 1995 and the 2 for 1 stock split of CNB Common Stock in 1992.
9
<PAGE> 19
PRO FORMA COMBINED
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
www
AT OR FOR THE
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Interest income $ 2,118 $ 1,967
Interest expense 862 887
-------- --------
Net interest income 1,256 1,080
Provision for credit losses 30 46
-------- --------
Net interest income after provision for credit losses 1,226 1,034
Noninterest income 296 273
Noninterest expenses 1,089 986
-------- --------
Earnings before income taxes 433 321
Provision for income taxes 145 110
-------- --------
Net earnings $ 288 $ 211
======== ========
Per share data: (1)
Earnings per share $ 0.61 $ 0.44
Cash dividends declared $ -- $ --
Book value at end of period $ 18.32 $ 16.78
Common shares outstanding at end of period (1) 475,223 475,223
Weighted average common shares outstanding
during period (1) 475,223 475,223
Total assets at end of period $111,459 $104,144
Cash and cash equivalents $ 4,353 $ 4,137
Investment and mortgage-backed securities $ 22,049 $ 25,761
Loans, net $ 72,370 $ 61,700
Deposits $101,605 $ 94,964
Stockholders' equity $ 8,707 $ 7,976
Total loans before allowance for loan losses $ 73,334 $ 62,526
Allowance for credit losses $ 964 $ 826
Nonperforming loans $ 803 $ 1,006
Nonperforming loans and other assets $ 1,005 $ 1,829
Allowance for credit losses as a percentage
of period-end total loans 1.31% 1.32%
Allowance for credit losses as a percentage
of nonperforming loans 120.05% 82.11%
Total nonperforming loans as a percentage
of total loans 1.09% 1.61%
Total nonperforming loans as a percentage
of total assets 0.72% 0.97%
Total nonperfoming loans and real estate owned
as a percentage of total assets 0.90% 1.76%
</TABLE>
- ----------------------------------
(1) Computed using the weighted average number of shares of BLF Common Stock
at the dates indicated plus an exchange ratio of .40 of a share of
Combined Corporation Stock in exchange for all of the CNB Common Stock
assumed outstanding.
10
<PAGE> 20
PRO FORMA COMBINED
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income $ 7,994 $ 6,749 $ 5,707 $ 5,478 $ 6,064
Interest expense 3,437 2,821 1,888 1,771 2,305
-------- -------- -------- -------- --------
Net interest income 4,557 3,928 3,819 3,707 3,759
Provision for credit losses 260 164 209 388 343
-------- -------- -------- -------- --------
Net interest income after provision for credit losses 4,297 3,764 3,610 3,319 3,416
Noninterest income 1,128 1,035 963 838 905
Noninterest expenses 4,268 3,466 3,755 3,563 3,403
-------- -------- -------- -------- --------
Earnings before income taxes 1,157 1,333 818 594 918
Provision for income taxes 347 460 216 143 230
-------- -------- -------- -------- --------
Net earnings $ 810 $ 873 $ 602 $ 451 $ 688
-------- -------- -------- -------- --------
Per share data:
Earnings per share $ 1.70 $ 1.84 $ 1.26 $ 0.94 $ 1.43
Cash dividends declared $ -- $ -- $ -- $ -- $ --
Book value at end of period $ 17.97 $ 16.74 $ 14.79 $ 14.27 $ 13.51
Common shares outstanding at end of period (1) 475,223 475,223 475,223 479,947 479,947
Weighted average common shares outstanding
during period (1) 475,223 475,223 477,546 479,947 479,947
Total assets at end of period $105,872 $100,722 $ 79,519 $ 74,715 $ 73,206
Cash and cash equivalents $ 5,832 $ 5,746 $ 4,520 $ 4,357 $ 3,980
Investment and mortgage-backed securities $ 23,011 $ 18,361 $ 11,855 $ 10,955 $ 14,663
Loans, net $ 69,741 $ 59,404 $ 53,093 $ 52,133 $ 47,536
Deposits $ 96,247 $ 91,585 $ 71,737 $ 67,120 $ 66,241
Stockholders' equity $ 8,542 $ 7,955 $ 7,030 $ 6,847 $ 6,485
Total loans before allowance for loan losses $ 70,685 $ 60,203 $ 53,834 $ 52,660 $ 48,101
Allowance for credit losses $ 944 $ 799 $ 741 $ 527 $ 565
Nonperforming loans $ 672 $ 807 $ 1,695 $ 661 $ 792
Nonperforming loans and other assets $ 732 $ 1,132 $ 2,263 $ 1,327 $ 1,537
Allowance for credit losses as a percentage
of period-end total loans 1.34% 1.33% 1.38% 1.00% 1.17%
Allowance for credit losses as a percentage
of nonperforming loans 140.48% 99.01% 43.72% 79.73% 71.34%
Total nonperforming loans as a percentage
of total loans 0.95% 1.34% 3.15% 1.26% 1.65%
Total nonperforming loans as a percentage
of total assets 0.63% 0.80% 2.13% 0.88% 1.08%
Total nonperfoming loans and real estate
owned as a percentage of total assets 0.69% 1.12% 2.85% 1.78% 2.10%
</TABLE>
- ------------------------
(1) Computed using the weighted average number of shares of BLF Common Stock at
the dates indicated plus an exchange ratio of .40 of a share of Combined
Corporation Stock in exchange for all of the CNB Common Stock assumed
outstanding.
11
<PAGE> 21
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combining condensed financial
presentation of the Combined Corporation was prepared to provide information on
the combined balance sheets and income statements of BLF and CNB.
The Pro Forma Condensed Combined Balance Sheet reflects the consolidated
balance sheet of BLF as of March 31, 1997, after giving effect to the proposed
Merger. The Merger will be accounted for as a purchase and is based on
assumptions explained herein and in the Notes to Pro Forma Condensed Combined
Balance Sheet and Statements of Earnings.
The information presented below should be read in conjunction with the
separate consolidated financial statements and notes thereto of BLF and CNB, the
respective Management's Discussion and Analysis of Financial Condition and
Results of Operations of BLF and CNB, and the other unaudited pro forma
financial information, all included elsewhere in this Proxy Statement.
12
<PAGE> 22
PRO FORMA COMBINED CAPITAL INFORMATION
(UNAUDITED)
The following table presents the actual and required levels and
excesses in both dollars and percentages of capital requirements at March 31,
1997, on an historical basis for Big Lake National Bank and Clewiston National
Bank, and on a pro forma basis if the two banks were combined:
<TABLE>
<CAPTION>
BIG LAKE CLEWISTON COMBINATION OF
NATIONAL BANK NATIONAL BANK BOTH BANKS
HISTORICAL HISTORICAL PRO FORMA
CAPITAL RATIO CAPITAL RATIO CAPITAL RATIO
------------- ------------- -------------
% OF % OF % OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------ ------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk-
weighted assets
Regulatory capital $ 4,047 12.19% $ 4,607 14.87% $ 8,200 12.92%
Requirement 2,655 8.00 2,479 8.00 5,079 8.00
----- ----- ----- ----- ----- -----
Excess $ 1,392 4.19% $ 2,128 6.87% $ 3,121 4.92%
===== ===== ===== ===== ===== =====
Tier 1 capital to risk-
weighted assets
Regulatory capital $ 3,631 10.94% $ 4,219 13.62% $ 7,396 11.65%
Requirement 1,328 4.00 1,239 4.00 2,540 4.00
----- ----- ----- ----- ----- -----
Excess $ 2,303 6.94% $ 2,980 9.62% $ 4,856 7.65%
===== ===== ===== ===== ===== =====
Tier 1 capital to total
assets
Regulatory capital $ 3,631 7.02% $ 4,219 8.76% $ 7,396 7.45%
Requirement 2,069 4.00 1,927 4.00 3,969 4.00
----- ----- ----- ----- ----- -----
Excess $ 1,562 3.02% $ 2,292 4.76% $ 3,427 3.45%
===== ===== ===== ===== ===== =====
</TABLE>
In addition to the foregoing, Big Lake National Bank and Clewiston
National Bank are (and, after the Merger, will be) subject to the capital
requirements under the prompt corrective action provisions of recent legislation
which places depository institutions into one of the following five categories
based upon their capital levels and other supervisory criteria: (i) well
capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv)
significantly undercapitalized; and (v) critically undercapitalized. See
"Supervision, Regulation and Governmental Policy -- Capital Requirements." At
March 31, 1997, each of Big Lake National Bank and Clewiston National Bank met
the prompt corrective action capital requirements of a "well capitalized"
depository institution. Based upon the foregoing pro forma capital information,
the two banks, on a combined basis, would have met the capital requirements of a
"well capitalized" depository institution at March 31, 1997.
13
<PAGE> 23
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
MARCH 31, 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR MERGER
---------- PRO
BLF CNB DEBIT CREDIT FORMA
--- --- ----- ------ -----
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,018 $ 2,335 $ -- $ -- $ 4,353
Federal funds sold 2,766 4,668 -- -- 7,434
Investment securities available-for-sale 14,871 6,078 -- -- 20,949
Investment securities held-to-maturity 01 -- -- -- 801
Mortgage-backed securities available-for-sale -- 299 -- -- 299
Loans receivable, net 39,564 33,494 -- 688 72,370
Accrued interest receivable 423 325 -- -- 748
Bank premises and equipment 1,460 1,008 -- -- 2,468
Other real estate owned -- 202 -- -- 202
Intangible assets 680 -- -- -- 680
Other assets 227 694 234 -- 1,155
--------- --------- -------- ------ ---------
Total assets $ 62,810 $ 49,103 $ 234 $ 688 $ 111,459
========= ========= ======== ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 57,376 $ 44,229 $ -- $ -- $ 101,605
Accrued interest on deposits 334 205 -- -- 539
Other accrued expenses and liabilities 146 462 -- -- 608
--------- --------- -------- ------ ---------
Total liabilities 57,856 44,896 -- -- 102,752
========= ========= ======== ====== =========
Common stock 3 4 4 2 5
Additional paid-in-capital 3,068 1,196 1,196 3,731 6,799
Retained earnings 2,073 3,046 3,046 -- 2,073
Treasury stock (59) -- -- 59 --
Unrealized loss on securities available-for-sale (131) (39) -- -- (170)
--------- --------- -------- ------ ---------
Total stockholders' equity 4,954 4,207 4,246 3,792 8,707
========= ========= ======== ====== =========
Total liabilities and
stockholders' equity $ 62,810 $ 49,103 $ 4,246 $3,792 $ 111,459
========= ========= ======== ====== =========
Book value per common share $ 16.05 $ 10.11 $ 18.32
========= ========= =========
Common shares outstanding 308,711 416,279 475,223
========= ========= =========
</TABLE>
- ------------------------------
See footnotes beginning on page 20.
14
<PAGE> 24
PRO FORMA CONDENSED COMBINED
PER SHARE INFORMATION
(UNAUDITED)
The following table summarizes the historical consolidated and
pro forma net earnings and book value of BLF and CNB after giving effect to the
proposed Merger at and for the three months ended March 31, 1997 and at and for
the year ended December 31, 1996. The following information should be read in
conjunction with the footnotes set forth on page 20:
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
THREE MONTH PERIOD YEAR ENDED
ENDED MARCH 31, 1997 DECEMBER 31, 1996
-------------------- -----------------
<S> <C> <C>
Shares outstanding at end of period:
Assumed number of shares of Combined
Corporation Stock issued 166,512 166,512
Shares of BLF Common Stock before
Merger 308,711 308,711
-------- --------
Pro forma shares of Combined Corporation
Stock outstanding after Merger 475,223 475,223
======== ========
Net earnings:
BLF - Historical $172,000 $551,000
======== ========
CNB - Historical 93,000 169,000
======== ========
Combined Corporation pro forma after
Merger $288,000 $810,000
======== ========
Earnings per share:
BLF - Historical $ 0.56 $ 1.79
======== ========
CNB - Historical $ 0.22 $ 0.41
======== ========
Combined Corporation pro forma
after Merger $ 0.61 $ 1.70
======== ========
Book value per share:
BLF - Historical $ 16.05 $ 15.72
======== ========
CNB - Historical $ 10.11 $ 9.93
======== ========
Combined Corporation pro forma
after Merger $ 18.32 $ 17.97
======== ========
</TABLE>
15
<PAGE> 25
PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
(UNAUDITED)
The following Pro Forma Condensed Combined Statements of Earnings reflect
the consolidated results of operations of BLF for the three-month period ended
March 31, 1997 and years ended December 31, 1996 and 1995, after giving effect
to the proposed Merger in a transaction which will be accounted for as a
purchase. The statements are based on the assumptions set forth herein and in
the Notes to Unaudited Pro Forma Condensed Combined Balance Sheet and Statements
of Earnings. The Pro Forma Condensed Combined Statements of Earnings do not
necessarily reflect the results of operations as they would have been if CNB and
BLF had constituted a single entity during the periods presented herein. The
information presented below should be read in conjunction with the separate
consolidated financial statements and notes thereto of CNB and BLF, the
respective Management's Discussion and Analysis of Financial Condition and
Results of Operations of CNB and BLF, and the other unaudited pro forma
financial information, all included elsewhere in this Proxy Statement.
16
<PAGE> 26
PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS AND SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
ADJUSTMENTS
FOR MERGER
---------- PRO
BLF CNB DEBIT CREDIT FORMA
--- --- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Interest income on loans $ 887 $ 787 $ - $ 35 $ 1,709
Interest income on investment
and mortgage-backed securities 236 96 - - 332
Other interest income 34 43 77
-------- -------- -------- ------- --------
Total interest income 1,157 926 - 35 2,118
Interest expense on deposits 442 420 - - 862
-------- -------- -------- ------- --------
Net interest income before
provision for credit losses 715 506 - 35 1,256
Provision for credit losses 24 6 - - 30
-------- -------- -------- ------- --------
Net interest income 691 500 - 35 1,226
-------- -------- -------- ------- --------
Fees and service charges 156 102 - - 258
Other income 24 14 - - 38
-------- -------- -------- ------- --------
Total other income 180 116 - - 296
-------- -------- -------- ------- --------
Compensation and employee benefits 297 266 - - 563
Other operating expenses 315 211 - - 526
-------- -------- -------- ------- --------
Total other expense 612 477 - - 1,089
-------- -------- -------- ------- --------
Earnings before income taxes 259 139 - 35 433
Provision for income taxes 87 46 12 - 145
-------- -------- -------- ------- --------
Net earnings $ 172 $ 93 $ (12) $ 35 $ 288
======== ======== ======== ======= ========
Per share data:
Earnings per share $ 0.56 $ 0.22 $ 0.61
======== ======== ========
Weighted average common shares
outstanding during period 308,711 416,279 475,223
======== ======== ========
</TABLE>
- -----------------------------------
See footnotes beginning on page 20.
17
<PAGE> 27
PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS AND SELECTED FINANCIAL DATA
(DOLLARS IN THOUSAND EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------
ADJUSTMENTS
FOR MERGER
---------- PRO
BLF CNB DEBIT CREDIT (1) FORMA
------- ------- ----- ---------- -----
<S> <C> <C> <C> <C> <C>
Interest income on loans $ 3,088 $ 3,019 $ - $135 $ 6,242
Interest income on investment
and mortgage-backed securities 1,042 415 - - 1,457
Other interest income 99 195 - 1 295
-------- -------- ----- ---- --------
Total interest income 4,229 3,629 - 136 7,994
Interest expense on deposits 1,736 1,701 - - 3,437
-------- -------- ----- ---- --------
Net interest income before provision
for credit losses 2,493 1,928 - 136 4,557
Provision for credit losses 132 128 - - 260
-------- -------- ----- ---- --------
Net interest income 2,361 1,800 - 136 4,297
-------- -------- ----- ---- --------
Fees and service charges 549 402 - - 951
Other income 40 138 - (1) 177
-------- -------- ----- ---- --------
Total other income 589 540 - (1) 1,128
-------- -------- ----- ---- --------
Compensation and employee benefits 1,063 991 - - 2,054
Other operating expenses 1,049 1,165 - - 2,214
-------- -------- ----- ---- --------
Total other expense 2,112 2,156 - - 4,268
-------- -------- ----- ---- --------
Earnings before income taxes 838 184 - 135 1,157
Provision for income taxes 287 15 45 - 347
-------- -------- ----- ---- --------
Net earnings $ 551 $ 169 $(45) $135 $ 810
======== ======== ===== ==== ========
Per share data:
Earnings per share $ 1.79 $ 0.41 $ 1.70
======== ======== ========
Weighted average common shares
outstanding during period 308,711 416,279 475,223
======== ======== ========
</TABLE>
- -------------------------------
(1) Includes rounding.
18
<PAGE> 28
PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS AND SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
ADJUSTMENTS
FOR MERGER
---------- PRO
BLF CNB DEBIT CREDIT FORMA
--- --- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Interest income on loans $ 2,521 $ 2,799 $ -- $131 $ 5,451
Interest income on investment
and mortgage-backed securities 464 450 -- -- 914
Other interest income 210 174 -- -- 384
-------- -------- --------- ---- --------
Total interest income 3,195 3,423 -- 131 6,749
Interest expense on deposits 1,211 1,610 -- -- 2,821
-------- -------- --------- ---- --------
Net interest income before provision
for credit losses 1,984 1,813 -- 131 3,928
Provision for credit losses 70 94 -- -- 164
-------- -------- --------- ---- --------
Net interest income 1,914 1,719 -- 131 3,764
-------- -------- --------- ---- --------
Fees and service charges 441 485 -- -- 926
Other income 77 32 -- -- 109
-------- -------- --------- ---- --------
Total other income 518 517 -- -- 1,035
-------- -------- --------- ---- --------
Compensation and employee benefits 789 1,006 -- -- 1,795
Other operating expenses 785 886 -- -- 1,671
-------- -------- --------- ---- --------
Total other expense 1,574 1,892 -- -- 3,466
-------- -------- --------- ---- --------
Earnings before income taxes 858 344 -- 131 1,333
Provision for income taxes 308 108 44 -- 460
-------- -------- --------- ---- --------
Net earnings $ 550 $ 236 $ (44) $131 $ 873
======== ======== ========= ==== ========
Per share data:
Earnings per share $ 1.78 $ 0.57 $ 1.84
======== ======== ========
Weighted average common shares
outstanding during period 308,711 416,279 475,223
======== ======== ========
</TABLE>
19
<PAGE> 29
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
AND STATEMENTS OF EARNINGS
The Pro Forma Condensed Combined Balance Sheet as of March 31, 1997,
assumes that the proposed Merger occurred on March 31, 1997. The Merger will be
accounted for as a purchase and, in accordance with GAAP, the issuance of
Combined Corporation Stock to be exchanged for CNB Common Stock will be valued
based on the fair value of the assets and liabilities of CNB as of the Effective
Time.
The Pro Forma Condensed Combined Statements of Earnings for the three-month
period ended March 31, 1997 and the years ended December 31, 1996 and 1995,
assume that the proposed Merger occurred on the first day of each respective
period.
The Pro Forma financial information included in the Pro Forma Condensed
Combined Balance Sheet and the Pro Forma Condensed Combined Statements of
Earnings assumes the issuance in the Merger of .40 of a share of Combined
Corporation Stock for each share of CNB Common Stock outstanding.
The following footnotes relate to the Pro Forma Condensed Combined Balance
Sheet and the Pro Forma Condensed Combined Statements of Earnings:
(1) Reflects the issuance of 166,512 shares of Combined Corporation Stock in
exchange for all of the issued and outstanding shares of CNB Common Stock
based on the exchange ratio of .40 of a share of Combined Corporation
Stock in exchange for all of the CNB Common Stock assumed outstanding.
(2) Reflects the elimination of the Common Stock component of stockholders'
equity of CNB and the related adjustments to the components of
stockholders' equity for the net effect of the adjustment to fair value
for loans in each of the years.
(3) The costs to complete the Merger have been expensed by BLF and CNB as
incurred. Future Merger costs are not expected to be material and
accordingly have not been considered in the pro forma statements.
(4) Computed using the weighted average number of shares of BLF Common Stock
at the dates indicated, plus 166,512 shares of Combined Corporation
Stock.
(5) Reflects the adjustment under purchase accounting to fair value for loans
in the amount of $688,000. All other assets and liabilities approximate
fair value.
(6) Reflects the accretion to interest income on the discount recorded to
loans in purchase accounting. The accretion is based on an estimated
weighted average maturity of the underlying loans, which is not expected
to exceed 5 years. For purposes of these pro forma statements, the
accretion is computed over 5 years using the straight-line method which
is not expected to be materially different than the interest method.
(7) Represents the estimated tax effect at 34%.
20
<PAGE> 30
SPECIAL MEETING OF CNB SHAREHOLDERS
GENERAL
This Proxy Statement is being furnished to the shareholders of CNB in
connection with the solicitation of proxies by the Board of Directors of CNB for
use at the Special Meeting of Shareholders of CNB to be held at _____ p.m.,
local time, on __________, 1997, at 950 West Ventura Avenue, Clewiston, Florida
33440. At the CNB Special Meeting, the shareholders of CNB will be asked to (i)
consider and vote upon approval of the Agreement, and (ii) transact such other
business as may properly come before the Special Meeting or any adjournment or
postponement thereof. This Proxy Statement and the enclosed Proxy are first
being sent to holders of CNB Common Stock on or about __________, 1997.
RECORD DATE; QUORUM; VOTING RIGHTS AND REQUIRED VOTE
The Board of Directors of CNB has fixed the close of business on
__________, 1997 as the CNB Record Date for determination of the shareholders
entitled to notice of, and to vote at, the CNB Special Meeting and at any
adjournment or postponement thereof. On the CNB Record Date, there were _______
shares of CNB Common Stock issued and outstanding, held of record by ____
shareholders. Each holder of CNB Common Stock will be entitled to one vote for
each share owned on each matter submitted to a vote at the CNB Special Meeting.
Only holders of record of CNB Common Stock as of the CNB Record Date are
entitled to vote at the CNB Special Meeting. The presence at the Special
Meeting, in person or by proxy, of the holders of a majority of the outstanding
shares of CNB Common Stock on the CNB Record Date is necessary to constitute a
quorum for the transaction of business at the CNB Special Meeting. In the
absence of a quorum, the CNB Special Meeting may be postponed from time to time
until CNB shareholders holding the requisite amount of shares of CNB Common
Stock are represented in person or by proxy. If a quorum is present, the
affirmative vote of the holders of a majority of the outstanding shares of CNB
Common Stock entitled to vote thereon at the CNB Special Meeting is required for
approval of the Agreement. Abstentions will be counted for purposes of
determining whether a quorum is present. Abstentions and broker non-votes, if
any, however, will have the same effect as a negative vote on the Agreement. As
of the CNB Record Date, CNB's directors and executive officers and their
affiliates beneficially owned approximately ___% of the outstanding shares of
CNB Common Stock entitled to vote at the CNB Special Meeting. All such directors
and executive officers have advised CNB that they intend to vote their shares of
CNB Common Stock at the Special Meeting in favor of the approval of the
Agreement. Mr. Edwin E. Walpole III (the Chairman, President and Chief Executive
Officer of BLF) held 1,735 shares of CNB Common Stock as of the CNB Record Date.
Mr. Walpole has advised BLF that he intends to vote his shares of CNB Common
Stock at the Special Meeting in favor of the approval of the Agreement.
REVOCABILITY AND SOLICITATION OF PROXIES
A proxy is enclosed with this Proxy Statement. Shares of CNB Common Stock
represented at the CNB Special Meeting by properly executed proxies which are
received prior to the vote at the CNB Special Meeting and not theretofore
revoked will be voted at the Special Meeting in accordance with the instructions
indicated on the proxies. Properly executed proxies containing no instructions
will be voted FOR approval of the Agreement. IF NO INSTRUCTIONS ARE INDICATED,
SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE DISCRETION
OF THE PROXIES AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE CNB
SPECIAL MEETING. ANY HOLDER OF CNB COMMON STOCK WHO RETURNS A SIGNED PROXY BUT
FAILS TO PROVIDE INSTRUCTIONS AS TO THE MANNER IN WHICH HIS SHARES ARE TO BE
VOTED WILL BE DEEMED TO HAVE VOTED IN FAVOR OF THE AGREEMENT IF THERE ARE NOT
SUFFICIENT VOTES TO APPROVE THE AGREEMENT AT THE CNB SPECIAL MEETING, THE PROXY
HOLDER MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT
FURTHER SOLICITATION OF PROXIES (HOWEVER PROXIES OF THOSE VOTING AGAINST THE
MERGER WILL NOT BE USED TO VOTE FOR ANY POSTPONEMENT OF THE CNB SPECIAL MEETING
IN ORDER TO SEEK MORE AFFIRMATIVE VOTES).
21
<PAGE> 31
Any shareholder who has executed and returned a proxy may revoke it at any
time before it is exercised at the CNB Special Meeting by (i) attending and
voting his shares in person at the CNB Special Meeting, (ii) giving to CNB a
properly executed proxy bearing a later date, or (iii) giving written notice of
revocation of such proxy to the Secretary of CNB, provided such notice is
actually received by the Secretary prior to the voting of the shares represented
by the proxy at the CNB Special Meeting. All written notices of revocation and
other communications with respect to revocation of proxies related to CNB Common
Stock should be addressed as follows: CNB Financial Corporation, 950 West
Ventura Avenue, Clewiston, Florida 33440, ATTN: Frederick W. Gesell. The mere
presence of a shareholder at the Special Meeting will not constitute a
revocation of a proxy previously given.
All costs relating to the solicitation of proxies of holders of CNB Common
Stock will be paid by CNB. In addition to solicitation by mail, proxies may be
solicited by the officers, directors, and employees of CNB by telephone,
telegram, or in person. Such directors, officers, and employees will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. All other expenses
associated with soliciting proxies will include the reimbursement of banks,
brokerage firms, nominees, fiduciaries and other custodians for reasonable
expenses of forwarding proxy materials to beneficial owners of shares of CNB
Common Stock.
OTHER BUSINESS
As of the date of this Proxy Statement, CNB's Board of Directors knows of
no other matter that will be presented for consideration at the CNB Special
Meeting other than as described in this Proxy Statement. However, if any other
matters come before the CNB Special Meeting or any adjournment or postponement
thereof and shall be voted upon, proxies submitted by shareholders will be
deemed to confer discretionary authority to the individuals named as authorized
therein to vote the shares represented by such proxies as to any such matters.
THE MERGER
THE FOLLOWING INFORMATION DESCRIBES CERTAIN INFORMATION PERTAINING TO THE
MERGER. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE APPENDICES HERETO, INCLUDING THE AGREEMENT, WHICH
IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A AND IS INCORPORATED HEREIN BY
REFERENCE THERETO. ALL SHAREHOLDERS OF CNB ARE URGED TO READ THE AGREEMENT IN
ITS ENTIRETY.
GENERAL
The Agreement provides for a combination of the CNB and BLF organizations
through the merger of CNB with and into BLF at the Effective Time. At the
Effective Time and as a result of the Merger, Clewiston National Bank will
become a wholly-owned subsidiary of BLF. Following the Effective Time, Clewiston
National Bank and Big Lake National Bank will continue to conduct business with
their same officers, employees and offices. Pursuant to the Merger, the shares
of BLF Common Stock outstanding prior to the Merger will remain outstanding as
shares of the Combined Corporation after the Effective Time. The shares of CNB
Common Stock (other than shares held by CNB shareholders who have perfected
dissenters' rights) will be converted into shares of Combined Corporation Stock
in the Merger in accordance with the Conversion Ratio. See "Conversion Ratio",
below.
22
<PAGE> 32
BACKGROUND OF THE MERGER
During 1995 and 1996, representatives of CNB and another bank located in
southeastern Florida had discussions regarding a possible combination of the two
financial institutions through a "merger of equals" transaction. No letter of
intent or definitive agreement was entered into between the parties.
In November, 1996, representatives of CNB had discussions with two other
community banks regarding a possible acquisition of CNB. The banks exchanged
limited information on their organizations. No due diligence reviews were
undertaken nor were any letters of intent or definitive agreements entered into
by the parties.
In early December, 1996, representatives of BLF and CNB held preliminary
discussions about a possible business combination of the two organizations. On
December 9, 1996, Mr. Edwin E. Walpole, III (Chairman, President and Chief
Executive Officer of BLF), Joe G. Mullins (Executive Vice President of BLF),
Curtis S. Fry (Chairman of CNB), and John H. Holmes (President of CNB) met to
discuss the possibility of a merger of CNB with BLF. At the meeting, the
representatives discussed the two organizations, the possible composition of the
Board of Directors and the executive officers of the Combined Corporation, and
that an evaluation would be done of BLF and CNB by an outside third party not
associated with either organization. During the meeting, the representatives of
BLF advised CNB that BLF was not interested in assuming the employment agreement
between CNB and its president and, accordingly, any transaction between BLF and
CNB must be in the context that CNB would terminate the employment agreement
prior to closing of the transaction. The representatives agreed that a
preliminary outline of a proposed transaction would be reviewed by each
organization's Board of Directors at its December, 1996 meeting and, if approved
by each board, BLF and CNB would enter into a confidentiality agreement to
exchange information so that each could perform a due diligence review of the
other. The representatives also expressed a desire that any decision regarding a
combination of the organizations be made prior to the end of the first quarter
of 1997 in order that any such transaction could be closed by the end of that
year.
On December 18, 1996, the Board of Directors of BLF, reviewed the
discussions to date between the BLF and CNB representatives, authorized the
signing of a confidentiality agreement and, assuming such confidentiality
agreement was also signed by CNB, to commence performance of a due diligence
review of CNB. Also, on December 18, 1996, the Board of Directors of CNB
reviewed the discussions to date between BLF and CNB representatives, as well as
discussions between CNB representatives and representatives of the two other
community banks interested in a possible merger or acquisition transaction with
CNB. The CNB Board of Directors unanimously approved authorizing the CNB
representatives to continue discussions with BLF representatives regarding a
possible combination transaction of the BLF and CNB organizations. Among other
factors considered by the CNB board was the greater knowledge by CNB of the BLF
organization, the market diversification afforded by the possible combination
transaction and the BLF earnings record over the past several years. On December
18, 1996, BLF and CNB entered into a confidentiality agreement.
During the remainder of December, 1996, BLF had discussions with several
investment banking firms regarding their possible representation of BLF. On
January 8, 1997, the BLF and Big Lake National Bank directors met with a
representative of Mercer Capital, which was retained by BLF to do a valuation of
BLF and CNB. Mercer Capital also was retained to issue a fairness opinion to the
BLF Board of Directors in connection with any potential definitive agreement
that might be entered into between BLF and CNB.
On January 9, 1997, representatives of BLF commenced a due diligence
review of CNB. On January 15, 1997, representatives of CNB commenced a due
diligence review of BLF.
On January 23, 1997, the CNB Board of Directors reviewed the status of the
due diligence review of BLF and approved the retention of William R. Hough & Co.
("Hough") to review and assess the evaluation reports
23
<PAGE> 33
issued by Mercer Capital and, if a transaction was entered into between BLF and
CNB, to issue a fairness opinion to the Board of Directors of CNB.
On February 5, 1997, the BLF Directors reviewed a report issued by Mercer
Capital, establishing an exchange ratio of .519 of BLF Common Stock for each
outstanding share of CNB Common Stock in a proposed merger of the two
organizations. The directors also discussed the status of the due diligence
review by BLF of CNB.
On February 7, 1997, the Chairman of BLF and the Chairman of CNB discussed
the composition of the Board of Directors of the Combined Corporation, which
would consist of the current directors of BLF plus three representatives of CNB.
Also on February 7, 1997, the Clewiston National Bank executive committee met
and reviewed the preliminary exchange ratio prepared by Mercer Capital. The
members authorized CNB management to continue with the negotiation of a
transaction with BLF which would include an exchange ratio .519 share of BLF
Common Stock for each outstanding share of CNB Common Stock.
On February 11, 1997, the BLF and Big Lake National Bank Directors
reviewed a presentation from Mercer Capital regarding its valuation of BLF and
CNB. The directors also reviewed the due diligence review conducted by BLF on
CNB. On February 12, 1997, BLF and CNB representatives reviewed and discussed
the terms of a proposed definitive agreement between BLF and CNB.
On February 19, 1997, the BLF Board of Directors approved an Agreement and
Plan of Reorganization. At the meeting, a representative of Mercer Capital
rendered an opinion that the terms of the Merger are fair, from a financial
point of view, to the shareholders of BLF. The BLF Board then unanimously
approved the Agreement and Plan of Reorganization and the transaction
contemplated thereby. On February 19, 1997, the Agreement and Plan of
Reorganization was approved by the Board of Directors of CNB. At the meeting, a
representative of Hough rendered an opinion that the terms of the Merger are
fair, from a financial point of view, to the shareholders of CNB. The CNB Board
then unanimously approved the Agreement and Plan of Reorganization and the
transactions contemplated thereby. The Agreement and Plan of Reorganization was
signed by the parties February 19, 1997. The terms of the Agreement and Plan of
Reorganization, as originally approved by the Boards of Directors of BLF and
CNB, provided that each share of CNB Common Stock would be converted into .519
shares of BLF Common Stock.
In late April and early May, 1997, BLF and CNB received and reviewed from
each other the financial results for each company during 1997. In May, 1997, BLF
and CNB negotiated an amendment to the original conversion ratio as a result of
a divergence between the financial results reported by CNB for 1997 and the
assumed financial results for CNB utilized in connection with the determination
of the conversion ratio by the parties. On May 2, 1997, representatives of BLF
and CNB met to review the updated 1997 financial information for BLF and CNB. On
June 18, 1997, the BLF Board of Directors approved an Amended and Restated
Agreement and Plan of Reorganization (the "Agreement") to provide for the
issuance in the Merger of .40 shares of BLF Common Stock for each share of CNB
Common Stock. At the meeting, a representative of Mercer Capital rendered an
opinion that the terms of the Merger are fair, from a financial point of view,
to the shareholders of BLF. On June 19, 1997, the Board of Directors of CNB also
approved the Agreement. At the meeting, a representative of Hough rendered an
opinion that the terms of the Merger are fair, from a financial point of view,
to the shareholders of CNB. The Agreement was signed by the parties effective
June 19,1997.
The terms of the Agreement were the result of arms-length negotiations
between representatives of BLF and representatives of CNB.
24
<PAGE> 34
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of CNB considered a number of factors in deciding
to approve and recommend the terms of the Agreement to CNB shareholders. The CNB
Board of Directors did not assign any relative or specific weights to the
factors considered. Among the factors considered by the CNB board were (i) the
respective business, operations, earnings, financial condition, and capital
position of BLF and CNB, as well as of the Combined Corporation on a prospective
basis, (ii) the terms of the Agreement, including the Conversion Ratio, (iii)
the overall compatibility of operations and management of the two organizations,
(iv) the tax-free nature of the transaction to CNB shareholders, (v) the
likelihood of receiving requisite regulatory approval, (vi) economic and other
conditions affecting the banking industry, (vii) that the Merger would afford
CNB shareholders the opportunity to participate in the ownership of a bank
holding company and bank with greater financial resources than either CNB or
Clewiston National Bank, (viii) that the Combined Corporation, Big Lake National
Bank, and Clewiston National Bank would be able to use the collective resources
and capital of BLF, CNB, Big Lake National Bank and Clewiston National Bank to
serve more and larger customers through a branching network not available to
either organization and larger lending limits reflecting the combined capital of
the two banks, and (ix) that the Merger would increase the ability to compete
with other banks and financial service institutions not only through a more
expansive branch network and lending capacity, but also through pricing
reflecting the economies and cost reductions afforded by a combination of the
two organizations. CNB also entered into the Agreement conditioned upon it
receiving from its financial advisor an opinion as to the fairness of the
Merger, from a financial point of view, to its shareholders. See " -- Opinion of
Financial Advisor."
THE BOARD OF DIRECTORS OF CNB UNANIMOUSLY RECOMMENDS THAT CNB SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT.
OPINION OF FINANCIAL ADVISOR
CNB retained the financial institution consulting firm of William R. Hough
& Co., St. Petersburg, Florida ("Hough"), to offer an opinion on the fairness of
the Merger from a financial point of view. As of February 19, 1997, Hough issued
a written opinion to the CNB Board of Directors that the Merger is fair to CNB
shareholders from a financial point of view. Hough updated its opinion to May
30, 1997 that, based on the matters set forth therein, the Merger is fair to CNB
shareholders from a financial point of view. A copy of Hough's opinion, which
sets forth the assumptions made, matters considered, and limitations on the
review undertaken, is set forth as Appendix C to this Proxy Statement and should
be read in its entirety by shareholders of CNB.
The original and updated opinions issued by Hough were addressed to the
Board of Directors of CNB for use by the Board in its consideration of the
financial terms of the Merger. Such opinions were not addressed to the
shareholders of CNB and do not constitute a recommendation to any CNB
shareholder as to how the shareholder should vote at the CNB Special Meeting.
Hough, as part of its financial institution consulting business, is
routinely engaged in the valuation of banks and other financial institutions and
their securities in connection with mergers and acquisitions and other
transactions. CNB retained Hough on the basis of its reputation and its
experience in evaluating financial institutions and in representing community
banks in merger transactions.
The terms of the Merger were determined by CNB and BLF after arms-length
negotiations between the parties. At the request of CNB, Hough reviewed the
Agreement and related documents and advised CNB on certain matters related to
its negotiations.
In arriving at its opinion, Hough reviewed and analyzed material bearing
upon the financial and operating condition of CNB and BLF, including but not
limited to the following: (i) this Proxy Statement; (ii) the financial
25
<PAGE> 35
statements of CNB and BLF for the period 1989 through March 31, 1997; (iii)
certain other publicly available information on CNB and BLF, consisting
principally of data obtained from each organization's financial statements filed
with the applicable Federal banking regulatory agency, which provides balance
sheet, income statement and other financial information; (iv) other internal
financial and operating information which was provided to Hough by CNB and BLF,
consisting of budgets and pro forma financial projections reflecting the Merger;
(v) publicly available information regarding the performance of certain other
banks whose business activities are believed to be generally comparable to those
of CNB and BLF; (vi) the Agreement and related documents; and (vii) Hough's
experience with respect to bank merger transactions which provides insights into
the unique aspects of any one particular transaction, thus influencing its
conclusion as to whether a transaction is fair from a financial point of view.
In connection with rendering its opinion, Hough performed a variety of
financial analyses, which are summarized below. Hough believes its analyses must
be considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the process underlying Hough's
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analyses or
summary description. In its analyses, Hough made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond CNB's or BLF's control. Any estimates
contained in Hough's analyses are not necessarily indicative of future results
or values, which may be significantly more or less favorable than the estimates.
Merger of Equals Analysis Of CNB and BLF. Hough completed a merger of
equals analysis of CNB and BLF as of December 31, 1996. This analysis included
the preparation of individual appraisals of CNB and BLF, respectively, for the
sole purpose of determining the relative contribution of value by each company,
including levels of equity, deposits, earnings and other factors, to the
combined corporation on a pro forma basis. The Hough analysis was updated to May
30, 1997, using substantially the same methodology. This updated analysis
included an evaluation of subsequent events since December 31, 1996, including
the interim financial performance of CNB and BLF and their subsidiaries. Hough
reviewed the updated analysis on behalf of CNB, and advised the CNB Board of
Directors in its negotiations with BLF. A fair exchange ratio analysis was then
prepared to complete the merger of equals financial analysis. This merger of
equals analysis concluded that a fair exchange ratio for CNB shares would be in
the range of .40 to .45 shares of the resulting holding company for each share
outstanding, and that a fair exchange ratio for BLF Common Stock would be 1.00
share of the resulting holding company for each share outstanding.
Financial Performance Analysis. Hough completed a financial analysis of
the performance and condition of CNB and BLF, including their affiliate banks.
This analysis included a five-year balance sheet and income statement
comparison, and a performance ratio analysis, including a comparison to industry
peer groups. Specific measures reviewed, among other areas, included that total
deposits of CNB increased from $38.6 million as of the end of 1992 to $42.0
million as of December 31, 1996. Income before taxes of CNB decreased from
$378,000 in 1992 to $184,000 in 1996. Total deposits of BLF increased from $27.6
million as of the end of 1992 to $54.2 million as of December 31, 1996, and
income before taxes increased from $420,000 in 1992 to $838,000 in 1996.
Hough also reviewed the performance of the affiliate banks of both CNB and
BLF as presented in each Bank's Uniform Bank Performance Report. The net income
of Clewiston National Bank in 1996 as a percentage of average assets ("ROA")
equaled .37% and compared to a peer group of 1.15%. The ROA for Big Lake
National Bank in 1996 of .97% compared to its a peer group average of 1.24%.
Hough also reviewed CNB's and BLF's disclosures included in this Proxy
Statement under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for each respective company.
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Contribution Analysis. Hough compared the pro forma ownership interest in
BLF that CNB shareholders would receive, in the aggregate, to the contribution
by CNB to the total assets, equity and net income in the combined organization.
As of March 31, 1997, CNB shareholders would own approximately 35% of the
combined organization, while CNB's contribution of total deposits would equal
approximately 44%, the contribution of total equity would equal approximately
46%, the contribution of income before taxes would have equaled approximately
35%, and CNB's contribution to 1996 total income before taxes (most recent
calendar year) would have equaled approximately 18%. Hough believes that the
marketplace sets a value on earnings and historical consistency of earnings is
considered an indicator of a bank's ability to sustain earnings. CNB has had
inconsistent earnings over the past five years. These measures are based on the
unaudited condensed pro forma financial information included under the section
"Unaudited Condensed Pro Forma Combined Financial Information."
Pro Forma Merger Analysis. Hough analyzed the historical and pro forma
effect of the Merger to the total book value of shareholders of CNB and BLF as
of March 31, 1997. As of such date, the Conversion Ratio resulted in a decrease
in pro forma total book value of approximately 27.5% to CNB shareholders, as
compared to an increase of approximately 14.2% for the shareholders of BLF. The
Conversion Ratio indicates that the Merger would result in an increase in the
total earnings of CNB shareholders of approximately 8.8% and an increase in
total earnings of BLF shareholders of approximately 8.5%. The market for
publicly traded stocks places a higher value on earnings than on book value.
The summary set forth above does not purport to be a complete description
of the analyses performed by Hough. Further, Hough did not conduct a physical
inspection of any of the properties or assets of CNB or BLF. Hough has assumed
and relied upon the accuracy and completeness of the financial and other
information provided to it or publicly available, has relied upon the
representations and warranties of CNB and BLF made pursuant to the Agreement,
and has not independently attempted to verify any of such information. Hough has
also assumed that the conditions to the Merger as set forth in the Agreement
would be satisfied and that the Merger would be consummated on a timely basis in
the manner contemplated by the Agreement. No limitations were imposed by CNB or
BLF on Hough regarding the scope of its investigation nor were any specific
instructions given to Hough in connection with its fairness opinion.
For Hough's services as financial advisor in the proposed transaction, CNB
will pay the firm professional fees based upon its customary rates, which are
estimated at $12,500. In addition, CNB has agreed to reimburse Hough for
reasonable out-of-pocket expenses and indemnify Hough against certain
liabilities, including liabilities under the securities laws.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
After the Effective Time, the combined business of CNB and BLF will be
conducted under the name "Big Lake Financial Corporation" at the bank holding
company level. The executive offices of the Combined Corporation will be located
at the executive offices of BLF at 1409 S. Parrott Avenue, Okeechobee, Florida
34974. No banking offices of Clewiston National Bank or Big Lake National Bank
will be closed as a result of the Merger. The officers and employees of the
Clewiston National Bank after the Merger will be those persons serving as
officers and employees of Clewiston National Bank as of the Effective Time.
The Board of Directors of the Combined Corporation will consist of the
seven individuals currently serving as directors of BLF plus John Boy, Jr.,
Curtis S. Fry, and Thomas A. Smith. Messrs. Boy, Fry, and Smith are currently
serving as directors of CNB and Clewiston National Bank. The executive officers
of BLF after the Merger will consist of Edwin E. Walpole III (Chairman,
President and Chief Executive Officer) and Joe G. Mullins (Executive Vice
President and Chief Administrative Officer). Upon consummation of the Merger,
the directors of Clewiston National Bank will consist of the eight individuals
currently serving as directors of Clewiston
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National Bank, plus Edwin E. Walpole III and Joe G. Mullins. Messrs. Walpole and
Mullins currently serve as directors of BLF and Big Lake National Bank. See "The
Merger -- Management and Operations After the Merger."
INTERESTS OF CERTAIN PERSONS; COMPENSATION AND EMPLOYEE BENEFIT PLANS
As of the date of this Proxy Statement, Edwin E. Walpole III (Chairman,
President and Chief Executive Officer of BLF) owned 1,735 shares of CNB Common
Stock. Also at that date, the following directors of CNB owned the number of
shares of BLF Common Stock set forth in parenthesis after their names: John Boy,
Jr. (2,261 shares), Curtis S. Fry (16,551 shares), Dan McCarthy (904 shares),
and Thomas A. Smith (3,109 shares).
The parties have agreed in the Agreement to use their best efforts to
coordinate the conversion of each employee benefit plan of CNB into similar
plans of the Combined Corporation, to the extent similar plans are maintained by
the Combined Corporation, and to make available for eligibility for CNB and
Clewiston National Bank employees all benefit plans and policies maintained by
the Combined Corporation following the Effective Time, with such employees
receiving credit for past service with CNB and Clewiston National Bank for
purposes of eligibility for participation, vesting and years of service under
such plan.
BLF has outstanding options covering 18,213 shares of BLF Common Stock
(the "BLF Options"). The BLF Options will remain outstanding after the Merger
convertible into the same number of shares of Combined Corporation Stock as such
options are convertible into shares of BLF Common Stock as of the Effective Time
and at the same exercise price per share.
The Agreement also provides that after the Effective Time, the Combined
Corporation will indemnify, defend and hold harmless the present and former
officers, directors and employees and agents of CNB and Clewiston National Bank
against all losses, expenses, claims, damages or liabilities occurring on or
prior to the Effective Time subject to the Florida Act. If the Combined
Corporation or any of its successors consolidates with or merges into any other
corporation, or transfers all or substantially all of its property and assets,
then the Combined Corporation will cause proper provision to be made so that the
successors of the Combined Corporation will assume the indemnification
obligations set forth in the Agreement.
Except as set forth above, no director or executive officer of BLF, Big
Lake National Bank, CNB or Clewiston National Bank and no associate of any such
person, has any substantial interest, direct or indirect, in the Merger, other
than an interest arising from the ownership of BLF Common Stock or CNB Common
Stock, in which case the director or officer receives no extra or special
benefit not shared on a pro rata basis by all other holders of BLF Common Stock
or CNB Common Stock.
BLF, Big Lake National Bank, CNB and Clewiston National Bank are not aware
of any material relationship between BLF or Big Lake National Bank or their
directors and executive officers and CNB or Clewiston National Bank or their
directors and executive officers, except as contemplated by the Agreement or as
described herein. In the ordinary course of business and from time to time,
however, BLF may do business with CNB, BLF may enter into banking transactions
with certain of CNB or CNB's directors, executive officers and their affiliates,
CNB may do business with BLF, and CNB may enter into banking transactions with
certain of BLF's directors, executive officers and their affiliates.
CONVERSION RATIO
CNB Common Stock. At the Effective Time, each share of CNB Common Stock
(other than shares held by shareholders of CNB who have perfected dissenters'
rights under the Florida Act) will be converted into the right to receive .40 of
a share of Combined Corporation Stock. If BLF changes the number of shares of
BLF Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, or similar
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reclassification or distribution with respect to such stock and the record date
therefor is prior to the Effective Time, the amount of shares of Combined
Corporation Stock issuable in the Merger will be subject to appropriate
adjustment. A fractional share otherwise issuable to a CNB shareholder in the
Merger will be rounded up to the next whole share if the fraction is .500 or
greater and rounded down to the next whole share if the fraction is .499 or
less.
BLF Common Stock. The shares of BLF Common Stock issued and outstanding
immediately prior to the Effective Time will remain outstanding and unchanged
after the Merger as shares of Combined Corporation Stock.
EFFECTIVE TIME
If the Agreement is approved by the CNB shareholders and if the Merger is
approved by the various authorities described under "Regulatory Approvals"
below, and if the other conditions to consummation of the Merger are satisfied
or waived, as permitted, the Merger will be closed on the date and at the time
mutually agreed upon by BLF and CNB. See "Conditions to Consummation" below.
Upon the satisfactory completion of the closing, the Merger will be deemed to be
effective and consummated on the date and at the time specified in the Articles
of Merger to be filed by the Florida Secretary of State (the "Effective Time").
Assuming the satisfaction of the conditions to the Merger, the parties
anticipate that the Merger will become effective in the fourth quarter of 1997,
although there can be no assurance as to whether or when the Merger will become
effective.
DISTRIBUTION OF COMBINED CORPORATION CERTIFICATES
After the Effective Time, the Combined Corporation will act as exchange
agent ("Exchange Agent") for the transaction or appoint another institution as
the Combined Corporation may designate to act as the exchange agent for the
transaction, and if another institution is so selected, the Combined Corporation
will deliver to such institution, the total consideration to be paid for shares
of CNB Common Stock in the Merger. As promptly as practicable after the
Effective Time, the Exchange Agent will send a letter of transmittal to each
former holder of record of shares of CNB Common Stock for use in exchanging
their certificates formerly representing shares of CNB Common Stock for exchange
and conversion in accordance with the procedures provided for in this Proxy
Statement and in the Agreement. The letter of transmittal will contain detailed
instructions concerning the manner of executing and submitting the CNB stock
certificates for certificates of the Combined Corporation. At the Effective
Time, all holders of shares of CNB Common Stock will be deemed to be holders of
the shares of Combined Corporation Stock into which such shares of CNB Common
Stock have converted in the Merger, whether or not they surrender the stock
certificates representing their shares of CNB Common Stock. Such holders will be
entitled to all dividends or distributions in respect of shares of Combined
Corporation Stock where the record date for the payment of such dividends or
distributions occurs on or after the Effective Time; however, no such dividends
or distributions will be paid to holders of any unsurrendered certificate or
certificates representing CNB Common Stock, and the Combined Corporation will
not be obligated to deliver any of the consideration to which any holder of CNB
Common Stock is entitled as a result of the Merger, until such holder surrenders
the certificate or certificates representing CNB Common Stock as provided for in
the Agreement. Until the stock certificates evidencing the shares of CNB Common
Stock are surrendered pursuant to the Agreement, no stock certificates
representing shares of Combined Corporation Stock will be delivered or remitted
to such holders. In addition, holders of shares of CNB Common Stock will not be
entitled to receive any interest respecting any dividends or distributions
payable in respect of shares of Combined Corporation Stock, and the Combined
Corporation, after the lapse of the appropriate time period and in accordance
with the applicable laws of escheat or abandoned property, may remit any
unclaimed funds or unclaimed stock certificates representing shares of Combined
Corporation Stock to state officials under the applicable laws of escheat or
abandoned property.
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RESALE OF COMBINED CORPORATION STOCK RECEIVED IN THE MERGER
The shares of Combined Corporation Stock to be issued in the Merger have
been registered under the Securities Act, thereby allowing such shares to be
sold without restriction by shareholders of CNB who are not deemed to be
"affiliates" (as that term is defined in the rules under the Securities Act) of
CNB and who do not become affiliates of the Combined Corporation. The shares of
Combined Corporation Stock to be issued to affiliates of CNB may be resold only
pursuant to an effective registration statement, pursuant to Rule 145 under the
Securities Act, or in transactions otherwise exempt from registration under the
Securities Act. The Combined Corporation will not be obligated and does not
intend to register its shares under the Securities Act for resale by
shareholders who are affiliates.
At or prior to the Effective Time, each such person deemed an affiliate of
CNB will deliver to the Combined Corporation a letter agreeing that he or she
will not sell, transfer, or otherwise dispose of such shares of Combined
Corporation Stock in violation of the Securities Act or the rules and
regulations thereunder.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO HOLDERS OF CNB COMMON STOCK WHO ARE
CITIZENS OF THE UNITED STATES. IT DOES NOT DISCUSS ALL THE TAX CONSEQUENCES THAT
MAY BE RELEVANT TO HOLDERS OF CNB COMMON STOCK ENTITLED TO SPECIAL TREATMENT
UNDER THE CODE. THE SUMMARY SET FORTH BELOW DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OF ALL POTENTIAL TAX EFFECTS OF THE TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT OR THE MERGER. EACH HOLDER OF CNB COMMON STOCK IS URGED TO CONSULT HIS
OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX
CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES, AND ALSO AS
TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF THE
MERGER.
Neither CNB, Clewiston National Bank, BLF, nor Big Lake National Bank has
requested a ruling from the Internal Revenue Service ("IRS") in connection with
the Merger. Instead, the parties will rely upon an opinion of Stevens, Thomas,
Schemer & Sparks, P.A., as to the Federal income tax consequences of the Merger
to the holders of CNB Common Stock. The opinion of Stevens, Thomas, Schemer &
Sparks, P.A., is based entirely upon the Code, the Treasury Regulations
thereunder, current administrative rulings and practices, and judicial
authority, all of which are subject to change. The opinion is filed with the
Commission as an exhibit to the Registration Statement. Unlike a ruling from the
IRS, an opinion is not binding on the IRS and there can be no assurance, and
none is hereby given, that the IRS will not take a position contrary to one or
more positions reflected herein or that the opinion will be upheld by the courts
if challenged by the IRS.
In the opinion of Stevens, Thomas, Schemer & Sparks, P.A., which opinion
is based on various representations and subject to various assumptions and
qualifications, the following federal income tax consequences to the holders of
BLF and CNB Common Stock will result from the Merger:
(i) Upon consummation, the Merger will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
CNB, Clewiston National Bank, BLF, and Big Lake National Bank will each be a
party to the reorganization.
(ii) No gain or loss will be recognized by any shareholder of CNB upon
the exchange of such shareholder's CNB Common Stock for Combined Corporation
Stock pursuant to the Merger.
(iii) No gain or loss will be recognized by any shareholder of BLF as a
result of the Merger.
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(iv) The basis of the Combined Corporation Stock received by the
shareholders of CNB will be the same as the basis of the CNB Common Stock
surrendered therefor.
(v) To the extent any shareholder of CNB owns less than 1.25 shares of
CNB Common Stock immediately prior to the Effective Time, a loss, if any, may be
recognized by such CNB shareholder in an amount equal to the tax basis in said
shares as determined in accordance with applicable provisions of the Code.
(vi) A shareholder of CNB who dissents to the proposed Merger and
receives solely cash for such shareholder's stock will be treated as having
received such cash as a distribution in redemption of such shareholder's stock
subject to the provisions and limitations of Section 302 of the Code.
(vii) Provided that shares of CNB Common Stock were capital assets in the
hands of a holder of CNB Common Stock immediately prior to the Merger, the
holding period of the Combined Corporation Stock received by a holder of CNB
Common Stock in the Merger will include the holding period of the CNB Common
Stock surrendered in exchange therefor.
CONDITIONS TO CONSUMMATION
The obligations of CNB, Clewiston National Bank, BLF and Big Lake National
Bank to consummate the Merger are subject to the satisfaction or waiver (to the
extent permitted) of certain conditions at or prior to the Effective Time,
including the following: (i) all approvals of, filings with, and notifications
to, all appropriate regulatory authorities necessary to consummate the Merger
shall have been made or received (and not include any provisions which unduly
impair or restrict the operations, or would have a material adverse effect on
the condition, of the Combined Corporation or the Combined Bank, or render
consummation of the Merger unduly burdensome, in each case as determined in the
reasonable discretion of the parties), and all waiting periods imposed by law
must have expired; (ii) the representations and warranties of the parties in the
Agreement shall be true and correct in all material respects as of the closing
date, and the various covenants and agreements of the parties shall have been
duly performed and complied with in all material respects; (iii) no action or
proceeding shall be pending or threatened preventing consummation of the
transactions contemplated by the Agreement, causing any such transactions to be
rescinded following consummation, or adversely affecting the right of the
Combined Corporation after the Effective Time to own, operate or control
essentially all the assets of CNB and BLF and their subsidiaries; (iv) the
shareholders of CNB shall have approved the Agreement; (v) the parties shall
have delivered to each other certain certificates setting forth compliance with
certain provisions of the Agreement; (vi) each of the parties shall have
delivered to the others certain legal opinions; (vii) the respective
shareholders' equity of CNB and BLF on the last day of the calendar month
immediately preceding the closing date, as determined in accordance with GAAP
and before of any adjustments required pursuant to Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), shall not be less than the amounts
reported by each as of April 30, 1997; (viii) the allowances for loan or credit
losses of CNB and BLF as of the last day of the calendar month immediately
preceding the closing date shall not be less than 1.20% in the case of BLF and
1.13% in the case of CNB, based upon such party's gross loans net of unearned
income (and before deduction of its allowance for loan or credit losses); and
(ix) the holders of no more than 5% of the outstanding CNB Common Stock shall
have elected to exercise their dissenters' rights in the Merger.
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. If the Merger is not effected on or before March 31, 1998, the Agreement
may be terminated, and the Merger abandoned, by either BLF or CNB. See
"Amendment, Waiver and Termination" below.
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REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve. Any approval
received from the banking agencies reflects only their view that the Merger
does not contravene applicable competitive standards imposed by law, and that
the Merger is consistent with regulatory policies relating to safety and
soundness. Such approval is not an opinion by any banking agency that the
Merger is favorable to the shareholders from a financial point of view or that
any banking agency has considered the adequacy of the terms of the Merger. THE
APPROVAL OF THE BANKING AGENCIES IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE
MERGER.
BLF and CNB are not aware of any other governmental approvals or actions
that may be required for consummation of the Merger except for the Federal
Reserve approval described above. Should any such approval or action be
required, it is presently contemplated that such approval or action would be
sought. There can be no assurance, however, that any such approval or action, if
needed, could be obtained and would not be conditioned in a manner that would
cause the parties to abandon the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement provides that the parties will (i) confer with each other on
a regular and frequent basis and deliver to each other periodic financial and
statistical information, (ii) use their best efforts to take all actions
necessary for all regulatory applications to be approved (provided that no such
condition unduly impairs or restricts the operations, or would have a material
adverse effect on the condition, of the Combined Corporation or render
consummation of the Merger unduly burdensome), (iii) use their best efforts to
obtain any consents, approvals, permits or authorizations required to consummate
the Merger, (iv) refrain from taking any action which would cause any
representations and warranties to become untrue in any material respect or any
condition set forth in the Agreement to not be satisfied, (v) continue to file
all reports and documents required with appropriate regulatory authorities, (vi)
refrain from taking any action (whether before or after the Effective Time)
which would disqualify the Merger as a "reorganization" within the meaning of
the Code, (vii) permit representatives of other parties to have full access to
information and documents pertaining to such party, (viii) notify the others of
any material adverse development affecting the business of such party, (ix)
conduct their businesses in the usual, regular and ordinary course consistent
with past practices, (x) use reasonable efforts to maintain their business
organizations, employees and business relationships, and (xi) take no action
which would adversely affect or delay the ability of any party to obtain any
consent or approval required for the Merger. In addition, until the Effective
Time, no party may (without the prior written consent of the other parties) (i)
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other person or entity, other than in the ordinary course of business, (ii)
adjust, split, combine or reclassify any capital stock; make, declare or pay any
dividend or make any other distribution on its stock; or redeem, purchase or
otherwise acquire, any shares of its stock or grant any person the right to
acquire any shares of its stock, (iii) sell, mortgage, or transfer any of its
material properties or assets to any person or entity, or cancel, release or
assign any material indebtedness to any person or entity, except in the ordinary
course of business, (iv) make any material investment in any other individual or
entity, except in the ordinary course of business, (v) enter into or terminate
any material contract or agreement, or make any change in any of its material
leases or contracts, other than renewals of contracts and leases without
material adverse changes of terms and except for transactions in the ordinary
course of business, (vi) increase in any material manner the compensation or
fringe benefits of any of its employees or pay any pension or retirement
allowance not required by any existing plan or agreement, or commit itself to
any pension, retirement, profit-sharing or other benefit plan or agreement for
the benefit of any employee, other than in the ordinary course of business (with
the understanding that entering into any new
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employment contracts or renewing or amending any existing employment contracts
are deemed to be outside the ordinary course of business), (vii) amend its
Articles of Incorporation or Bylaws, (viii) enter into any new material line of
business, (ix) change its lending, investment, liability management and other
material banking policies in any respect which is material, (x) incur or commit
to any capital expenditure or any obligations or liabilities, other than in the
ordinary course of business, (except, as to BLF, the construction of an
operations center, two drive-in lanes for the BLF main office, the renovation of
the interior of the BLF main office, and the installation of safe-deposit boxes
in BLF's Lake Placid banking office); (xi) change its methods of accounting
(except as required by SFAS Nos. 121, 123 or 125), or (xii) issue or sell any
shares of its capital stock or any securities convertible into any such shares,
other than the issuance of BLF Common Stock, pursuant to outstanding BLF
Options, as in effect on the date of the Agreement and in accordance with their
present terms. The Agreement also provides that no party may acquire or agree to
acquire any business, entity or assets which are material to such party (except
that internal reorganizations, foreclosures in the ordinary course of business,
acquisitions of control in a fiduciary capacity, investments made in small
business investment corporations in the ordinary course of business, or the
creation of new subsidiaries organized to conduct or continue activities
otherwise permitted by the Agreement are permitted).
The Agreement also provides that, except as specifically permitted or
contemplated by the Agreement, no party may solicit, initiate, encourage,
entertain, consider, or participate in the negotiation, discussion or submission
of any proposal or offer from any person relating to any (i) liquidation,
dissolution, or recapitalization, (ii) merger or consolidation, (iii)
acquisition or purchase of 25% or more of securities or assets, or (iv) similar
transaction or business combination involving the party and/or its subsidiaries
or their respective assets (an "Acquisition Proposal"). However, each party is
entitled to entertain, consider, and participate in negotiations and discussions
regarding, and furnish any information with respect to, any effort or attempt by
any person to do or seek to do any of the foregoing to the extent that the Board
of Directors of such party determines in good faith that the failure to so
consider or participate in such negotiations or discussions would be
inconsistent with the fiduciary obligations of the directors of such party to
the shareholders of such party. The parties are required to give prompt notice
to all of the parties of such negotiations and discussions and to notify the
others immediately if any person makes any proposal, offer, inquiry, or contact
with respect to any Acquisition Proposal. Under certain circumstances, the
receipt of an Acquisition Proposal can give rise to the termination of the
Agreement and abandonment of the Merger by a party. See "Amendment, Waiver and
Termination" below.
REPRESENTATIONS AND WARRANTIES
The Agreement contains representations and warranties by each of BLF, CNB,
Big Lake National Bank, and Clewiston National Bank relating to corporate
existence, powers and similar matters, corporate authorization, regulatory
filings and approvals, non-contravention of corporate documents, agreements and
instruments, capitalization, regulatory filings, financial statements, absence
of certain changes, undisclosed liabilities, litigation, taxes and tax
treatment, employee plans and benefits, compliance with law, and other issues.
The representations, warranties, covenants and agreements in the Agreement do
not survive the Effective Time.
EXPENSES AND FEES
The Agreement provides that each of the parties will bear its own expenses
in connection with the negotiation and execution of the Agreement and the
implementation and effectiveness of the Merger, provided that each of BLF and
CNB will pay one-half of all filing fees relating to all applications submitted
for prior regulatory approval of the Merger, the fees and expenses related to
obtaining the tax opinion, the fees and expenses of counsel relating to the
preparation of applications to the regulatory authorities for approval of the
Merger and the preparation of the Proxy Statement, and the costs of printing and
mailing the Proxy Statement.
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AMENDMENT, WAIVER AND TERMINATION
Notwithstanding the approval of the Agreement by the CNB shareholders, the
Agreement may be terminated, and the Merger abandoned, at any time prior to the
Effective Time by (i) mutual consent of the parties, or (ii) any party if (A)
the Merger has not been consummated by March 31, 1998, (B) there is a material
breach of a representation, warranty, or covenant by the other party (which has
not been cured during the period of time set forth in the Agreement), (C) if a
material adverse development shall have occurred affecting the condition of the
other party, (D) the Agreement or the Merger fails to receive the requisite
shareholder approval of a party, or (E) any approval from a bank regulatory
agency necessary to permit consummation of the Merger is not received, or
includes conditions or restrictions which in the reasonable judgment of a party
would (y) unduly impair or restrict the operations, or would have a material
adverse effect on the condition, of the Combined Corporation or (z) render
consummation of the Merger unduly burdensome.
If the Agreement is terminated as described above, no party will have any
further liability to any other party, except for any liability of any party then
in breach.
The Agreement also can be terminated by any party if during the term of
the Agreement an Acquisition Proposal is submitted to and approved by the
shareholders of such party prior to the Effective Time, or an Acquisition
Proposal is received by such party or is made directly to its shareholders and,
as to CNB, its Board of Directors fails to recommend, or withdraws its
recommendation, that CNB's shareholders approve the Agreement or the Merger, or
CNB's Board of Directors fails to solicit proxies to approve the Agreement or
the Merger, and the Agreement and the Merger are subsequently rejected by CNB's
shareholders. If the party terminating the Agreement is BLF or Big Lake National
Bank, then BLF will pay to CNB, and if the party terminating the Agreement is
CNB or Clewiston National Bank, then CNB will pay to BLF, a termination fee
equal to 10% of the shareholders' equity of the party required to make such
payment as of the end of the month preceding such payment, as liquidated
damages, and not as a penalty, and, upon the payment of such amount, the
Agreement will be terminated and no party will have any further liability under
the Agreement or the Merger, except as otherwise provided in the Agreement.
Any termination and abandonment of the Agreement would not require
approval of CNB shareholders.
The Agreement may be amended at any time prior to the Effective Time upon
written agreement of all of the parties, except that after approval of the
Agreement by CNB's shareholders, no amendment may be made in the conversion
ratio in a manner that adversely affects the economic value of the Merger to
such shareholders without their further approval.
Substantially all of the conditions to consummation of the Merger may be
waived, in whole or in part, to the extent permissible under applicable law, by
the party for whose benefit the condition has been imposed, without the approval
of the shareholders of CNB.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a purchase for accounting and
financial reporting purposes. Under this accounting method, the assets and
liabilities of CNB will be recorded at fair value. BLF anticipates that the
purchase price will be less than the book value of CNB's net assets. BLF does
not anticipate that any negative goodwill will be booked as the discount from
CNB's book value approximates the adjustment to record CNB's loans at fair
value. This adjustment will be recorded to income as an interest yield
adjustment over the expected life of the loan portfolio using the interest
method. The amortization period will be determined at the time of merger based
on the estimated average remaining maturities of the loan portfolio and is
expected not to exceed five years.
34
<PAGE> 44
The results of the operations of CNB will be included in the consolidated
financial statements from the date of acquisition and the prior periods will not
be restated. In the year of acquisition, the pro forma combined results of
operations for BLF and CNB will be disclosed from the beginning of the year of
acquisition and for the immediately preceding year in accordance with generally
accepted accounting principles.
DISSENTERS' RIGHTS
Florida law accords the shareholders of CNB the right to dissent from the
transactions contemplated by the Agreement. Consummation of the Merger is
subject to, among other things, the holders of no more than 5% of the
outstanding CNB Common Stock electing to exercise their dissenters' rights. A
shareholder of CNB may dissent from the transactions contemplated by the
Agreement and receive in cash the fair value, as of the day prior to the CNB
Special Meeting, of the shares of CNB Common Stock held by such shareholder
pursuant to Sections 607.1301, 607.1302 and 607.1320 of the Florida Act (the
"Florida Dissent Provisions"). Such fair value is exclusive of any appreciation
or depreciation in anticipation of the Merger, unless exclusion would be
inequitable. The following summary of the Florida Dissent Provisions is
qualified in its entirety by reference to the full text of the provisions which
is set forth as Appendix B to this Proxy Statement.
Under the Florida Dissent Provisions, a shareholder of CNB may dissent
from the Agreement by complying with the following procedures: (i) the
dissenting shareholder must file with CNB, prior to the CNB Special Meeting,
written notice of the shareholder's intent to demand payment for the
shareholder's shares; (ii) the dissenting shareholder must refrain from voting
in favor of the Agreement; (iii) within 10 days after the date of the CNB
Special Meeting, CNB must give written notice of approval of the Agreement by
the shareholders to such dissenting shareholder; and (iv) within 20 days after
the dissenting shareholder receives such notice of authorization the dissenting
shareholder must file with CNB a notice of election and a demand for payment of
the fair value of his shares. Any dissenting shareholder filing an election to
dissent must deposit the shareholder's certificates for certificated shares with
CNB simultaneously with the filing of the election to dissent. A shareholder may
dissent as to less than all of the shares of CNB Common Stock held by the
shareholder, and in such event, the shareholder is treated as two separate
shareholders. Once CNB offers to pay the dissenting shareholder for the
shareholder's shares, the notice of election cannot be withdrawn except with the
consent of CNB. However, the right of a dissenting shareholder to be paid the
fair value of the shareholder's shares will cease if (i) the demand is
withdrawn, (ii) the proposed Merger is abandoned, (iii) no demand or petition
for determination of fair value is filed with the appropriate court within the
time provided by law or (iv) a court of competent jurisdiction determines that
such shareholder is not entitled to the relief provided by the Florida Dissent
Provisions.
Submission of a proxy or a vote against the Agreement does not constitute
a notice of intent to demand payment under the Florida Dissent Provisions.
Within 10 days after the later of the expiration of the period in which
the dissenting shareholder may file the shareholder's notice of election to
dissent, or the Effective Time, the Combined Corporation is required to make a
written offer to each dissenting shareholder to purchase the shares of the
Combined Corporation Stock at a price deemed by the Combined Corporation to be
the fair value of such shares. If, within 30 days after the making of such
offer, any shareholder accepts the same, payment therefor shall be made within
90 days after the later of the date such offer was made or the consummation of
the Merger. However, if, within such 30 day period, the Combined Corporation and
the dissenting shareholder are unable to agree with respect to a price, then the
Combined Corporation, within 30 days after receipt of written demand from such
dissenting shareholder given within 60 days after the Effective Time, shall, or
at its election within such period may, file an action in a court of competent
jurisdiction in Okeechobee County requesting that the fair value of the shares
of CNB Common Stock be found and determined. If the Combined Corporation fails
to institute such proceedings, any dissenting shareholder may do so in the name
of the Combined Corporation. All dissenting shareholders are deemed to be
35
<PAGE> 45
parties to the proceeding as an action against their shares. In such proceeding,
the court may, if it so elects, appoint one or more persons as appraisers to
receive evidence and recommend a decision on the question of fair value. The
Combined Corporation is required to pay each dissenting shareholder the amount
found to be due within 10 days after final determination of the proceedings.
Upon payment of such judgment, the dissenting shareholder will cease to have any
interest in the shares of CNB Common Stock.
Any judgment rendered in any dissent proceeding may, at the discretion of
the court, include an allowance for interest at such rate as the court may deem
fair and equitable. The cost and expenses of any such dissent proceeding will be
determined by the court and assessed against the Combined Corporation, but all
or any part of such costs and expenses may be apportioned and assessed against
the dissent shareholders, in such amount as the court deems equitable, if the
court determines that the Combined Corporation made an offer to the dissenting
shareholders and the shareholders' failure to accept such offer was arbitrary or
vexatious and not in good faith. The expenses awarded by the court will include
compensation for reasonable expenses of any appraiser but will not include the
fees and expenses of counsel or experts employed by any party. If the fair value
of the shares of CNB Common Stock, as determined by the proceeding, materially
exceeds the amount which the Combined Corporation initially offered to pay, or
if no offer was made, the court, in its discretion, may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation for any expert employed by the shareholder in the
proceeding.
The foregoing discussion only describes certain provisions of the Florida
Dissent Provisions; however, CNB shareholders are urged to review such
provisions in their entirety, which are included as Appendix B to this Proxy
Statement. Any CNB shareholder who intends to dissent from the Merger should
review the text of the Florida Dissent Provisions carefully and also should
consult with his or her attorney. Any CNB shareholder who fails to strictly
follow the procedure set forth in such statutes will forfeit dissenters' rights.
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
After the Merger, the Restated Articles of Incorporation of BLF will
constitute the Restated Articles of Incorporation of the Combined Corporation
(the "Combined Corporation Articles"). The Combined Corporation Articles and the
Combined Corporation Bylaws will govern the outstanding shares of Combined
Corporation Stock after the Merger. The outstanding shares of Combined
Corporation Stock after the Merger will consist of shares of BLF Common Stock
outstanding at the Effective Time and the shares of Combined Corporation Stock
issued to CNB shareholders in the Merger. See "The Merger -- Conversion Ratio."
Since both CNB and BLF (which, after the Merger, is referred to in this Proxy
Statement as the Combined Corporation) are Florida corporations, the rights of
CNB shareholders are in general similar to the rights of BLF shareholders.
However, there are certain differences between the Combined Corporation Articles
and the Combined Corporation Bylaws and the CNB Articles of Incorporation ("CNB
Articles") and Bylaws. The following is a summary of certain of these
differences and is qualified in its entirety by reference to the Restated
Articles of Incorporation of BLF and Combined Corporation Bylaws (copies of
which are filed as exhibits to the Registration Statement).
AUTHORIZED CAPITAL STOCK; PAR VALUE
The Combined Corporation Articles authorize the Combined Corporation to
issue up to 1,000,000 shares of Combined Corporation common stock, par value
$.01 per share ("Combined Corporation Stock"), as compared to the CNB Articles
(which authorize the issuance of up to 10,000,000 shares of CNB Common Stock).
The Combined Corporation Articles authorize the Combined Corporation to issue up
to 500,000 shares of preferred stock, par value $1.00 per share, as compared to
the CNB Articles (which do not authorize the issuance of any shares of CNB
preferred stock). The shares of Combined Corporation preferred stock may be
issued by the
36
<PAGE> 46
Combined Corporation Board, from time to time, without further shareholder
action, in one or more series and with such relative rights and preferences
(including, with respect to any series, the dividend rate, the terms and
conditions of redemption, liquidation value, voting rights, conversion rights,
and such other relative, participating, optional, or special rights,
qualifications, limitations, or restrictions) as the Combined Corporation Board
may determine.
The Combined Corporation Board of Directors may authorize the issuance of
additional shares of the Combined Corporation Common Stock or preferred stock
without further action by the Combined Corporation shareholders, unless such
action is required in a particular case by applicable laws or regulations. The
authority to issue additional shares of Combined Corporation Stock or preferred
stock provides the Combined Corporation with the flexibility necessary to meet
its future needs without the delay resulting from seeking shareholder approval.
The unissued shares of the Combined Corporation Stock and preferred stock may be
issued from time to time for any corporate purposes, including, without
limitation, stock splits, stock dividends, employee benefit and compensation
plans, acquisitions, and public or private sales for cash as a means of raising
capital. Such shares could be used to dilute the stock ownership of persons
seeking to obtain control of the Combined Corporation. In addition, the sale of
a substantial number of shares of the Combined Corporation Stock or the sale of
preferred stock to persons who have an understanding with the Combined
Corporation concerning the voting of such shares, or the distribution or
dividend of shares of Combined Corporation Stock or preferred stock (or the
right to receive such shares) to the Combined Corporation shareholders, may have
the effect of discouraging or increasing the cost of unsolicited attempts to
acquire control of the Combined Corporation. Further, because the Combined
Corporation Board will have the power to determine the voting, conversion or
other rights of the Combined Corporation preferred stock, the issuance of a
series of preferred stock to persons friendly to management could effectively
discourage or preclude consummation of a change in control transaction or have
the effect of maintaining the position of Combined Corporation incumbent
management. CNB and BLF do not currently have any plans or commitments for the
Combined Corporation to use its authority to effect any such issuance, but
reserve the right to take any action that the Board of Directors deems to be in
the best interests of the Combined Corporation and its shareholders.
DIRECTORS; REMOVAL
BLF has seven directors. The Combined Corporation Articles divide the
number of directors into three classes, as nearly equal in number as reasonably
possible, with the term of office of each class expiring at each succeeding
annual meeting of the Combined Corporation shareholders. CNB has eight
directors, all of whom stand for re-election at each annual meeting of the CNB
shareholders. The Combined Corporation Articles provide that Combined
Corporation directors may be removed only for cause and only by the affirmative
vote of the holders of a majority of the outstanding shares of Combined
Corporation Common Stock. The CNB Articles have no such provision, and thus are
subject to the Florida law provisions which provide that directors may be
removed by shareholders with or without cause.
SHAREHOLDER MEETINGS
Special meetings of shareholders of CNB may be called by its Board of
Directors, or upon the written request of any three or more shareholders owning
less than 25% of all outstanding CNB Common Stock entitled to vote at the
meeting. Special meetings of shareholders of Combined Corporation may be called
by the Board of Directors, or upon the request of holders of not less than 10%
of all outstanding Combined Corporation Common Stock.
37
<PAGE> 47
MARKET AND DIVIDEND INFORMATION
STOCK TRADING INFORMATION
The shares of BLF Common Stock and CNB Common Stock are not actively
traded, and such trading activity, as it occurs, takes place in privately
negotiated transactions. There is no established public trading market for the
shares of BLF Common Stock or CNB Common Stock. Management of BLF and CNB are
aware of certain transactions in their respective shares that have occurred
since January 1, 1995, although the trading prices of all stock transactions are
not known.
As to shares of BLF Common Stock traded since January 1, 1995, BLF
management is aware of the trading prices for the following transactions: in
1995, an aggregate of 2,150 shares were traded in eight transactions for prices
ranging from $10.00 to $13.75 per share; in 1996, an aggregate of 12,718 shares
were traded in 15 transactions for $15.00 per share; and in 1997, an aggregate
of 212 shares were traded in two transactions for $15.00 per share. The last
sale of BLF Common Stock of which BLF had knowledge occurred on February 24,
1997, at a price of $15.00 per share.
With respect to the CNB Common Stock, CNB management is aware of the
trading prices for the following transactions: in 1995, there were no shares
known to have been traded; in 1996, an aggregate of 2,798 shares were traded in
four transactions for prices ranging from $9.61 to $9.78 per share; and in 1997,
an aggregate of 2,351 shares were traded in five transactions for prices ranging
from $6.59 to $9.00 per share. The last sale of CNB Common Stock of which CNB
had knowledge occurred on June 13, 1997 at a price of $9.00 per share.
Public announcement of the Merger by BLF and CNB occurred on February 21,
1997. The following sets forth on a historical basis for CNB Common Stock and
BLF Common Stock, the price per share in the last sale of such shares (for which
CNB and BLF management, respectively, had knowledge) at or prior to February 20,
1997 (the day prior to the public announcement of the Merger), the book value of
CNB Common Stock and BLF Common Stock as of February 21, 1997, and the
equivalent pro forma per share amounts of BLF Common Stock and CNB Common Stock
based upon such per share prices as adjusted for the Conversion Ratio. As noted
above, there is no established public trading market for the shares of BLF
Common Stock or CNB Common Stock. Accordingly, there is no assurance that the
last trading prices or the book value per share for CNB Common Stock and BLF
Common Stock are reflective of the market value of such shares or the price at
which such shares could be sold to others.
38
<PAGE> 48
<TABLE>
<CAPTION>
BLF COMMON STOCK CNB COMMON STOCK
---------------- ----------------
EQUIVALENT EQUIVALENT
HISTORICAL PER SHARE (1) HISTORICAL PER SHARE (1)
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Approximate Book value per Common Share
as of February 21, 1997 $15.94 $15.94 $10.05 $6.38
Last sales price (and date) of
Common Stock prior to
February 21, 1997 public
announcement of Merger $15.00(2) $15.00 $ 9.00(3) $6.00
</TABLE>
- ---------------------
(1) Computed (a) as to BLF Common Stock, by multiplying the BLF Common Stock
historical amounts by 1.0 and (b) as to CNB Common Stock, by multiplying
the BLF Common Stock historical amounts by the Conversion Ratio.
(2) Sale occurred on January 7, 1997
(3) Sale occurred on January 31, 1997
DIVIDENDS
BLF has not paid any cash dividends in the past and CNB has not paid
any cash dividends since June, 1992. BLF and CNB intend that, for the
foreseeable future, the Combined Corporation will retain earnings to
finance continued growth rather than pay cash dividends on the
Combined Corporation Stock. If at any time the Combined Corporation
Board determines to pay dividends on the Combined Corporation Stock,
the timing and the extent to which dividends are paid by the Combined
Corporation will be determined by such Board in light of
then-existing circumstances, including the Combined Corporation's
rate of growth, profitability, financial condition, existing and
anticipated capital requirements, the amount of funds legally
available for the payment of cash dividends, regulatory constraints
and such other factors as the Board determines relevant. The source
of funds for payment of dividends by the Combined Corporation will be
dividends received from Big Lake National Bank and Clewiston National
Bank. Payments by these national banks to the Combined Corporation
are limited by law and regulations of the bank regulatory
authorities. There are various statutory and contractual limitations
on the ability of Big Lake National Bank and Clewiston National Bank
to pay dividends to the Combined Corporation. The OCC also has the
general authority to limit the dividends paid by national banks if
such payment may be deemed to constitute an unsafe and unsound
practice. As a national bank, Big Lake National Bank and Clewiston
National Bank may not pay dividends from their paid-in surplus. All
dividends must be paid out of undivided profits then on hand, after
deducting expenses, including reserves for losses and bad debts. In
addition, a national bank is prohibited from declaring a dividend on
its shares of common stock until its surplus equals its stated
capital, unless there has been transferred to surplus no less than
one/tenth of the bank's net profits of the preceding two consecutive
half-year periods (in the case of an annual dividend). The approval
of the OCC is required if the total of all dividends declared by a
national bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.
39
<PAGE> 49
BLF
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
BLF's principal asset is its ownership of Big Lake National Bank.
Accordingly, BLF's results of operations are primarily dependent upon the
results of operations of Big Lake National Bank. Big Lake National Bank conducts
commercial banking business consisting of attracting deposits from the general
public and applying those funds to the origination of commercial, consumer and
real estate loans (including commercial loans collateralized by real estate).
Big Lake National Bank's profitability depends primarily on net interest income,
which is the difference between interest income generated from interest-earning
assets (i.e., loans and investments) less the interest expense incurred on
interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net
interest income is affected by the relative amounts of interest-earning assets
and interest-bearing liabilities, and the interest rate earned and paid on these
balances. Net interest income is dependent upon Big Lake National Bank's
interest-rate spread which is the difference between the average yield earned on
its interest-earning assets and the average rate paid on its interest-bearing
liabilities. When interest-earning assets approximate or exceed interest-bearing
liabilities, any positive interest rate spread will generate net interest
income. The interest rate spread is impacted by interest rates, deposit flows,
and loan demand. Additionally, and to a lesser extent, Big Lake National Bank's
profitability is affected by such factors as the level of noninterest income and
expenses, the provision for credit losses, and the effective tax rate.
Noninterest income consists primarily of service fees on deposit accounts.
Noninterest expense consists of compensation and employee benefits, occupancy
and equipment expenses, deposit insurance premiums paid to the FDIC, and other
operating expenses.
Management's discussion and analysis of earnings and related financial
data are presented herein to assist investors in understanding the financial
condition of BLF at, and results of operations of BLF for the years ended,
December 31, 1996 and 1995, and for the three-month periods ended March 31, 1997
and 1996. This discussion should be read in conjunction with the consolidated
financial statements and related footnotes of BLF presented elsewhere herein.
LIQUIDITY AND CAPITAL RESOURCES
A national bank is required to maintain a liquidity reserve of at least 3%
of its net transaction deposit accounts under $49.3 million. Where net
transaction deposit accounts exceed $49.3 million, the reserve requirements are
$1,479,000 plus 10% of the amount over $49.3 million. The liquidity reserve may
consist of cash on hand, cash on demand deposit with other correspondent banks,
and other investments and short-term marketable securities as determined by the
rules of the OCC, such as federal funds sold and United States securities or
securities guaranteed by the United States. As of March 31, 1997 and December
31, 1996 and 1995, Big Lake National Bank had liquidity ratios of 41.3%, 29.1%
and 103.3%, respectively.
BLF's principal sources of funds are those generated by Big Lake National
Bank, including net increases in deposits, principal and interest payments on
loans, and proceeds from sales and maturities of investment securities.
BLF uses its capital resources principally to fund existing and continuing
loan commitments and to purchase investment securities. At March 31, 1997, and
December 31, 1996 and 1995, BLF had commitments to originate loans totaling $2.2
million, $2.4 million and $2.8 million, respectively, and had issued but unused
letters of credit of $74,000, $74,000 and $457,000, respectively. In addition,
scheduled maturities of certificates of deposit
40
<PAGE> 50
during the 12 months following March 31, 1997, and December 31, 1996 and 1995
totaled $21.6 million, $23.1 million and $22.7 million, respectively. Management
believes that BLF has adequate resources to fund all its commitments, that
substantially all of its existing commitments will be funded within 12 months
and, if so desired, that BLF can adjust the rates and terms on certificates of
deposit and other deposit accounts to retain deposits in a changing interest
rate environment.
In accordance with risk capital guidelines issued by the OCC, Big Lake
National Bank is required to maintain a minimum standard of total capital to
risk-weighted assets of 8.0%. Additionally, the OCC requires banks to maintain a
minimum leverage-capital ratio of Tier 1 capital (as defined) to average assets.
The leverage-capital ratio ranges from 3.0% to 5.0% based on the bank's rating
under the regulatory rating system.
The following table summarizes the regulatory capital levels and ratios
for Big Lake National Bank:
<TABLE>
<CAPTION>
ACTUAL REGULATORY
RATIOS REQUIREMENT
------ -----------
<S> <C> <C>
At March 31, 1997:
Total capital to risk-weighted assets 12.19% 8.00%
Tier I capital to risk-weighted assets 10.94% 4.00%
Tier I capital to average assets - leverage ratio 7.02% 4.00%
At December 31, 1996:
Total capital to risk-weighted assets 12.12% 8.00%
Tier I capital to risk-weighted assets 10.87% 4.00%
Tier I capital to average assets - leverage ratio 7.37% 4.00%
At December 31, 1995:
Total capital to risk-weighted assets 11.69% 8.00%
Tier I capital to risk-weighted assets 10.43% 4.00%
Tier I capital to average assets - leverage ratio 6.74% 4.00%
</TABLE>
RESULTS OF OPERATIONS
Net interest income, which constitutes the principal source of income for
BLF, represents the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities. The principal
interest-earning assets are investment securities and loans made to businesses
and individuals. Interest-bearing liabilities primarily consist of time
deposits, interest-bearing checking accounts ("NOW accounts"), retail savings
deposits and money market accounts. Funds attracted by these interest-bearing
liabilities are invested in interest-earning assets. Accordingly, net interest
income depends upon the volume of average interest-earning assets and average
interest-bearing liabilities and the interest rates earned or paid on them.
Net interest income was $715,000 for BLF for the three months ended March
31, 1997, compared with $556,000 for the three months ended March 31, 1996. This
improvement in net interest income was a result of a higher volume of net
interest-earning assets and a more favorable interest-rate spread. Net interest
income was $2,493,000 for BLF for the year ended December 31, 1996, compared
with $1,984,000 for the year ended December 31, 1995. This improvement in net
interest income was a result of a higher volume of net interest-earning assets
offset in part by a lower interest-rate spread.
41
<PAGE> 51
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average equity as a percentage
of average assets 8.03% 7.88% 8.01% 9.89%
Equity to total assets at end
of period 7.89% 7.76% 8.16% 7.86%
Return on average assets 1.12% 0.71% 0.98% 1.34%
Return on average equity 13.94% 9.04% 12.26% 13.53%
Noninterest expense to
average assets 3.98% 3.66% 3.76% 3.82%
Interest-rate spread 4.11% 3.63% 4.02% 4.30%
</TABLE>
The rates and yields at the dates indicated were as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YIELD OR RATE AT
---------------------------------
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Loans 9.34% 9.45% 9.49% 9.39%
Investment securities 5.85% 5.93% 6.00% 6.08%
Other interest-earning assets 5.06% 5.24% 5.26% 5.81%
All interest-earning assets 8.15% 7.92% 8.17% 8.39%
Savings deposits 2.57% 3.28% 3.11% 2.73%
NOW accounts 2.22% 2.20% 2.02% 1.81%
Money market deposits 1.91% 2.23% 2.24% 2.55%
Certificates of deposit 5.20% 5.39% 5.30% 5.57%
All interest-bearing liabilities 4.02% 4.29% 4.14% 4.08%
Interest-rate spread 4.13% 3.63% 4.03% 4.31%
</TABLE>
42
<PAGE> 52
The following tables set forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of BLF
from interest-earning assets and the resultant average yield; (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; (v) net interest margin. Average balances were based on average daily
balances.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------------
1997 1996
---------------------------------------------------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------- --------- ---- ------- --------- ----
(Dollars in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans(1) $37,988 $ 887 9.34% $29,788 $ 704 9.45%
Investment securities 16,132 236 5.85% 15,509 230 5.93%
Other interest-earning assets(2) 2,687 34 5.06% 5,501 72 5.24%
------- ------ ------
Total interest-earning assets 56,807 1,157 8.15% 50,798 1,006 7.92%
Noninterest-earning assets 4,641 4,776
------- -------
Total assets $61,448 $55,574
======= =======
Interest-bearing liabilities:
Demand, money market and
NOW deposits $11,802 61 2.07% $10,687 59 2.21%
Savings 5,596 36 2.57% 5,726 47 3.28%
Certificates of deposit 26,539 345 5.20% 25,548 344 5.39%
Other Borrowings - - 0.00% - - 0.00%
Total interest-bearing ------- ------ ------- ------
liabilities 43,937 442 4.02% 41,961 450 4.29%
------ ------
Noninterest-bearing liabilities 12,576 9,233
Stockholders' equity 4,935 4,380
------- -------
Total liabilities and
stockholders' equity $61,448 $55,574
======= =======
Net interest/dividend income $ 715 $ 556
====== ======
Interest-rate spread(3) 4.13% 3.63%
==== ====
Net interest margin(4) 5.03% 4.38%
==== ====
Ratio of average interest-earning assets
to average interest-bearing
liabilities 129.29% 121.06%
======= =======
</TABLE>
- -------------------------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits due from other banks and federal funds
sold.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
43
<PAGE> 53
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995
------------------------------ -------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1) $ 32,531 $ 3,088 9.49% $ 26,841 $ 2,521 9.39%
Investment securities 17,354 1,041 6.00% 7,630 464 6.08%
Other interest-earning assets(2) 1,901 100 5.26% 3,614 210 5.81%
-------- -------- -------- -------
Total interest-earning assets 51,786 4,229 8.17% 38,085 3,195 8.39%
-------- -------
Noninterest-earning assets 4,314 3,097
-------- --------
Total assets $ 56,100 $ 41,182
======== ========
Interest-bearing liabilities:
Demand, money market and
NOW deposits $ 11,263 235 2.09% $ 8,347 179 2.14%
Savings 5,781 180 3.11% 5,491 150 2.73%
Certificates of deposit 24,646 1,306 5.30% 15,831 882 5.57%
Other borrowings 247 15 6.07% - - 0.00%
-------- -------- -------- -------
Total interest-bearing
liabilities 41,937 1,736 4.14% 29,669 1,211 4.08%
-------- -------
Noninterest-bearing liabilities and
minority interest 9,670 7,440
Stockholders' equity 4,493 4,073
-------- --------
Total liabilities and
stockholders' equity $ 56,100 $ 41,182
======== ========
Net interest/dividend income $ 2,493 $ 1,984
======== =======
Interest-rate spread(3) 4.03% 4.31%
==== ====
Net interest margin(4) 4.81% 5.21%
==== ====
Ratio of average interest-earning assets
to average interest-bearing
liabilities 123.49% 128.37%
======= =======
</TABLE>
- ------------------------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits due from other banks and federal funds
sold.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average interest-
earning assets.
44
<PAGE> 54
The following tables set forth certain information regarding changes in
interest income and interest expense of BLF for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in interest rate
(change in rate multiplied by prior volume), (2) changes in the volume (change
in volume multiplied by prior rate) and (3) changes in rate-volume (change in
rate multiplied by change in volume):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 VS. 1996
INCREASE (DECREASE) DUE TO
------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans $ (8) $ 194 $(3) $ 183
Investment securities (3) 9 -- 6
Other interest-earning assets (2) (37) 1 (38)
---- ----- --- -----
Total (13) 166 (2) 151
---- ----- --- -----
Interest-bearing liabilities:
Demand, money market and NOW deposits (4) 6 -- 2
Savings (10) (1) -- (11)
Certificates of deposit (12) 13 -- 1
Other borrowings -- -- -- --
---- ----- --- -----
Total (26) 18 -- (8)
---- ----- --- -----
Net change in net interest income $ 13 $ 148 $(2) $ 159
==== ===== === =====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 VS. 1995
INCREASE (DECREASE) DUE TO
----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 27 $ 534 $ 6 $ 567
Investment securities (6) 591 (8) 577
Other interest-earning assets (19) (100) 9 (110)
---- ------ ---- -------
Total 2 1,025 7 1,034
---- ------ ---- -------
Interest-bearing liabilities:
Demand, money market and NOW deposits (5) 63 (2) 56
Savings 21 8 1 30
Certificates of deposit (43) 491 (24) 424
Other borrowings -- -- 15 15
---- ------ ---- -------
Total (27) 562 (10) 525
---- ------ ---- -------
Net change in net interest income $ 29 $ 463 $ 17 $ 509
==== ====== ==== =======
</TABLE>
45
<PAGE> 55
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
General
Net earnings for the three months ended March 31, 1997 were $172,000, or
$0.56 per share, compared to net earnings of $99,000, or $0.32 per share, for
the three months ended March 31, 1996. The increase in net earnings was
primarily due to an increase in earning assets, particularly the increase in
loans that carries a higher yield than other earning assets. This change in mix
of earning assets also contributed to an overall increase in the average yield
of earning assets. The overall decline in interest rates resulted in a favorable
decrease in the average yield of all interest-bearing liabilities from 4.29% to
4.02%.
Interest Income and Expense
Interest income increased by $151,000 from $1,006,000 for the three months
ended March 31, 1996 to $1,157,000 for the three months ended March 31, 1997.
Interest income on loans increased $183,000 due to an increase in the average
loan portfolio balance from $29.8 million for the three months ended March 31,
1996 to $38.0 million for the comparable 1997 period, partially offset by a
decrease in the weighted average yield of 11 basis points. The decrease in
weighted average yield was the result of decreases in market interest rates,
rather than a material change in the loan composition. Interest on investment
securities increased $6,000 due to an increase in the average investment
securities portfolio from $15.5 million in 1996 to $16.1 million in 1997,
partially offset by a decrease in the average yield on the investment securities
portfolio of 8 basis points. Interest on other interest-earning assets decreased
$38,000 due to a decline from $5.5 million in average other interest-earning
assets in 1996 to $2.7 million in 1997 and a decline in the weighted average
yield of 18 basis points. The decrease in average other interest-earning assets
during the three months ended March 31, 1997 was attributable to the BLF's use
of its liquidity to fund the loan growth, which resulted in less federal funds
available for sale during the quarter ended March 31, 1997.
Interest expense decreased to $442,000 for the three months ended March
31, 1997 from $450,000 for the three months ended March 31, 1996. Interest
expense on deposit accounts decreased because the average yield declined 27
basis points, a percentage decline of 6.29%, partially offset by an increase of
4.7% in the average interest-bearing deposits from $42.0 million for the three
months ended March 31, 1996, to $43.9 million for the comparable 1997 period.
The decrease in rates paid on deposits was caused by declining interest rates
since there was no material change in the deposit mix.
Provision for Credit Losses
The provision for credit losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by BLF, the
amounts of nonperforming loans, general economic conditions, particularly as
they relate to BLF's market area, and other factors related to the
collectibility of BLF's loan portfolio. The decline in the provision from
$36,000 for the three months ended March 31, 1996 to $24,000 for the three
months ended March 31, 1997 was primarily due to improvements in nonperforming
loans and the favorable charge-off experience of recent years.
Other Income
Total other income increased $41,000 for the three months ended March 31,
1997 compared to 1996, principally due to an increase in service fees on deposit
accounts that resulted from an increase in deposit accounts subject to service
fees.
46
<PAGE> 56
Other Expense
Total other expense increased $103,000 to $612,000 for the three months
ended March 31, 1997 from $509,000 for the three months ended March 31, 1996,
primarily due to an increase in employee compensation and benefits of $41,000,
expenses of premises and fixed assets of $7,000, and other expenses of $55,000
(substantially all of which were related to the Merger and totaled $41,000).
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
General
Net earnings for the year ended December 31, 1996 were $551,000, or $1.79
per share, compared to net earnings of $550,000, or $1.78 per share, for the
year ended December 31, 1995. Net earnings for 1996 versus 1995 were level due
primarily to BLF's acquisition of its Lake Placid branch in late 1995. Favorable
growth in earning assets were offset by higher costs including the amortization
of goodwill and core deposit premium.
Interest Income and Expense
Interest income increased by $1,034,000 from $3,195,000 for the year ended
December 31, 1995 to $4,229,000 for the year ended December 31, 1996. Interest
income on loans increased $567,000 due to an increase in the average loan
portfolio balance from $26.8 million for the year ended December 31, 1995 to
$32.5 million for the comparable 1996 period, partially offset by a decrease of
22 basis points in the weighted average yield of total interest-earning assets.
The decrease in the weighted average yield was due to a change in the
composition of the interest-earning assets, which was associated with the
acquisition of deposits at Lake Placid. Initially, BLF acquired investment
securities with the net proceeds from BLF's purchase and assumption of the
deposits at Lake Placid. During 1996, BLF used the liquidity from these
investment securities to fund in part the growth in loans. Interest on
investment securities increased $577,000 due to an increase in the average
investment securities portfolio to $17.4 million in 1996 from $7.6 million in
1995 partially offset by a slight decrease in the average yield earned from
6.08% in 1995 to 6.00% in 1996. Interest on other interest-earning assets
decreased $110,000 due to a decrease from $3.6 million in average other
interest-earning assets in 1995 to $1.9 million in 1996 and a decrease in the
weighted average yield of 55 basis points, primarily due to an overall declining
interest rate environment.
Interest expense increased to $1,736,000 for the year ended December 31,
1996, from $1,211,000 for the year ended December 31, 1995. Interest expense on
deposit accounts increased because of an increase in the average balance from
$26.7 million in 1995 to $41.9 million in 1996 and a slight increase in the
average rates paid on interest-bearing liabilities of 6 basis points. The mix of
deposits and the volume changes were impacted by the acquisition of $11.2
million in deposits by BLF in its purchase of the Lake Placid branch on December
15, 1995.
Provision for Credit Losses
The provision for credit losses is charged to earnings to bring the total
allowance to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by BLF, the
amounts of nonperforming loans, general economic conditions, particularly as
they relate to BLF's market area, and other factors related to the
collectibility of BLF's loan portfolio. The increase in the provision from
$70,000 for the year ended December 31, 1995 to $132,000 for the year ended
December 31, 1996 was primarily due to the increase in average loans outstanding
for the same periods, from approximately $26.8 million in 1995 to $32.5 million
in 1996, and an increase in nonperforming loans from $30,000 at December 31,
1995, to $111,000 at December 31, 1996.
47
<PAGE> 57
Other Income
Total noninterest income increased $71,000 primarily due to the
acquisition of Lake Placid deposit accounts in 1995. The increase in service
charges, fees, and commissions of $108,000 was partially offset by losses on the
sale of other real estate owned totaling $8,000 versus a gain of $18,000 in the
comparable period for 1995.
Other Expense
Total noninterest expense increased $538,000 to $2,112,000 for the year
ended December 31, 1996 from $1,574,000 for the year ended December 31, 1995,
primarily due to increases in compensation and employee benefits of $274,000,
amortization of goodwill and core deposit premiums of $84,000, and other
operating expenses of $170,000 resulting primarily from the increased costs
associated with the acquisition of the Lake Placid branch.
ASSET/LIABILITY MANAGEMENT
A principal objective of BLF's asset/liability management strategy is to
minimize its exposure to changes in interest rates by matching the maturity and
repricing horizons of interest-earning assets and interest-bearing liabilities.
This strategy is overseen in part through the direction of an Asset and
Liability Committee (the "ALCO Committee") which establishes policies and
monitors results to control interest rate sensitivity.
Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the ALCO
Committee. The ALCO Committee uses internally generated reports to measure the
Bank's interest rate sensitivity. From these reports, the ALCO Committee can
estimate the net income effect of various interest rate scenarios.
As a part of BLF's interest rate risk management policy, the ALCO
Committee examines the extent to which its assets and liabilities are "interest
rate sensitive" and monitors the bank's interest rate sensitivity "gap." An
asset or liability is considered to be interest rate sensitive if it will
reprice or mature within the time period analyzed, usually one year or less. The
interest rate sensitivity gap is the difference between interest-earning assets
and interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
During a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income, while a positive gap would tend to
adversely affect net interest income. If the repricing of each bank's assets and
liabilities were equally flexible and moved concurrently, the impact of any
increase or decrease in interest rates on net interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or period of
repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable rate mortgage loans, have features (generally
referred to as "interest rate caps") which limit changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment (on loans) and early withdrawal (of deposit accounts)
48
<PAGE> 58
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also may
decrease in the event of an interest rate increase.
Management's strategy is to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. To this
end, the ALCO Committee reviews, on a monthly basis, the maturity and repricing
of assets and liabilities. BLF's cumulative one-year gap at December 31, 1996
was a negative 24.82% of assets. BLF's cumulative one-year gap at March 31, 1997
was a negative 14.64% of assets.
Principal among BLF's asset/liability management strategies has been the
emphasis on managing its interest rate sensitive liabilities in a manner
designed to attempt to reduce BLF's exposure during periods of fluctuating
interest rates. Management believes that the type and amount of BLF's interest
rate sensitive liabilities may reduce the potential impact that a rise in
interest rates might have on BLF's net interest income. BLF seeks to maintain a
core deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. BLF's demand,
money market, and NOW deposit accounts approximated 41.5%, 39.1% and 36.5% of
total deposits at March 31, 1997, and December 31, 1996 and 1995, respectively.
These accounts bore a weighted average cost of deposits of 1.08%, 1.20% and
1.17% during the three months ended March 31, 1997 and years ended December 31,
1996 and 1995, respectively. Management anticipates that these accounts will
continue to comprise a significant portion of BLF's total deposit base. BLF also
maintains a portfolio of liquid assets in order to reduce its overall exposure
to changes in market interest rates. At March 31, 1997, and December 31, 1996
and 1995, approximately 12.8%, 8.2% and 29.5%, respectively, of BLF's total
assets consisted of cash and due from banks, federal funds sold, and short-term
investment securities. In addition, at March 31, 1997 and December 31, 1996, Big
Lake National Bank's liquidity ratio was approximately 41.3% and 29.1%,
respectively. BLF also maintains a "floor," or minimum rate, on certain of its
floating or prime based loans. These floors allow BLF to continue to earn a
higher rate when the floating rate falls below the established floor rate.
49
<PAGE> 59
The following table sets forth certain information relating to BLF's
interest-earning assets and interest-bearing liabilities at December 31, 1996
that are estimated to mature or are scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
UNDER 3 TO 12 OVER
3 MONTHS MONTHS 1-5 YEARS 5 YEARS TOTALS
-------- -------- --------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Federal funds sold $ 992 $ -- $ -- $ -- $ 992
Loans (1) 6,018 18,204 11,489 971 36,682
Securities (2) 251 250 15,221 201 15,923
-------- -------- ------- ------ -------
Total rate-sensitive assets $ 7,261 $ 18,454 $26,710 $1,172 $53,597
======== ======== ======= ====== =======
Money market and NOW accounts (2) $ 11,157 $ -- $ -- $ -- $11,157
Savings accounts (2) 6,492 -- -- -- 6,492
Certificates of deposit (2) 9,015 13,825 3,673 -- 26,513
-------- -------- ------- ------ -------
Total rate-sensitive liabilities $ 26,664 $ 13,825 $ 3,673 $ -- $44,162
======== ======== ======= ====== =======
Gap (repricing differences) $(19,403) $ 4,629 $23,037 $1,172 $ 9,435
======== ======== ======= ====== =======
Cumulative Gap $(19,403) $(14,774) $ 8,263 $9,435
======== ======== ======= ======
Cumulative GAP/total assets (32.60)% (24.82)% 13.88% 15.85%
======== ======== ======= ======
Total Assets $59,518
=======
</TABLE>
- ----------------------
(1) In preparing the table above, adjustable-rate loans were included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed-rate loans were
scheduled according to their contractual maturities.
(2) Excludes noninterest bearing deposit accounts. Money market, NOW, and
savings deposits were regarded as maturing immediately. All other time
deposits were scheduled through the maturity dates. Investments were
scheduled through their contractual maturity dates.
FINANCIAL CONDITION
Lending Activities
A significant source of income for BLF is the interest earned on loans. At
March 31, 1997, BLF's total assets were $62.8 million and its net loans were
$39.6 million or 62.99% of total assets. At December 31, 1996, BLF's total
assets were $59.5 million and its net loans were $36.2 million or 60.93% of
total assets. At December 31, 1995, BLF's total assets were $55.8 million and
its net loans were $28.7 million or 51.35% of the total assets.
Big Lake National Bank's primary market area consists of Okeechobee and
Lake Placid, Florida, located in Okeechobee County and Highlands County,
Florida, respectively. This region's economy is primarily dependent upon
agriculture, light industry, and tourism. Okeechobee is located on the northern
end of Lake Okeechobee in South Central Florida and is the seat of government
for Okeechobee County. Okeechobee County has a diverse group of employers.
Services provide approximately 29% of jobs, followed by trade (28%), and
government (15%). The
50
<PAGE> 60
larger employers include Raulerson Hospital, Walpole, Inc. (trucking), Larson
Dairy, Inc. (milk producer), Wal-Mart (retail sales), McArthur Farms (milk
producer), Publix (grocery), and Winn-Dixie (grocery). Among the newer employers
in the area are Holiday Inn Express, Days Inn, and a correction facility that
provides approximately 300 jobs. Lake Okeechobee, located in the Southern
portion of the County is a 750 square mile lake bordered by four other counties.
The lake serves as a major tourist attraction. Big Lake National Bank's primary
market area also includes Lake Placid, Florida, which is located approximately
70 miles east of Fort Myers in Highlands County. Agriculture is the main income
producing industry around the city. The area also supports the citrus and cattle
industries. The larger employers in Highlands County include Florida Hospitals
Heartland, Highlands Regional Medical Center, Lesco (mowers, fertilizers),
Consolidated - Tomoka (citrus packing), Wellcraft Marine (boats), Ben Hill
Griffin (citrus), United Telephone of Florida, Barnett Banks, Georgia Pacific
(corrugated boxes), and Lin Pac (packaging products).
There is no assurance that the Okeechobee or Lake Placid communities will
continue to experience economic growth. Adverse conditions in any one or more of
the industries operating in such markets or slow-down in general economic
conditions could have an adverse effect on Big Lake National Bank.
Lending activities are conducted pursuant to a written policy which has
been adopted by BLF. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by a loan committee comprised of certain directors of Big Lake National Bank.
51
<PAGE> 61
The following table sets forth information concerning BLF's loan portfolio
by type of loan at the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ---------------
1997 1996 1995
---- ---- ----
% OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate loans $32,185 80.2% $29,149 79.2% $22,083 75.9%
Installment loans 5,348 13.3 5,436 14.8 4,677 16.1
Commercial and all other loans 2,583 6.5 2,208 6.0 2,329 8.0
------- ----- ------- ----- ------- -----
Total loans 40,116 100.0% 36,793 100.0% 29,089 100.0%
===== ===== =====
Less:
Deferred loan and unearned fees 60 61 63
Allowance for credit losses 492 470 363
------- ------- -------
Loans, net $39,564 $36,262 $28,663
======= ======= =======
</TABLE>
The following table reflects the contractual principal repayments by period
of BLF's loan portfolio at March 31, 1997 (excluding nonaccrual loans):
<TABLE>
<CAPTION>
1 YEAR 1 THROUGH AFTER
OR LESS 5 YEARS 5 YEARS TOTAL
------- ------- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real Estate loans $7,195 $ 7,569 $17,211 $31,975
Installment loans 1,375 3,670 278 5,323
Commercial and all other loans 440 1,777 363 2,580
------ ------- ------- -------
Total loans $9,010 $13,016 $17,852 $39,878
====== ======= ======= =======
Loans with maturities over one year:
Fixed rate $14,063
Variable rate 16,805
-------
Total maturities greater than one year $30,868
=======
</TABLE>
The following table sets forth total loans originated and repaid during the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------- --------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Originations:
Real Estate loans $4,138 $1,880 $ 8,769 $5,536
Installment loans 1,075 1,031 3,918 2,527
Commercial and all other loans 270 260 813 1,638
------ ------ ------- ------
Total loans originated 5,483 3,171 13,500 9,701
Principal reductions 2,160 1,094 5,796 5,587
------ ------ ------- ------
Increase in total loans $3,323 $2,077 $ 7,704 $4,114
====== ====== ======= ======
</TABLE>
52
<PAGE> 62
Asset Quality
Management seeks to maintain a high quality of assets through
conservative underwriting and sound lending practices. The majority of the loans
in BLF's loan portfolio are collateralized by residential and commercial real
estate mortgages. As of March 31, 1997, and December 31, 1996, and 1995,
approximately 80.2%, 79.2% and 75.9%, respectively, of the total loan portfolio
was collateralized by real estate of which 27.7%, 24.9% and 23.2% of the total
loan portfolio was secured by commercial real estate as of March 31, 1997, and
December 31, 1996 and 1995, respectively. The level of delinquent loans and real
estate owned also is relevant to the credit quality of a loan portfolio. As of
March 31, 1997, total nonperforming assets were $238,000 or 0.4% of total
assets, compared to $111,000 or 0.2% of total assets and $126,000, or 0.2% of
total assets at December 31, 1996 and 1995, respectively.
In an effort to maintain the quality of the loan portfolio, management
seeks to minimize higher risk types of lending. In view of the relative
significance of real estate related loans, a downturn in the value of the real
estate could have an adverse impact on BLF's profitability. However, as part of
its loan portfolio management strategy, BLF generally limits its loans to a
maximum of 80% of the value of the underlying real estate as determined by
appraisal. In addition, knowledgeable members of management make physical
inspections of properties being considered for mortgage loans. Management
believes that such precautions reduce BLF's exposure to the risk associated with
a downturn in real estate values.
Commercial loans also entail risks since repayment is usually dependent
upon the successful operation of the commercial enterprise. They also are
subject to adverse conditions in the economy. Commercial loans are generally
riskier than mortgage loans because they are typically underwritten on the basis
of the ability to repay from the cash flow of a business rather than on the
ability of the borrower or guarantor to repay. Further, the collateral
underlying a commercial loan may depreciate over time, cannot be appraised with
as much precision as real estate, and may fluctuate in value based on the
success of the business.
Loan concentrations are defined as amounts loaned to a number of
borrowers engaged in similar activities which would cause them to be similarly
impacted by economic or other conditions. BLF, on a routine basis, monitors
these concentrations in order to consider adjustments in its lending practices
to reflect economic conditions, loan to deposit ratios, and industry trends.
Concentrations of loans in the following categories constituted the total loan
portfolio as of March 31, 1997:
<TABLE>
<S> <C>
Real estate mortgage loans 80.2%
Installment and other loans 14.6%
Commercial loans 5.2%
-----
100.0%
=====
</TABLE>
The Loan Committee of the Board of Directors of Big Lake National Bank
concentrates its efforts and resources, and that of its senior management and
lending officers, on loan review and underwriting procedures. Internal controls
include ongoing reviews of loans made to monitor documentation and the existence
and valuations of collateral. In addition, management of BLF has established a
review process with the objective of identifying, evaluating, and initiating
necessary corrective action for marginal loans. The goal of the loan review
process is to address classified and nonperforming loans as early as possible.
Classification of Assets
Generally, interest on loans accrues and is credited to income based
upon the principal balance outstanding. It is management's policy to discontinue
the accrual of interest income and classify a loan as nonaccrual when principal
or interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the
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<PAGE> 63
obligation. Consumer installment loans are generally charged-off after 90 days
of delinquency unless adequately collateralized and in the process of
collection. Loans are not returned to accrual status until principal and
interest payments are brought current and future payments appear reasonably
certain. Interest accrued and unpaid at the time a loan is placed on nonaccrual
status is charged against interest income. Subsequent payments received are
applied to the outstanding principal balance.
Real estate acquired by BLF as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate owned ("OREO"). BLF
considers the collateral for a loan in-substance foreclosed when the debtor has
little or no equity in the collateral, expects repayment for the loan to come
only from the operation and sale of the collateral, and the borrower has either
effectively abandoned control of the collateral or has retained control of the
collateral but will be unable to rebuild equity in the collateral or repay the
loan. At March 31, 1997 and December 31, 1996 and 1995, no loans were considered
in-substance foreclosed.
OREO properties are recorded at the lower of cost or fair value less
estimated selling costs, and the estimated loss, if any, is charged to the
allowance for credit losses at the time it is transferred to OREO. Further
allowances for losses in OREO are recorded at the time management believes
additional deterioration in value has occurred.
The following tables sets forth certain information on nonaccrual loans
and real estate owned, the ratio of such loans and real estate owned to total
assets as of the dates indicated, and certain other related information:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ---------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans:
Real estate $210 $ 85 $ 30
Installment loans 25 -- --
Commercial and all other loans 3 26 --
---- ---- ----
Total nonaccrual loans 238 111 30
Accruing loans over 90 days delinquent -- -- --
Troubled debt restructurings -- -- --
---- ---- ----
Total nonperforming loans 238 111 30
Other real estate owned:
Real estate acquired by foreclosure or
deed in lieu of foreclosure -- -- 96
---- ---- ----
Total nonperforming loans and other real
estate owned $238 $111 $126
==== ==== ====
Total nonperforming loans as a percentage
of total loans 0.59% 0.30% 0.10%
==== ==== ====
Total nonperforming loans as a percentage
of total assets 0.38% 0.19% 0.05%
==== ==== ====
Total nonperforming loans and real estate
owned as a percentage of total assets 0.38% 0.19% 0.23%
==== ==== ====
</TABLE>
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<PAGE> 64
Allowance for Credit Losses
In originating loans, BLF recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a collateralized loan, the quality of the
collateral for the loan as well as general economic conditions. It is
management's policy to attempt to maintain an adequate allowance for credit
losses based on, among other things, BLF's historical loan loss experience,
evaluation of economic conditions and regular reviews of any delinquencies and
loan portfolio quality. Specific allowances are provided for individual loans
when ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due and
considering the net realizable value of the collateral for the loan. Management
recognizes the greater inherent risks in connection with commercial and consumer
lending. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Provision for Credit Losses."
Management continues to actively monitor BLF's asset quality and to
charge-off loans against the allowance for credit losses when appropriate or to
provide specific loss allowances when necessary. Although management believes it
uses the best information available to make determinations with respect to the
allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in making
the initial determinations. BLF's allowance for credit losses at December 31,
1995 was $363,000. BLF increased the allowance to $470,000 as of December 31,
1996 and $492,000 at March 31, 1997, consistent with the increase in the loan
portfolio, reflecting management's intent to maintain reserves at a level
management believes to be adequate when compared with BLF's nonperforming loans
and total loans.
The following table sets forth information with respect to activity in
BLF's allowance for credit losses during the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------- ---------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period $ 470 $ 363 $ 363 $ 323
Charge-offs:
Real estate loans -- -- 8 --
Installment loans 3 -- 23 26
Commercial and all other loans -- 3 15 10
-------- -------- -------- -------
Total loans charged-off 3 3 46 36
Recoveries 1 4 21 6
-------- -------- -------- -------
Net charge-offs 2 (1) 25 30
-------- -------- -------- -------
Provision for credit losses charged to
operating expenses 24 36 132 70
-------- -------- -------- -------
Allowance at end of period $ 492 $ 400 $ 470 $ 363
======== ======== ======== =======
Net charge-offs as a percentage of average
loans outstanding 0.01% --% 0.08% 0.11%
======== ======== ======== =======
Allowance for credit losses as a percentage
of period-end total loans 1.23% 1.29% 1.28% 1.25%
======== ======== ======== =======
Allowance for credit losses as a percentage
of nonperforming loans 206.72% 115.61% 423.42% 1210.00%
======== ======== ======== =======
Average loans outstanding, net $ 37,988 $ 29,788 $ 32,531 $26,841
======== ======== ======== =======
Period-end total loans $ 40,056 $ 31,103 $ 36,732 $29,026
======== ======== ======== =======
</TABLE>
55
<PAGE> 65
BLF classifies its loan portfolio for internal purposes as mortgage
loans, installment loans and commercial loans. BFL prepares its quarterly
computation of allowance for losses in this manner. The following table presents
information regarding the BLF's total allowance for losses as well as the
allocation of such amounts to the various categories of loans (dollars in
thousands):
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
--------------- -------------------------------
1997 1996 1995
--------------- --------------- ---------------
% OF % OF % OF
LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Mortgage loan system $229 46.5% $224 47.7% $164 45.2%
Installment loan system 89 18.1 86 18.3 65 17.9
Commercial loan system 174 35.4 160 34.0 134 36.9
---- ----- ---- ----- ---- -----
Total allowance for credit losses $492 100.0% $470 100.0% $363 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
The allowance for credit losses represented 1.23% of the total loans
outstanding as of March 31, 1997, compared with 1.28% of the total loans
outstanding as of December 31, 1996, and 1.25% of the total loans outstanding at
December 31, 1995.
Investment Securities
BLF's investment securities portfolio at March 31, 1997 primarily
consisted of United States Government agency obligations. The following table
sets forth the amortized cost of the BLF's investment portfolio at the dates
indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ---------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Investment securities:
Available-for-sale:
U.S. Government agency obligations $14,989 $15,237 $10,260
Other securities 92 92 92
------- ------- -------
Total available-for-sale 15,081 15,329 10,352
Held-to-maturity:
Obligations of states and
municipalities 801 801 1,554
------- ------- -------
Total investment securities, at amortized cost $15,882 $16,130 $11,906
======= ======= =======
</TABLE>
56
<PAGE> 66
The following table sets forth, by maturity distribution, certain
information pertaining to the investment securities portfolio as follows:
<TABLE>
<CAPTION>
AFTER ONE YEAR AFTER FIVE YEARS
ONE YEAR OR LESS TO FIVE YEARS TO TEN YEARS AFTER TEN YEARS TOTAL
---------------- ---------------- ------------------ ----------------- ------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1997:
U.S. Government and
agency securities $ 3,231 5.56% $11,548 5.98% $ -- --% $ -- --% $14,779 5.89%
Obligations of states
and municipalities 50 6.56% 550 6.02% 50 4.80% 151 6.95% 801 6.15%
Other securities -- --% -- --% -- --% 92 3.89% 92 3.89%
------- ------- ------- ------- -------
Total $ 3,281 5.58% $12,098 5.98% $ 50 4.80% $ 243 5.79% $15,672 5.89%
======= ======= ======= ======= =======
December 31, 1996:
U.S. Government and
agency securities $ 501 6.27% $14,622 5.89% $ -- --% $ -- --% $15,123 5.90%
Obligations of states
and municipalities -- --% 600 6.06% 50 4.80% 151 6.95% 801 6.15%
Other securities -- --% -- --% -- --% 92 3.89% 92 3.89%
------- ------- ------- ------- -------
Total $ 501 6.27% $15,222 5.90% $ 50 4.80% $ 243 5.79% $16,016 5.90%
======= ======= ======= ======= =======
December 31, 1995:
U.S. Government and
agency securities $ 2,957 5.66% $ 7,073 6.12% $ 246 6.02% $ -- --% $10,276 5.98%
Obligations of states
and municipalities 1,003 7.20% 350 6.07% 50 4.80% 151 6.95% 1,554 6.84%
Other securities -- --% -- --% -- --% 92 3.89% 92 3.89%
------- ------- ------- ------- -------
Total $ 3,960 6.05% $ 7,423 6.12% $ 296 5.81% $ 243 5.79% $11,922 6.08%
======= ======= ======= ======= =======
</TABLE>
57
<PAGE> 67
Deposit Activities
Deposits are the major source of BLF's funds for lending and other
investment purposes. Deposits are attracted principally from within BLF's
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more) and retirement savings plans.
Maturity terms, service fees and withdrawal penalties are established
by BLF on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals and federal regulations.
FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits by offering rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having the same type
of charter in such depository institutions' normal market area. Under these
regulations, "well capitalized" depository institutions may accept, renew, or
rollover deposits at such rates without restriction, "adequately capitalized"
depository institutions may accept, renew or rollover deposits at such rates
with a waiver from the FDIC (subject to certain restrictions on payments of
rates), and "undercapitalized" depository institutions may not accept, renew or
rollover deposits at such rates. The regulations contemplate that the
definitions of "well capitalized," "adequately capitalized" and
"undercapitalized" will be the same as the definitions adopted by the agencies
to implement the prompt corrective action provisions of applicable law. See
"Supervision, Regulation and Governmental Policy -- Capital Requirements." As of
March 31, 1997, Big Lake National Bank met the definition of a "well
capitalized" depository institution.
The following table shows the distribution of, and certain other
information relating to, BLF's deposit accounts by type:
<TABLE>
<CAPTION>
AT MARCH 31 AT DECEMBER 31,
----------- ---------------
1997 1996 1995
------------------- ------------------- -------------------
% OF % OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT AMOUNT DEPOSIT
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $11,915 20.8% $10,083 18.6% $ 6,846 13.5%
NOW deposits 7,589 13.2 6,860 12.6 8,210 16.2
Money market deposits 4,319 7.5 4,297 7.9 3,470 6.8
Savings deposits 7,041 12.3 6,492 12.0 6,466 12.7
------- ----- ------- ----- ------- -----
Subtotal 30,864 53.8 27,732 51.1 24,992 49.2
------- ----- ------- ----- ------- -----
Certificates of deposit:
3.00% - 3.99% -- -- -- -- 85 0.1
4.00% - 4.99% 12,405 21.6 11,868 21.9 4,528 8.9
5.00% - 5.99% 11,277 19.7 9,457 17.4 13,542 26.7
6.00% - 6.99% 2,516 4.4 4,834 8.9 6,994 13.8
7.00% - 7.99% 314 0.5 354 .7 652 1.3
------- ----- ------- ----- ------- -----
Total certificates of deposit(1) 26,512 46.2 26,513 48.9 25,801 50.8
------- ----- ------- ----- ------- -----
Total deposits $57,376 100.0% $54,245 100.0% $50,793 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
- --------------------------
(1) Includes individual retirement accounts ("IRAs") totaling $479, $252
and $612 at March 31, 1997, and December 31, 1996 and 1995,
respectively, all of which are in the form of certificates of deposit.
58
<PAGE> 68
The following tables show the average amount outstanding and the
average rate paid on each of the following deposit account categories during the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
-------------------------- --------------------------
MARCH 31, 1997 MARCH 31, 1996
-------------------------- --------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand, money market
and NOW $22,627 1.08% $18,847 1.25%
Savings deposits 5,596 2.57% 5,726 3.28%
Certificates of deposit 26,539 5.20% 25,548 5.39%
------- -------
Total deposits $54,762 3.23% $50,121 3.58%
======= =======
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995
-------------------------- --------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand, money market
and NOW $19,755 1.20% $15,415 1.17%
Savings deposits 5,781 3.11% 5,491 2.73%
Certificates of deposit 24,646 5.30% 15,831 5.57%
------- -------
Total deposits $50,182 3.43% $36,737 3.30%
======= =======
</TABLE>
BLF does not have a concentration of deposits from any one source, the
loss of which would have a material adverse effect on BLF. Management believes
that substantially all of BLF's depositors are residents in its primary market
areas. BLF currently does not accept brokered deposits. As shown in the tables
below, a significant amount of BLF's certificates of deposit will mature during
the year ending March 31, 1998. The high volume of maturities during this period
is primarily due to customer demand for certificates of deposit having original
maturities of 12 months or less. Based upon current and anticipated levels of
interest rates and past practice, BLF management anticipates that substantially
all of BLF's certificates of deposit maturing during this time period will be
renewed or replaced by certificates of deposit issued to other customers at
competitive market rates, which may be higher or lower than the rates currently
being paid. Consequently, BLF management does not believe that the maturity of
BLF's certificates of deposit during the year ending March 31, 1998, will have a
material adverse effect on BLF's liquidity. However, if BLF is required to pay
substantially higher rates to obtain the renewal of these or other certificates
of deposit or alternative sources of funds, the higher net interest expense
could have a material adverse effect on BLF's net income.
59
<PAGE> 69
The following tables present by various interest rate categories the
amounts of certificates of deposit at March 31, 1997, December 31, 1996 and 1995
which mature during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
---------------------
1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
At March 31, 1997:
4.00% - 4.99% $12,242 $ 147 $ 16 $ -- $ -- $12,405
5.00% - 5.99% 7,916 2,181 489 76 615 11,277
6.00% - 6.99% 1,458 264 227 80 487 2,516
7.00% - 7.99% -- -- 314 -- -- 314
------- ------- ------- ------- ------- -------
Total certificates of deposit $21,616 $ 2,592 $ 1,046 $ 156 $ 1,102 $26,512
======= ======= ======= ======= ======= =======
<CAPTION>
YEAR ENDING MARCH 31,
---------------------
1997 1998 1999 2000 2001 TOTAL
---- ---- ---- ---- ---- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1996:
4.00% - 4.99% $11,626 $ 193 $ 49 $ -- $ -- $11,868
5.00% - 5.99% 7,272 1,207 445 62 471 9,457
6.00% - 6.99% 4,175 272 111 59 217 4,834
7.00% - 7.99% 44 -- 206 104 -- 354
------- ------- ------- ------- ------- -------
Total certificates of deposit $23,117 $ 1,672 $ 811 $ 225 $ 688 $26,513
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
1996 1997 1998 1999 2000 200 TOTAL
---- ---- ---- ---- ---- --- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1995:
3.00% - 3.99% $ 85 $ -- $ -- $ -- $ -- $ -- $ 85
4.00% - 4.99% 4,409 94 25 -- -- -- 4,528
5.00% - 5.99% 12,249 736 241 251 65 -- 13,542
6.00% - 6.99% 5,572 652 277 98 178 217 6,994
7.00% - 7.99% 347 -- -- 205 100 -- 652
------- ------- ------- ------- ------- ------- -------
Total certificates of deposit $22,662 $ 1,482 $ 543 $ 554 $ 343 $ 217 $25,801
======= ======= ======= ======= ======= ======= =======
</TABLE>
60
<PAGE> 70
Jumbo certificates ($100,000 and over) mature as follows:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ----------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Due in three months or less $ 911 $1,835 $1,802
Due from three months to one year 2,693 1,767 2,607
Due over one year 458 300 300
------ ------ ------
$4,062 $3,902 $4,709
====== ====== ======
</TABLE>
The following table sets forth the net deposit flows of BLF during the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------ ----------
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net increase before interest credited $2,791 $206 $1,673 $16,582
Net interest credited 413 460 1,779 912
------ ---- ------ -------
Net deposit increase $3,204 $666 $3,452 $17,494
====== ==== ====== =======
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data concerning BLF
presented in this Proxy Statement have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary impact of inflation on the operations of BLF is reflected
in increased operating costs. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature. As
a result, changes in interest rates have a more significant impact on the
performance of a financial institution than do the effects of changes in the
general rate of inflation and changes in prices. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of
goods and services.
FUTURE ACCOUNTING REQUIREMENTS
SFAS No. 125 and its amendment SFAS No. 127 apply to certain transfers
and servicing of financial assets and extinguishments of liabilities effective
January 1, 1997 (except as deferred by SFAS No. 127). BLF has not transferred
and serviced significant financial assets nor does it anticipate that these
Statements will have any material impact on the financial statements of BLF.
SFAS Nos. 128 and 129 addressing earnings per share and disclosure of
information about the capital structure, respectively, are effective for BLF's
financial statements issued after December 15, 1997. SFAS No. 128 establishes
standards for the computation and presentation of earnings per share ("EPS").
This statement is not expected to have a material impact on the financial
statements of BLF. SFAS No. 129 requires only additional disclosure and will not
have any material impact on the financial statements of BLF.
61
<PAGE> 71
BUSINESS OF BLF
GENERAL
BLF was incorporated under the laws of the State of Florida on August
8, 1985. BLF is a registered bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHC Act") and owns all of the voting shares of Big
Lake National Bank. BLF has no significant operations other than owning the
stock of Big Lake National Bank. Big Lake National Bank, which is a national
banking association, is the only source of revenue for BLF.
Big Lake National Bank provides a range of consumer and commercial
banking services to individuals, businesses and industries. The basic services
offered by Big Lake National Bank include: demand interest-bearing and
noninterest bearing accounts, money market deposit accounts, NOW accounts, time
deposits, safe deposit services, credit cards, cash management, direct deposits,
notary services, money orders, night depository, travelers' checks, cashier's
checks, domestic collections, savings bonds, bank drafts, automated teller
services, drive-in tellers, and banking by mail. In addition, Big Lake National
Bank makes secured and unsecured commercial and real estate loans and issues
stand-by letters of credit. Big Lake National Bank provides automated teller
machine (ATM) cards, as a part of the HONOR ATM Network, thereby permitting
customers to utilize the convenience of larger ATM networks. In addition to the
HONOR ATM Network, the Bank also provides the Presto and Cirrus systems for ATM
use. In addition to the foregoing services, the offices of Big Lake National
Bank provide customers with extended banking hours. Big Lake National Bank does
not have trust powers and, accordingly, no trust services are provided.
The revenues of Big Lake National Bank are primarily derived from
interest on, and fees received in connection with, real estate and other loans,
and from interest and dividends from investment and mortgage-backed securities,
and short-term investments. The principal sources of funds for Big Lake National
Bank's lending activities are its deposits, repayment of loans, and the sale and
maturity of investment securities. The principal expenses of Big Lake National
Bank are the interest paid on deposits, and operating and general administrative
expenses.
As is the case with banking institutions generally, Big Lake National
Bank's operations are materially and significantly influenced by general
economic conditions and by related monetary and fiscal policies of financial
institution regulatory agencies, including the Federal Reserve and the OCC.
Deposit flows and costs of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other types of loans,
which in turn is affected by the interest rates at which such financing may be
offered and other factors affecting local demand and availability of funds. Big
Lake National Bank faces strong competition in the attraction of deposits (its
primary source of lendable funds) and in the origination of loans. See
"Competition."
62
<PAGE> 72
LENDING ACTIVITIES
Big Lake National Bank offers a range of lending services, including
real estate, consumer and commercial loans, to individuals and small businesses
and other organizations that are located in or conduct a substantial portion of
their business in Big Lake National Bank's market area. Big Lake National Bank's
total loans at March 31, 1997 were $40.1 million, or 63.8% of total BLF
consolidated assets. The interest rates charged on loans vary with the degree of
risk, maturity, and amount of the loan, and are further subject to competitive
pressures, money market rates, availability of funds, and government
regulations. Big Lake National Bank has no foreign loans or loans for highly
leveraged transactions.
Big Lake National Bank's loans are concentrated in three major areas:
commercial loans, real estate loans, and consumer loans. A majority of Big Lake
National Bank's loans are made on a secured basis. As of March 31, 1997,
approximately 80% of the loan portfolio consisted of loans secured by mortgages
on real estate, of which approximately 48% of the total loan portfolio is
secured by 1-4 family residential properties.
Big Lake National Bank's commercial loan portfolio includes loans to
individuals and small-to-medium sized businesses located primarily in Okeechobee
and Highlands Counties for working capital, equipment purchases, and various
other business purposes. A majority of Big Lake National Bank's commercial loans
are secured by real estate, equipment, or similar assets, but these loans may
also be made on an unsecured basis. Commercial loans may be made at variable or
fixed rates of interest. Commercial lines of credit are typically granted on a
one-year basis, with loan covenants and monetary thresholds. Other commercial
loans with terms or amortization schedules of longer than one year will normally
carry interest rates which vary with the prime lending rate and will become
payable in full and are generally refinanced in three to five years. Commercial
and industrial loans not secured by real estate amounted to approximately 5% of
the total loan portfolio as of March 31, 1997.
Big Lake National Bank's real estate loans are secured by mortgages and
consist primarily of loans to individuals and businesses for the purchase,
improvement of or investment in real estate and for the construction of
single-family residential units or the development of single-family residential
building lots. These real estate loans may be made at fixed or variable interest
rates. Big Lake National Bank generally does not make fixed-rate commercial real
estate loans for terms exceeding three years. Loans in excess of three years are
generally adjustable. Big Lake National Bank's residential real estate loans
generally are repayable in monthly installments based on up to a 30-year
amortization schedule with variable interest rates.
Big Lake National Bank's consumer loan portfolio consists primarily of
loans to individuals for various consumer purposes, but includes some business
purpose loans which are payable on an installment basis. The majority of these
loans are for terms of less than five years and are secured by liens on various
personal assets of the borrowers, but consumer loans may also be made on an
unsecured basis. Consumer loans are made at fixed and variable interest rates,
and are often based on up to a five-year amortization schedule.
For additional information regarding Big Lake National Bank's loan
portfolio, see "BLF'S Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition."
Loan originations are derived from a number of sources. Loan
originations can be attributed to direct solicitation by Big Lake National
Bank's loan officers, existing customers and borrowers, advertising, walk-in
customers and, in some instances, referrals from brokers.
Certain credit risks are inherent in making loans. These include
prepayment risks, risks resulting from uncertainties in the future value of
collateral, risks resulting from changes in economic and industry conditions,
and risks inherent in dealing with individual borrowers. In particular, longer
maturities increase the risk that economic conditions will change and adversely
affect collectibility. Big Lake National Bank attempts to minimize loan losses
through various means. In particular, on larger credits, Big Lake National Bank
generally relies on
63
<PAGE> 73
the cash flow of a debtor as the source of repayment and secondarily on the
value of the underlying collateral. In addition, Big Lake National Bank attempts
to utilize shorter loan terms in order to reduce the risk of a decline in the
value of such collateral.
DEPOSIT ACTIVITIES
Deposits are the major source of Big Lake National Bank's funds for
lending and other investment activities. Big Lake National Bank considers the
majority of its regular savings, demand, NOW and money market deposit accounts
to be core deposits. These accounts comprised approximately 53.8% of Big Lake
National Bank's total deposits at March 31, 1997. Approximately 46.2% of Big
Lake National Bank's deposits at March 31, 1997 were certificates of deposit.
Generally, Big Lake National Bank attempts to maintain the rates paid on its
deposits at a competitive level. Time deposits of $100,000 and over made up
approximately 7.1% of Big Lake National Bank's total deposits at March 31, 1997.
The majority of the deposits of Big Lake National Bank are generated from
Okeechobee County. Big Lake National Bank does not accept brokered deposits. For
additional information regarding Big Lake National Bank's deposit accounts, see
"BLF'S Management's Discussion and Analysis of Financial Condition and Results
of Operations - Financial Condition."
EMPLOYEES
At March 31, 1997, BLF and Big Lake National Bank employed 38 full-time
(including its executive officers) and no part-time employees. The employees are
not represented by a collective bargaining unit. BLF and Big Lake National Bank
consider relations with employees to be good.
PROPERTIES
The main office of BLF and Big Lake National Bank is located at 1409 S.
Parrott Avenue, Okeechobee, Florida 34974, in a two-story building of
approximately 8,010 square feet, which is owned by BLF. Big Lake National Bank
also has banking offices located at 1801 Highway 441 SE, Okeechobee, Florida
34974, in a one-story building of approximately 1,196 square feet, which is
owned by Big Lake National Bank and a branch at 199 N. U.S. Highway 27, Lake
Placid, Florida 33852, in a one-story building of approximately 2,000 square
feet, which is owned by Big Lake National Bank.
LITIGATION
BLF and/or Big Lake National Bank are periodically parties or a party
to or otherwise involved in legal proceedings arising in the normal course of
business, such as claims to enforce liens, claims involving the making and
servicing of real property loans, and other issues incident to its business.
Management does not believe that there is any pending or threatened proceeding
against BLF and/or Big Lake National Bank which, if determined adversely, would
have a material adverse effect on the business, results of operations, or
financial position of BLF and/or Big Lake National Bank.
64
<PAGE> 74
MANAGEMENT
Board of Directors. The Board of Directors of BLF currently consists of
seven directors, divided into three classes. Each director is elected to serve
for a three-year term or until his or her successor is elected. Each director of
BLF currently also serves as a director of Big Lake National Bank. The following
table sets forth certain information with respect to the directors of BLF:
<TABLE>
<CAPTION>
DIRECTOR OR OFFICER PRINCIPAL OCCUPATION
OF BLF OR BIG LAKE DIRECTOR AND BUSINESS
NATIONAL BANK TERM EXPERIENCE DURING
NAME AND AGE SINCE EXPIRES PAST FIVE YEARS
-------------------------- ------------------- -------- ---------------------------------
<S> <C> <C> <C>
John W. Abney, Sr., 47 1986 1999 Building Contractor
Mary Beth Cooper, 48 1986 1999 Homemaker
H. G. Culbreth, Jr., 51 1986 1998 Auto Franchise Dealer
Henry C. Kelly, 79 1986 2000 Retired
Joe G. Mullins, 57 1988 1998 President, Big Lake National Bank
Bobby H. Tucker, 47 1993 1998 Real Estate Broker
Edwin E. Walpole, III, 61 1986 1999 Business Owner
</TABLE>
Executive Officers. BLF has four officers: Edwin E. Walpole, III
(Chairman, President and Chief Executive Officer), Joe G. Mullins (Executive
Vice President and Chief Administrative Officer), Mary Beth Cooper (Secretary),
and Anita DeWitt (Treasurer), of which only Messrs. Walpole and Mullins are
executive officers. The officers of BLF and Big Lake National Bank serve at the
pleasure of the Board of Directors of BLF and Big Lake National Bank,
respectively. The following sets forth information regarding the executive
officers of Big Lake National Bank.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
AND BUSINESS
EXPERIENCE DURING
NAME AND AGE PAST FIVE YEARS
- ------------ -----------------------------------------------------
<S> <C>
Joe G. Mullins, 57 President, Big Lake National Bank
Anita DeWitt, 36 Vice President/Operations Officer, Big Lake National
Bank
Rick Justice, 36 Senior Lending Officer/Vice President of the Bank
(September 1995 to present); Vice
President/Commercial Lender of SouthTrust Bank
(February 1995 to September 1995); Commercial Lender
of Pikeville National Bank (July 1994 to February
1995); Vice President/Loan Officer of Citizens Bank
of Frostproof (July 1993 to July 1994); and Assistant
Vice President/Business Banker (June 1987 to July
1993) of Barnett Bank/First Florida Bank.
</TABLE>
65
<PAGE> 75
<TABLE>
<S> <C>
Brenda Mathews, 44 Vice President/Marketing Director of the Bank
(January 1996 to present); Vice
President/Correspondent Relations of Independent
Bankers' Bank of Florida (December 1994 to January
1996); President and Chief Operating Officer of
Governors Bank (December 1991 to December 1994) .
</TABLE>
COMPENSATION AND BENEFITS
The table below sets forth certain information with respect to
compensation paid by Big Lake National Bank to Mr. Mullins (the Executive Vice
President and Chief Administrative Officer of BLF and the President and Chief
Executive Officer of Big Lake National Bank) during the years presented. No
other executive officer of Big Lake National Bank received a total salary and
bonus in excess of $100,000 in 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION COMPENSATION(1)
- ------------------ ---- --------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Joe G. Mullins 1996 $96,000 $ -- $ -- $1,419
Executive Vice President and
Chief Administrative Officer 1995 $91,500 $3,897 $ -- $2,689
of BLF and the President
and Chief Executive Officer 1994 $88,000 $ -- $ -- $2,148
Big Lake National Bank
</TABLE>
- ------------------
(1) Represents amounts contributed by Big Lake National Bank to Mr.
Mullins' account pursuant to the Big Lake National Bank Profit Sharing
Plan.
Directors of BLF are not paid any fees for meetings of BLF. Directors
of Big Lake National Bank are paid fees of $350, with the Chairman receiving
$450, for each meeting. Non-employee directors of Big Lake National Bank are
also paid $75 for each committee meeting.
Stock Option Plan. BLF has a stock option plan. The plan authorizes the
issuance of options for approximately 18,213 shares to certain BLF directors. As
of the date of this Proxy Statement, options exercisable for an aggregate of
approximately 18,213 shares of BLF Common Stock were outstanding and held by
certain Big Lake National Bank directors at an exercise price of $10.00 per
share. The options terminate June 30, 1998.
Profit Sharing Plan. Big Lake National Bank has adopted a 401(k) Profit
Sharing Plan. Employees are eligible to participate after meeting certain length
of service requirements. Each year, participants may elect to defer up to 15% of
compensation instead of receiving that amount in cash. Big Lake National Bank
may contribute a percentage amount provided that only salary reductions up to 6%
of compensation will be considered. Big Lake National Bank also may contribute a
discretionary amount. Amounts deferred by participants are fully vested.
Contributions by Big Lake National Bank vest based upon percentage amounts of
20% to 100% over three to seven years of service.
CERTAIN TRANSACTIONS
BLF has had, and expects to have in the future, banking transactions in
the ordinary course of business with certain of its directors and executive
officers and their associates. As of March 31, 1997, the directors and executive
officers of BLF and their associates, as a group, were indebted to BLF in the
aggregate amount of approximately $1,239,000. All loans included in such
transactions were made in the ordinary course of business,
66
<PAGE> 76
on substantially the same terms (including interest rate and collateral) as
those prevailing at the time for comparable transactions with other persons, and
in the opinion of management of BLF did not involve more than the normal risk of
collectibility or present other unfavorable features.
MANAGEMENT AND PRINCIPAL STOCK OWNERSHIP
Directors and Executive Officers
The following table sets forth the beneficial ownership of outstanding
shares of BLF Common Stock as of March 31, 1997 by BLF's current directors, and
by current directors and executive officers as a group:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AMOUNT/NATURE OF PERCENT
(AND ADDRESS OF 5% OWNER) BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------- ----------------------- --------
<S> <C> <C>
John W. Abney, Sr. 9,982(2) 2.98%
Mary Beth Cooper 4,163 1.24%
H. Gilbert Culbreth, Jr. 14,454(3) 4.32%
Henry C. Kelly 50,365(4) 15.05%
P.O. Box 176
Okeechobee, FL 34973-0176
Joe G. Mullins 11,941 3.57%
Bobby H. Tucker 670(5) .20%
Edwin E. Walpole III 61,743(6) 18.45%
P.O. Box 1177
Okeechobee, FL 34973-1177
All directors and executive
officers as a group (nine persons) 153,893 43.99%
</TABLE>
- ------------------------------
(1) Information related to beneficial ownership is based upon information
available to BLF and also includes as to each director the number of
shares listed below, which represents shares the individual has the
right to acquire pursuant to presently exercisable options:
<TABLE>
<CAPTION>
Name of Individual Number of Shares
------------------ ----------------
<S> <C>
John W. Abney, Sr. 3,035.49
Mary Beth Cooper 3,035.49
H. Gilbert Culbreth, Jr. 3,035.49
Henry C. Kelly 3,035.49
Joe G. Mullins 3,035.49
Edwin E. Walpole, III 3,035.49
---------
18,212.94
=========
</TABLE>
67
<PAGE> 77
(2) Includes 618 shares held in trust for his children, 563 shares held by
a company owned by him and 5,767 shares held as trustee
(3) Includes 110 shares held jointly with his son, 5,655 shares held by a
company owned by him, and 5,655 shares held jointly with his spouse
(4) Includes 13,451 shares held in trust
(5) Shares held jointly with spouse
(6) Includes 1,129 shares held by a company owned by him, 28,623 shares
held by his individual retirement account, and 1,102 shares held
jointly with his daughter
Other Principal Shareholders
In addition to Messrs. Walpole and Kelly, the following are the only
individuals beneficially owning more than 5% of BLF Common Stock on March 31,
1997:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT - NATURE OF
OF OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------- -------------------- ----------------
<S> <C> <C>
Robert L. Mace 39,028 12.64%
c/o Fijian RV Park
6500 Hwy 441 S.
Okeechobee, FL 34974
Curtis S. Fry 16,551 5.36%
111 San Benito Street
Clewiston, FL 33440
</TABLE>
68
<PAGE> 78
CNB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
CNB's principal asset is its ownership of Clewiston National Bank.
Accordingly, CNB's results of operations are primarily dependent upon the
results of operations of Clewiston National Bank. Clewiston National Bank
conducts a commercial banking business which consists of attracting deposits
from the general public and applying those funds to the origination of
commercial, consumer and real estate loans (including commercial loans
collateralized by real estate). Clewiston National Bank's profitability depends
primarily on net interest income, which is the difference between interest
income generated from interest-earning assets (i.e., loans and investments) less
the interest expense incurred on interest-bearing liabilities (i.e., customer
deposits and borrowed funds). Net interest income is affected by the relative
amounts of interest-earning assets and interest-bearing liabilities, and the
interest-rate earned and paid on these balances. Net interest income is
dependent upon Clewiston National Bank's interest-rate spread, which is the
difference between the average yield earned on its interest-earning assets and
the average rate paid on its interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income. The interest rate spread is
impacted by interest rates, deposit flows, and loan demand. Additionally, and to
a lesser extent, Clewiston National Bank's profitability is affected by such
factors as the level of noninterest income and expenses, the provision for
credit losses, and the effective tax rate. Noninterest income consists primarily
of service fees on deposit accounts. Noninterest expense consists of
compensation and employee benefits, occupancy related expenses, deposit
insurance premiums paid to the FDIC, and other operating expenses.
Management's discussion and analysis of earnings and related financial
data are presented herein to assist investors in understanding the consolidated
financial condition of CNB at, and results of operations of CNB for the years
ended, December 31, 1996 and 1995, and for the three-month periods ended March
31, 1997 and 1996. For purposes of the following discussion, CNB includes
Clewiston National Bank, unless otherwise indicated. The following discussion
should be read in conjunction with the consolidated financial statements and
related footnotes presented elsewhere herein.
LIQUIDITY AND CAPITAL RESOURCES
A national bank is required to maintain a liquidity reserve of at least
3% of its net transaction deposit accounts under $49.3 million. When net
transaction deposit accounts exceed $49.3 million, the reserve requirements are
$1,479,000 plus 10% of the amount over $49.3 million. The liquidity reserve may
consist of cash on hand, cash on demand deposit with other correspondent banks,
and other investments and short-term marketable securities as determined by the
rules of the OCC, such as federal funds sold and United States securities or
securities guaranteed by the United States. As of March 31, 1997 and December
31, 1996 and 1995, Clewiston National Bank had liquidity ratios of 60.5%, 44.5%
and 96.3%, respectively.
CNB's principal sources of funds are those generated by Clewiston
National Bank. Clewiston National Bank's principal sources of funds are net
increases in deposits, principal and interest payments on loans, and proceeds
from sales and maturities of investment and mortgage-backed securities. CNB used
its capital resources primarily to fund existing and continuing loan commitments
and to purchase investment and mortgage-backed securities. At March 31, 1997,
and December 31, 1996 and 1995, CNB had commitments to originate loans totaling
$3.4 million, $4.0 million and $2.9 million, respectively, and had issued but
unused standby letters of credit of $90,000, $79,000, and $103,000,
respectively. Scheduled maturities of certificates of deposit during the twelve
months following March 31, 1997, and December 31, 1996 and 1995, totaled $14.9
million, $15.6
69
<PAGE> 79
million and $9.9 million, respectively. Management believes that CNB had
adequate resources to fund all its commitments, that substantially all of its
existing commitments will be funded in the subsequent twelve months and, if so
desired, that it can adjust the rates on certificates of deposit and other
deposit accounts to retain deposits in a changing interest rate environment.
In accordance with risk capital guidelines issued by the OCC, Clewiston
National Bank was required to maintain a minimum standard of total capital to
risk-weighted assets of 8%. Additionally, the OCC requires banks to maintain a
minimum leverage-capital ratio of Tier 1 capital (as defined) to total assets.
The leverage-capital ratio ranges from 3% to 5% based on the bank's rating under
the regulatory rating system.
The following table summarizes the regulatory capital levels and ratios
of Clewiston National Bank:
<TABLE>
<CAPTION>
ACTUAL REGULATORY
RATIOS REQUIREMENT
------ -----------
<S> <C> <C>
At March 31, 1997:
Total capital to risk-weighted assets 14.87% 8.00%
Tier 1 capital to risk-weighted assets 13.62% 4.00%
Tier 1 capital to total average assets - leverage ratio 8.76% 4.00%
At December 31, 1996:
Total capital to risk-weighted assets 14.72% 8.00%
Tier I capital to risk-weighted assets 13.47% 4.00%
Tier I capital to total average assets - leverage ratio 9.10% 4.00%
At December 31, 1995:
Total capital to risk-weighted assets 14.47% 8.00%
Tier I capital to risk-weighted assets 13.22% 4.00%
Tier I capital to total average assets - leverage ratio 8.92% 4.00%
</TABLE>
RESULTS OF OPERATIONS
Net interest income, which constitutes the principal source of income
for CNB, represents the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities. The principal
interest-earning assets are investment and mortgage-backed securities and loans
made to businesses and individuals. Interest-bearing liabilities primarily
consist of time deposits, interest-bearing checking accounts ("NOW accounts"),
retail savings deposits and money market accounts. Funds attracted by these
interest-bearing liabilities are invested in interest-earning assets.
Accordingly, net interest income depends upon the volume of average
interest-earning assets and average interest-bearing liabilities and the
interest rates earned or paid on them.
Net interest income was $506,000 for CNB for the three months ended
March 31, 1997 compared with $491,000 for the three months ended March 31, 1996.
Net interest income was $1,928,000 for CNB for the year ended December 31, 1996
compared with $1,813,000 for the year ended December 31, 1995. This improvement
in net interest income was a result of a higher volume of net interest-earning
assets.
70
<PAGE> 80
The following table shows selected ratios for the periods ended or at
the dates indicated:
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
----------------- ----------------
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Average equity as a percentage
of average assets 8.66% 8.34% 8.65% 8.55%
Equity to total assets at end
of period 8.57% 8.38% 8.83% 8.83%
Return on average assets .77% .75% .36% .53%
Return on average equity 8.92% 9.02% 4.14% 6.16%
Noninterest expense to
average assets 3.99% 3.96% 4.57% 4.22%
Interest-rate spread 3.66% 3.87% 3.72% 3.81%
</TABLE>
The rates and yields at the dates indicated were as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YIELD OR RATE AT
------------------------------------------
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Loans 9.17% 9.58% 9.28% 9.25%
Investment and mortgage-backed securities 5.72% 6.46% 6.00% 6.22%
Other interest-earning assets 5.40% 5.13% 5.49% 5.77%
All interest-earning assets 8.37% 8.60% 8.44% 8.52%
Savings deposits 3.19% 3.24% 3.26% 3.13%
NOW accounts 2.97% 2.26% 2.38% 2.17%
Money Market deposits 3.59% 3.20% 3.26% 3.05%
Certificates of deposit 5.64% 5.90% 5.83% 5.79%
All interest-bearing liabilities 4.71% 4.73% 4.72% 4.64%
Interest-rate spread 3.66% 3.87% 3.72% 3.81%
</TABLE>
71
<PAGE> 81
The following tables set forth for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of CNB
from interest-earning assets and the resultant average yield; (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; (v) net interest margin. Average balances were based on average daily
balances.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------
1997 1996
------------------------------- -------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
------- --------- ------- ------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1) $34,333 $787 9.17% $31,738 $760 9.58%
Investment and mortgage-
backed securities 6,718 96 5.72% 6,374 103 6.46%
Other interest-earning assets(2) 3,188 43 5.40% 5,068 65 5.13%
------- ---- ------- ----
Total interest-earning
assets 44,239 926 8.37% 43,180 928 8.60%
---- ----
Noninterest-earning assets 3,937 4,665
------- -------
Total assets $48,176 $47,845
======= =======
Interest-bearing liabilities:
Demand, money market and
NOW deposits $ 8,866 71 3.20% $ 9,081 63 2.78%
Savings 4,764 38 3.19% 5,559 45 3.24%
Certificates of deposit 22,067 311 5.64% 22,304 329 5.90%
------- ---- ------- ----
Total interest-bearing
liabilities 35,697 420 4.71% 36,944 437 4.73%
---- ----
Noninterest-bearing liabilities 8,308 6,910
Stockholders' equity 4,171 3,991
------- -------
Total liabilities and
stockholders' equity $48,176 $47,845
======= =======
Net interest/dividend income $506 $491
==== ====
Interest-rate spread(3) 3.66% 3.87%
==== ====
Net interest margin(4) 4.58% 4.55%
==== ====
Ratio of average interest-earning assets
to average interest-bearing
liabilities 123.93% 116.88%
======= =======
</TABLE>
- ------------------------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits in other banks and federal funds
sold.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
72
<PAGE> 82
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995
--------------------------------- -----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
-------- --------- ------- ------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1) $32,515 $3,019 9.28% $30,250 $2,799 9.25%
Investment and mortgage-
backed securities 6,918 415 6.00% 7,232 450 6.22%
Other interest-earning assets(2) 3,555 195 5.49% 3,018 174 5.77%
------- ------ ------- ------
Total interest-earning
assets 42,988 3,629 8.44% 40,500 3,423 8.45%
------ ------
Noninterest-earning assets 4,278 4,318
------- -------
Total assets $47,266 $44,818
======= =======
Interest-bearing liabilities:
Demand, money market and
NOW deposits $ 8,573 240 2.80% $ 8,181 215 2.63%
Savings 5,369 175 3.26% 5,214 163 3.13%
Certificates of deposit 22,073 1,286 5.83% 21,263 1,232 5.79%
Other interest-bearing liabilities -- -- --% 6 -- 5.90%
------- ------ ------- ------
Total interest-bearing
liabilities 36,015 1,701 4.72% 34,664 1,610 4.64%
------ ------
Noninterest-bearing liabilities 7,167 6,323
Stockholders' equity 4,084 3,831
------- -------
Total liabilities and
stockholders' equity $47,266 $44,818
======= =======
Net interest/dividend income $1,928 $1,813
====== ======
Interest-rate spread(3) 3.72% 3.81%
==== ====
Net interest margin(4) 4.48% 4.48%
==== ====
Ratio of average interest-earning assets
to average interest-bearing
liabilities 119.36% 116.84%
======= =======
</TABLE>
- -----------------------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits in other banks and federal funds
sold.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
73
<PAGE> 83
The following tables set forth certain information regarding changes in
interest income and interest expense of CNB for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in interest rate
(change in rate multiplied by prior volume), (ii) changes in the volume (change
in volume multiplied by prior rate) and (iii) changes in rate-volume (change in
rate multiplied by change in volume).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 VS. 1996
INCREASE (DECREASE) DUE TO
--------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans $ (32) $ 62 $ (3) $ 27
Investment and mortgage-backed securities (12) 6 (1) (7)
Other interest-earning assets 3 (24) (1) (22)
----- ----- ----- -----
Total (41) 44 (5) (2)
----- ----- ----- -----
Interest-bearing liabilities:
Demand, money market and NOW deposits 10 (2) -- 8
Savings (1) (6) -- (7)
Certificates of deposit (15) (3) -- (18)
----- ----- ----- -----
Total (6) (11) -- (17)
----- ----- ----- -----
Net change in net interest income $ (35) $ 55 $ (5) $ 15
===== ===== ===== =====
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
1996 VS. 1995
INCREASE (DECREASE) DUE TO
--------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 10 $ 210 $ -- $ 220
Investment and mortgage-backed securities (16) (20) 1 (35)
Other interest-earning assets (8) 31 (2) 21
----- ----- ----- -----
Total (14) 221 (1) 206
----- ----- ----- -----
Interest-bearing liabilities:
Demand, money market and NOW deposits 14 10 1 25
Savings 7 5 -- 12
Certificates of deposit 7 47 -- 54
----- ----- ----- -----
Total 28 62 1 91
----- ----- ----- -----
Net change in net interest income $ (42) $ 159 $ (2) $ 115
===== ===== ===== =====
</TABLE>
74
<PAGE> 84
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
General
Net earnings for the three months ended March 31, 1997 were $93,000, or
$.22 per share, compared to net earnings of $90,000, or $.22 per share, for the
three months ended March 31, 1996. This increase in CNB's net earnings was
primarily due to an increase in net interest income partially offset by a
decline in noninterest income.
Interest Income and Expense
Interest income decreased by $2,000 from $928,000 for the three months
ended March 31, 1996, to $926,000 for the three months ended March 31, 1997.
Interest income on loans increased $27,000 due to an increase in the average
loan portfolio balance outstanding from $31.7 million for the three months ended
March 31, 1996, to $34.3 million for the comparable 1997 period, which was
partially offset by a decrease in the weighted average yield of 41 basis points.
Interest on investment and mortgage-backed securities decreased $7,000 due to a
decrease in the average yield earned from 6.46% in 1996 to 5.72% in 1997,
partially offset by an increase in the average investment and mortgage-backed
securities portfolio outstanding from $6.4 million in 1996 to $6.7 million in
1997. Interest on other interest-earning assets declined as a result of a
decrease in the average other interest-earning assets from $5.1 million in 1996
to $3.2 million in 1997, partially offset by an increase in the average yield
earned from 5.13% in 1996 to 5.40% in 1997.
Provision for Credit Losses
The provision for credit losses is charged to earnings to bring the
total allowance for credit losses to a level deemed appropriate by management,
which is based upon historical experience, the volume and type of lending
conducted by CNB, the amounts of nonperforming loans, general economic
conditions, particularly as they relate to CNB's market areas, and other factors
related to the collectibility of CNB's loan portfolio. The provision decreased
from $10,000 for the three months ended March 31, 1996, to $6,000 for the three
months ended March 31, 1997. Nonperforming loans and other real estate owned to
total assets were 1.15% at March 31, 1997 compared to 1.37% at March 31, 1996.
CNB's allowance for loan losses increased to 1.39% of loans outstanding at March
31, 1997 as compared to 1.33% at March 31, 1996. Net charge-offs as a percentage
of average loans outstanding decreased from .25% for the three months ended
March 31, 1996 to .10% for the three months ended March 31, 1997. Based upon the
decreases in nonperforming assets and net charge-offs, CNB's management believed
that a reduction of the provision for credit losses for the three months ended
March 31, 1997 as compared to the 1996 period was appropriate.
Other Income
Total other income decreased $18,000 for the three months ended March
31, 1997, compared to 1996, principally due to a $9,000 decrease in other
service charges on deposit accounts and a $9,000 decrease in all other income.
Other Expense
Total other expense remained at $477,000 for the three months ended
March 31, 1997 and 1996. Increases in compensation and employee benefits expense
of $10,000 and supplies expense of $6,000 (substantially all of which were
related to the Merger) were offset by a decrease in occupancy expense of
$15,000.
75
<PAGE> 85
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
General
Net earnings for the year ended December 31, 1996 were $169,000
compared to net earnings of $236,000 for the year ended December 31, 1995. This
decrease in CNB's net earnings was primarily due to the increases in the
provision for credit losses and noninterest expenses in 1996 versus 1995,
partially offset by increased net interest income and a lower provision for
income taxes for 1996 as compared with 1995 (which resulted in part from the
recognition of an alternative minimum tax credit of $48,000 in 1996).
Interest Income and Expense
Interest income increased by $206,000 from $3,423,000 for the year
ended December 31, 1995, to $3,629,000 for the year ended December 31, 1996.
Interest income on loans increased $220,000 due to an increase in the average
loan portfolio balance outstanding from $30.3 million for the year ended
December 31, 1995, to $32.5 million for the comparable 1996 period, and by an
increase in the weighted average yield of 3 basis points. Interest on investment
and mortgage-backed securities decreased $35,000 due to a decrease in the
average yield earned from 6.22% in 1995 to 6.00% in 1996, and a decrease in the
average investment and mortgage-backed securities portfolio outstanding to $6.9
million in 1996 from $7.2 million in 1995. Interest on other interest-earning
assets increased $21,000 primarily due to an increase in the average other
interest-earning assets from $3.0 million in 1995 to $3.6 million in 1996,
partially offset by a decrease in the average yield earned from 5.77% in 1995 to
5.49% in 1996.
Interest expense increased to $1,701,000 for the year ended December
31, 1996, from $1,610,000 for the year ended December 31, 1995. Interest expense
on deposit accounts increased because of an increase in the average balance of
deposit accounts outstanding from $34.7 million during 1995 to $36.0 million
during 1996, and an increase in the weighted average rate paid on deposit
accounts from 4.64% during 1995 to 4.72% during 1996.
Provision for Credit Losses
The provision for credit losses is charged to earnings to bring the
total allowance for credit losses to a level deemed appropriate by management,
which is based upon historical experience, the volume and type of lending
conducted by CNB, the amounts of nonperforming loans, general economic
conditions, particularly as they relate to CNB's market areas, and other factors
related to the collectibility of CNB's loan portfolio. The provision increased
from $94,000 for the year ended December 31, 1995, to $128,000 for the year
ended December 31, 1996. The increase resulted from CNB management's assessment
of the economic environment and the level of nonperforming assets.
Other Income
Total noninterest income increased $23,000 for the year ended December
31, 1996, compared to 1995, principally due to an increase in miscellaneous
income.
Other Expense
Total noninterest expense increased approximately $264,000 to
$2,156,000 for the year ended December 31, 1996, from $1,892,000 for the year
ended December 31, 1995, primarily due to an increase in deferred compensation
for the directors and a former officer of the Bank totaling approximately
$185,000, an increase in salaries of approximately $52,000, an increase in other
expenses of approximately $116,000, and offset by a
76
<PAGE> 86
decrease in repairs and maintenance expenses and depreciation of $55,000 and a
decrease in deposit insurance premiums totaling $36,000.
ASSET/LIABILITY MANAGEMENT
A principal objective of CNB's asset/liability management strategy is
to minimize CNB's exposure to changes in interest rates by matching the maturity
and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is monitored by an Asset and Liability Committee (the
"ALCO Committee") which establishes policies and monitors results to control
interest rate sensitivity.
Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the ALCO
Committee. The ALCO Committee uses computer models prepared by a third party to
measure the Bank's interest rate sensitivity. From these reports, the ALCO
Committee can estimate the net income effect of various interest rate scenarios.
As a part of CNB's interest rate risk management policy, the ALCO
Committee examines the extent to which its assets and liabilities are "interest
rate sensitive" and monitors Clewiston National Bank's interest rate sensitivity
"gap." An asset or liability is considered to be interest rate sensitive if it
will reprice or mature within the time period analyzed, usually one year or
less. The interest rate sensitivity gap is the difference between
interest-earning assets and interest-bearing liabilities scheduled to mature or
reprice within such time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to adversely affect net
interest income, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest rates, a negative gap would
tend to result in an increase in net interest income, while a positive gap would
tend to adversely affect net interest income. If the repricing of CNB's assets
and liabilities were equally flexible and moved concurrently, the impact of any
increase or decrease in interest rates on net interest income would be minimal.
The ALCO Committee's policy is to maintain a cumulative one-year gap
which falls in the range of negative 20% to positive 20% of total rate sensitive
assets. Management attempts to conform to this policy by managing the maturity
distribution of its investment portfolio and emphasizing originations and
purchases of adjustable rate loans, and by managing the product mix and maturity
of its deposit accounts.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or periods
of repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable rate mortgage loans, have features (generally
referred to as "interest rate caps") which limit changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment (on loans) and early withdrawal (of deposit accounts)
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also may
decrease in the event of an interest rate increase.
77
<PAGE> 87
Management's strategy is to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. To this
end, the ALCO Committee reviews, on a monthly basis, the maturity and repricing
of assets and liabilities.
CNB's cumulative one-year gap at December 31, 1996 was a negative 5.83%
of assets, which was in the target range established by the ALCO Committee. At
March 31, 1997, the cumulative one-year gap was a negative 3.17%, which was
within the target range established by the ALCO Committee. Management believes
that the foregoing interest rate sensitivity analysis does not take into account
the potential impact of prepayments on fixed rate loans (which would tend to
mitigate the effect of a negative gap) and that the analysis assumes all NOW and
statement savings accounts will reprice immediately, although management
considers at least a portion of such accounts to be "core deposits" which
management believes would not reprice in direct response to changes in market
interest rates, and therefore would tend to mitigate the effect of a negative
gap.
Principal among CNB's asset/liability management strategies has been
the emphasis on managing its interest rate sensitive liabilities in a manner
designed to attempt to reduce CNB's exposure during periods of fluctuating
interest rates. Management believes that the type and amount of CNB's interest
rate sensitive liabilities may reduce the potential impact that a rise in
interest rates might have on CNB's net interest income. CNB seeks to maintain a
core deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. CNB's demand,
money market, and NOW deposit accounts, approximated 39.5%, 36.4% and 33.0% of
total deposits at March 31, 1997, and December 31, 1996 and 1995, respectively.
These accounts bore a weighted average rate of 1.70%, 1.72% and 1.57% during the
three months ended March 31, 1997 and the years ended December 31, 1996 and
1995, respectively. Management anticipates that these accounts will continue to
comprise a significant portion of CNB's total deposit base. At March 31, 1997,
and December 31, 1996 and 1995, 17.5%, 11.9%, and 19.4%, respectively, of CNB's
total assets consisted of cash and cash equivalents and short-term investment
securities. In addition, at March 31, 1997 and December 31, 1996, CNB's
liquidity ratio was 60.5% and 44.5%, respectively. CNB also maintains a "floor,"
or minimum rate, on certain of its floating or prime based loans. These floors
allow CNB to continue to earn a higher rate when the floating rate falls below
the established floor rate.
78
<PAGE> 88
The following tables sets forth certain information relating to CNB's
interest-earning assets and interest-bearing liabilities at December 31, 1996
that were estimated to mature or were scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
UNDER 3 TO 12 OVER
3 MONTHS MONTHS 1-5 YEARS 5 YEARS TOTALS
-------- ------ --------- ------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Federal funds sold $ 1,038 $ -- $ -- $ -- $ 1,038
Loans(1) 10,635 11,522 7,995 4,149 34,301
Securities(2) 584 1,748 4,618 46 6,996
-------- -------- -------- -------- --------
Total rate-sensitive assets $ 12,257 $ 13,270 $ 12,613 $ 4,195 $ 42,335
======== ======== ======== ======== ========
Money market and NOW accounts(2) $ 8,033 $ -- $ -- $ -- $ 8,033
Savings accounts(2) 4,582 -- -- -- 4,582
Certificates of deposit(2) 6,169 9,470 6,497 -- 22,136
-------- -------- -------- -------- --------
Total rate-sensitive liabilities $ 18,784 $ 9,470 $ 6,497 $ -- $ 34,751
======== ======== ======== ======== ========
Gap (repricing differences) $ (6,527) $ 3,800 $ 6,116 $ 4,195 $ 7,584
======== ======== ======== ======== ========
Cumulative Gap $ (6,527) $ (2,727) $ 3,389 $ 7,584
======== ======== ======== ========
Cumulative Gap/total assets (13.95)% (5.83)% 7.24% 16.21%
======== ======== ======== ========
</TABLE>
- ------------------------------
(1) In preparing the table above, adjustable-rate loans were included in
the period in which the interest rates are next scheduled to adjust
rather than in the period in which the loans mature. Fixed-rate loans
were scheduled according to their contractual maturities.
(2) Excludes noninterest bearing deposit accounts. Money market, NOW, and
savings deposits were regarded as maturing immediately. All other time
deposits were scheduled through the maturity dates. Investment and
mortgage-backed securities were scheduled through their contractual
maturity dates.
FINANCIAL CONDITION
Lending Activities
A significant source of income for CNB is the interest earned on loans.
At March 31, 1997, CNB's total assets were $49.1 million of which net loans were
$33.5 million or 68.21% of total assets. At December 31, 1996, CNB's total
assets were $46.8 million, of which net loans were $34.2 million or 72.98% of
total assets. At December 31, 1995, CNB's total assets were $45.3 million and
net loans were $31.4 million or 69.26% of total assets. CNB's primary market
area consists of the Clewiston, Florida community. Clewiston is located
approximately 56 miles southwest of Okeechobee.
Coinciding with the general increase in interest rates during 1996,
residential real estate sales in Hendry County increased approximately 10.55% in
1996 over the previous year. The housing trend has increased due in part to the
relocation of Northern residents to the Clewiston area. In Clewiston and the
surrounding areas, the 12-month average sales price for homes sold in 1996 was
$54,932 compared to $54,542 in 1995.
79
<PAGE> 89
The labor force in Hendry County, Florida has increased over the past
five years. In 1990, the average size of the county's labor force was
approximately 11,151 workers, average employment was approximately 41.5%, and
the unemployment rate was approximately 12.9%. In 1995, the average Hendry
County labor force was approximately 15,713 workers, average employment was
approximately 54.7, and the annual unemployment rate was approximately 15.1%. A
contributing factor to the growth in the labor force is that a number of large
companies have established operations in Hendry County. Among such companies are
U.S. Sugar Corporation, Berry Citrus Processing, A. Duda & Sons, LaBelle Plant
World and Southern Gardens Processing. In addition to growth, the Hendry County
economy also has experienced diversification over the past 15 years. In the
early 1980's, Hendry County was essentially a rural community, dependent on
several seasonal or cyclical industries. As the Ft. Myers and West Palm Beach
business markets have experienced expansion over the past 10 years, Hendry
County's location between these two metropolitan areas has afforded relocation
and business opportunities for industries desiring a proximate location to two
of Florida's major growth regions.
There is no assurance that the Clewiston community, or Hendry County,
will continue to experience economic growth. Adverse conditions in any one or
more of the industries operating in such markets or a slow-down in general
economic conditions could have an adverse effect on Clewiston National Bank.
Lending activities are conducted pursuant to a written policy which has
been adopted by CNB. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by a loan committee comprised of certain directors of CNB.
80
<PAGE> 90
The following table sets forth information concerning CNB's loan
portfolio by type of loan at the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
----------------- ---------------------------------------
1997 1996 1995
----------------- --------------- ----------------
% OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial loans $ 5,544 16.3% $ 6,134 17.7% $ 3,703 11.6%
Commercial real estate loans 3,435 10.1 3,598 10.4 4,407 13.8
Residential mortgage loans 20,125 59.2 20,053 57.8 18,126 56.8
Consumer loans 4,905 14.4 4,888 14.1 5,654 17.8
------- ----- ------- ----- ------- -----
Total loans 34,009 100.0% 34,673 100.0% 31,890 100.0%
===== ===== =====
Less:
Deferred loan fees 43 44 58
Allowance for credit losses 472 475 436
------- ------- -------
Loans, net $33,494 $34,154 $31,396
======= ======= =======
</TABLE>
The following table reflects the contractual principal repayments by
period of CNB's loan portfolio at March 31, 1997:
<TABLE>
<CAPTION>
DUE AFTER 1
DUE IN 1 YEAR YEAR THROUGH DUE AFTER
OR LESS 5 YEARS 5 YEARS TOTAL
------- ------- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial loans $2,442 $1,653 $ 1,449 $ 5,544
Commercial real estate loans 1,209 1,214 1,012 3,435
Residential mortgage loans 948 1,769 17,408 20,125
Consumer loans 1,279 2,749 877 4,905
------ ------ ------- -------
Total loans $5,878 $7,385 $20,746 $34,009
====== ====== ======= =======
Loans with maturities over one year consist of:
Fixed rate $10,927
Variable rate 17,204
-------
Total Loans $28,131
=======
</TABLE>
81
<PAGE> 91
The following table sets forth total loans originated and principal
reductions during the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------- -----------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Originations:
Commercial loans $ 1,945 $ 1,136 $ 4,472 $ 3,863
Commercial real estate loans 180 120 345 67
Residential mortgage loans 1,273 1,036 3,566 2,944
Consumer loans 839 668 2,795 2,469
------- ------- ------- -------
Total loans originated 4,237 2,960 11,178 9,343
Principal reductions 4,901 2,719 8,395 7,102
------- ------- ------- -------
Increase (decrease) in total loans $ (664) $ 241 $ 2,783 $ 2,241
======= ======= ======= =======
</TABLE>
Asset Quality
Management seeks to maintain a high quality of assets through
conservative underwriting and sound lending practices. As of March 31, 1997, and
December 31, 1996 and 1995, approximately 69.3%, 68.2% and 70.6%, respectively,
of the total loan portfolio was collateralized by commercial and residential
real estate mortgages. The level of delinquent loans and real estate owned also
is relevant to the credit quality of a loan portfolio. As of March 31, 1997,
total nonperforming assets were $767,000, or 1.6% of total assets, while as of
December 31, 1996, total non-performing assets were $621,000, or 1.3% of total
assets, and at December 31, 1995, total non-performing assets amounted to
$1,006,000, or 2.2% of total assets.
In an effort to maintain the quality of the loan portfolio, management
seeks to minimize higher risk types of lending. In view of the relative
significance of real estate related loans, a downturn in the value of the real
estate could have an adverse impact on CNB's profitability. However, as part of
its loan portfolio management strategy, CNB generally limits its loans to a
maximum of 80% of the value of the underlying real estate as determined by
appraisal. In addition, knowledgeable members of management generally make
physical inspections of properties being considered for mortgage loans.
Commercial loans also entail risks since repayment is usually dependent
upon the successful operation of the commercial enterprise. They also are
subject to adverse conditions in the economy. Commercial loans are generally
riskier than mortgage loans because they are typically underwritten on the basis
of the ability to repay from the cash flow of a business rather than on the
ability of the borrower or guarantor to repay. Further, the collateral
underlying a commercial loan may depreciate over time, cannot be appraised with
as much precision as real estate, and may fluctuate in value based on the
success of the business.
Loan concentrations are defined as amounts loaned to a number of
borrowers engaged in similar activities which would cause them to be similarly
impacted by economic or other conditions. CNB, on a routine basis, monitors
these concentrations in order to consider adjustments in its lending practices
to reflect economic conditions, loan to deposit ratios, and industry trends.
Concentrations of loans in the following categories constituted the total loan
portfolio as of March 31, 1997:
82
<PAGE> 92
<TABLE>
<S> <C>
Commercial loans 16.3%
Real estate mortgage loans 69.3%
Installment and other loans 14.4%
-----
100.0%
</TABLE>
The Loan Committee of the Board of Directors of CNB concentrates its
efforts and resources, and that of its senior management and lending officers,
on loan review and underwriting procedures. Internal controls include ongoing
reviews of loans made to monitor documentation and the existence and valuations
of collateral. In addition, management of CNB has established a review process
with the objective of identifying, evaluating, and initiating necessary
corrective action for marginal loans. The goal of the loan review process is to
address classified and non-performing loans as early as possible.
Classification of Assets
Generally, interest on loans accrues and is credited to income based
upon the principal balance outstanding. It is management's policy to discontinue
the accrual of interest income and classify a loan as non-accrual when principal
or interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the obligation. Consumer
installment loans are generally charged-off after 120 days of delinquency unless
adequately collateralized and in the process of collection. Loans are not
returned to accrual status until principal and interest payments are brought
current and future payments appear reasonably certain. Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent payments received are applied to the outstanding
principal balance.
Real estate acquired by CNB as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate owned ("OREO"). CNB
considers the collateral for a loan in-substance foreclosed when the debtor has
little or no equity in the collateral, expects repayment for the loan to come
only from the operation and sale of the collateral, and the borrower has either
effectively abandoned control of the collateral or has retained control of the
collateral but will be unable to rebuild equity in the collateral or repay the
loan. At March 31, 1997, and December 31, 1996 and 1995, no loans were
considered in-substance foreclosed.
OREO properties are recorded at the lower of cost or fair value less
estimated selling costs, and the estimated loss, if any, is charged to the
allowance for credit losses at the time it is transferred to OREO. Further
allowances for losses in OREO, including in-substance foreclosed loans, are
recorded by a charge to operations at the time management believes additional
deterioration in value has occurred.
83
<PAGE> 93
The following table sets forth certain information on nonaccrual loans
and other real estate owned, the ratio of such loans and other real estate owned
to total loans and total assets as of the dates indicated, and certain other
related information:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ---------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans:
Real estate loans $ 527 $ 371 $ 653
Installment loans 1 1 --
Credit cards and related plans -- -- --
Commercial and other loans 27 -- 17
------ ------ ------
Total nonaccrual loans 555 372 670
Accruing loans 90 days or more past due 10 189 107
Troubled debt restructurings -- -- --
------ ------ ------
Total nonperforming loans 565 561 777
Other real estate:
Real estate acquired by foreclosure or deed
in lieu of foreclosure 202 60 229
------ ------ ------
Total nonperforming loans and other
real estate owned $ 767 $ 621 $1,006
====== ====== ======
Total nonperforming loans and real estate
owned to total assets 1.56% 1.33% 2.22%
====== ====== ======
Total nonperforming loans as a percentage
of total loans 1.66% 1.62% 2.44%
====== ====== ======
Total nonperforming loans as a percentage
of total assets 1.15% 1.20% 1.71%
====== ====== ======
</TABLE>
Allowance for Credit Losses
In originating loans, CNB recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a collateralized loan, the quality of the
collateral for the loan as well as general economic conditions. It is
management's policy to attempt to maintain an adequate allowance for credit
losses based on, among other things, CNB's historical loan loss experience,
evaluation of economic conditions and regular reviews of any delinquencies and
loan portfolio quality. Specific allowances are provided for individual loans
when ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due and
considering the fair value of the collateral for the loan. Management recognizes
the greater inherent risks in connection with commercial and consumer lending.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition."
84
<PAGE> 94
Management continues to actively monitor CNB's asset quality and to
charge-off loans against the allowance for credit losses when appropriate or to
provide specific loss allowances when necessary. Although management believes it
uses the best information available to make determinations with respect to the
allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in making
the initial determinations. CNB's allowance was $472,000, or 1.39% of total
loans at March 31, 1997, compared to $475,000 or 1.37% of total loans at
December 31, 1996, and $436,000, or 1.37% of total loans at December 31, 1995.
The following table sets forth information with respect to activity in
CNB's allowance for credit losses during the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------- ---------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period $ 475 $ 436 $ 436 $ 418
------- ------- ------- -------
Charge-offs:
Real estate loans 2 -- 1 34
Installment loans 3 14 49 44
Credit cards and related plans 5 2 10 7
Commercial and all other loans 5 7 98 14
------- ------- ------- -------
Total loans charged-off 15 23 158 99
Recoveries 6 3 69 23
------- ------- ------- -------
Net charge-offs 9 20 89 76
------- ------- ------- -------
Provision for credit losses charged to
operating expenses 6 10 128 94
------- ------- ------- -------
Allowance at end of period $ 472 $ 426 $ 475 $ 436
======= ======= ======= =======
Net charge-offs as a percentage of average
loans outstanding 0.10% 0.25% 0.27% 0.25%
======= ======= ======= =======
Allowance for credit losses as a percentage of
period-end total loans 1.39% 1.33% 1.37% 1.37%
======= ======= ======= =======
Allowance for credit losses as a percentage of
nonperforming loans 83.54% 64.55% 84.67% 56.11%
======= ======= ======= =======
Period-end total loans $33,966 $32,084 $34,629 $31,832
======= ======= ======= =======
Average loans outstanding, net $34,333 $31,738 $32,515 $30,250
======= ======= ======= =======
</TABLE>
85
<PAGE> 95
The following table presents information regarding CNB's total
allowance for credit losses as well as the allocation of such amounts to the
various categories of loans:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1995
-------------------- ---------------------- ------------------------
% OF % OF % OF
LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate loans $107 22.7% $133 28.0% $ 28 6.4%
Installment loans 93 19.7 89 18.7 99 22.7
Credit cards and related plans 8 1.7 7 1.5 11 2.5
Commercial loans and all other plans 264 55.9 246 51.8 298 68.4
Total allowance for credit losses $472 100.0% $475 100.0% $436 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
The allowance for credit losses represented 1.39% of the total loans
outstanding as of March 31, 1997, compared with 1.37% of the total loans
outstanding as of December 31, 1996. The amount of the provision for credit
losses charged to expense in each of the periods presented above represents
management's best estimate during those periods of the additions necessary to
establish appropriate allowances for estimated credit losses. Such estimates
were based on management's assessment of the current and future general economic
conditions in CNB's market area, the risk levels associated with the particular
composition of the loan portfolio during such periods, and CNB's past collection
experience.
The provision for credit losses decreased from $10,000 the three month
period ending March 31, 1996 to $6,000 during the comparable period in 1997, and
increased from $94,000 for the year ending December 31, 1995 to $128,000 for the
year ending December 31, 1996. The changes in the provision for credit losses in
those periods reflect CNB management's assessment of the economic environment,
trends in nonperforming loans and an assessment of the exposure in its
nonperforming loans and loans criticized by CNB's regulators. Total
nonperforming loans and other real estate owned as a percentage of total assets
decreased from 2.22% at December 31, 1995 to 1.56% at March 31, 1997. During the
year ended December 31, 1996, net charge-offs as a percentage of average loans
outstanding increased slightly to 0.27% versus the year ended December 31, 1995
of 0.25%. Charge-offs decreased during the three months ended March 31, 1997
versus the comparable period in 1996 from 0.25% to 0.10%. Considering the nature
of CNB's loan portfolio, management believes that the $472,000 allowance for
credit losses at March 31, 1997 was adequate.
86
<PAGE> 96
Investment Securities
The following table sets forth the amortized cost of CNB's investment
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ -----------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Investment securities:
Government and agency securities $5,992 $6,491 $5,573
FNMA collateralized mortgage obligation 303 309 363
Obligations of states and municipalities 95 180 431
Other 46 46 46
------ ------ ------
Total $6,436 $7,026 $6,413
====== ====== ======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the investment securities portfolio as follows:
<TABLE>
<CAPTION>
AFTER ONE YEAR AFTER FIVE YEARS
ONE YEAR OR LESS TO FIVE YEARS TO TEN YEARS AFTER TEN YEARS TOTAL
---------------- ------------------ ---------------- ------------------- -------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
------ ---- ------ ---- ------ ---- ------- ---- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1997:
U.S. Government and
agency securities $1,499 5.75% $4,437 5.74% $ -- --% $ -- --% $ 5,936 5.74%
FNMA collateralized
mortgage obligations -- --% 61 7.59% -- --% -- 9.73% 299 9.29%
Obligations of states
and municipalities 96 7.90% -- --% -- --% -- --% 96 7.90%
Other securities -- --% -- --% -- --% 46 4.70% 46 4.70%
------ ------ ------ ------- ---------
Total $1,595 5.88% $4,498 5.77% $ -- --% $ 284 8.91% $ 6,377 5.93%
====== ====== ====== ======= =========
December 31, 1996:
U.S. Government and
agency securities $2,002 5.57% $4,459 5.74% $ -- --% $ -- --% $ 6,461 5.69%
FNMA collateralized
mortgage obligations -- --% 62 7.57% -- --% 245 9.73% 307 9.29%
Obligations of states
and municipalities 85 7.70% 97 7.90% -- --% -- --% 182 7.81%
Other securities -- --% -- --% -- --% 46 4.70% 46 4.70%
------ ------ ------ ------- ---------
Total $2,087 5.66% $4,618 5.81% $ -- --% $ 291 8.93% $ 6,996 5.90%
====== ====== ====== ======= =========
December 31, 1995:
U.S. Government and
agency securities $3,581 6.58% $2,004 6.37% $ -- --% $ -- --% $ 5,585 6.50%
FNMA collateralized
mortgage obligations -- --% 64 7.59% 29 9.02% 274 9.73% 367 9.29%
Obligations of states
and municipalities -- --% 185 7.81% 256 8.15% -- --% 441 8.01%
Other securities -- --% -- --% -- --% 46 4.70% 46 4.70%
------ ------ ------ ------- ---------
Total $3,581 6.58% $2,253 6.52% $ 285 8.24% $ 320 9.01% $ 6,439 6.75%
====== ====== ====== ======= =========
</TABLE>
87
<PAGE> 97
Mortgage-backed Securities
CNB invests in mortgage-backed securities that are guaranteed as to
principal and interest by the Government National Mortgage Association ("GNMA"),
the Federal Home Loan Mortgage Corporation ("FHLMC"), or the Federal National
Mortgage Association ("FNMA"). Although mortgage-backed securities generally
have a lower yield than loans, mortgage-backed securities increase the quality
of CNB's assets by virtue of the guarantees that back them, are more liquid than
individual mortgage loans and may be used to collateralize borrowing or other
obligations of CNB. Due to repayment and prepayments of the underlying loans,
the actual maturities of mortgage-backed securities are substantially less than
the scheduled maturities. Changes in interest rates may also affect the average
life, yield to maturity, and related market value of BLF's mortgage-backed
securities. Changes in the market values of BLF's mortgage-backed securities may
result in volatility in capital based on how CNB classifies the securities. CNB
has adopted Statement of Financial Accounting Standards No. 115 ("FAS 115"),
which requires companies to classify mortgage-backed securities as either
held-to-maturity, available-for-sale, or trading securities. Securities
classified as held-to-maturity are carried at amortized cost. Securities
classified as available-for-sale are reported at fair value, with unrealized
gains and losses, net of tax effect, reported as a separate component of
stockholders' equity. Securities classified as trading securities are recorded
at fair value, with unrealized gains and losses included in earnings. At March
31, 1997, all mortgage-backed securities were classified as available-for-sale.
As a result of the adoption of FAS 115, under which CNB expects to continue to
hold certain of its mortgage-backed securities classified as available-for-sale,
changes in the underlying market values of such securities could have a material
adverse effect on CNB's capital position. Typically, an increase in interest
rates results in a decrease in underlying market value and an increase in the
level of principal repayments on mortgage-backed securities. During the past
year, interest rates have not varied significantly and a decrease in the market
value of available-for-sale mortgage-backed securities resulted in a decrease in
stockholders' equity of $3,000 at March 31, 1997. Such decrease represents the
impact of changes in interest rates on the value and maturity of these
investments.
The following table sets forth the amortized cost of CNB's
mortgage-backed securities portfolio as of the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ---------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Mortgage-backed securities:
Available-for-sale:
FNMA collateralized mortgage obligations $299 $307 $367
==== ==== ====
</TABLE>
Deposit Activities
Deposits are the major source of CNB's funds for lending and other
investment purposes. Deposits are attracted principally from within CNB's
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more) and retirement savings plans.
Maturity terms, service fees and withdrawal penalties are established
by CNB on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals and federal regulations.
88
<PAGE> 98
FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits by offering rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having the same type
of charter in such depository institutions's normal market area. Under these
regulations, "well capitalized" depository institutions may accept, renew, or
rollover deposits at such rates without restriction, "adequately capitalized"
depository institutions may accept, renew or rollover deposits at such rates
with a waiver from the FDIC (subject to certain restrictions on payments of
rates), and "undercapitalized" depository institutions may not accept, renew or
rollover deposits at such rates. The regulations contemplate that the
definitions of "well capitalized," "adequately capitalized" and
"undercapitalized" will be the same as the definitions adopted by the agencies
to implement the prompt corrective action provisions of applicable law. See
"Supervision, Regulation and Governmental Policy -- Capital Requirements." As of
March 31, 1997, Clewiston National Bank met the definition of a "well
capitalized" depository institution.
The following table shows the distribution of, and certain other
information relating to, CNB's deposit accounts by type:
<TABLE>
<CAPTION>
AT MARCH 31 AT DECEMBER 31,
----------- ---------------
1997 1996 1995
------------------ ----------------------- -------------------
% OF % OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT AMOUNT DEPOSIT
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 8,237 18.6% $ 7,263 17.3% $ 5,576 13.7%
NOW deposits 5,806 13.1 5,010 11.9 3,571 8.8
Money market deposits 3,464 7.8 3,011 7.2 4,276 10.5
Savings deposits 4,949 11.2 4,582 10.9 5,067 12.4
------- ----- ------- ----- ------- -----
Subtotal 22,456 50.8 19,866 47.3 18,490 45.3
------- ----- ------- ----- ------- -----
Certificates of deposit:
2.00% - 2.99% 241 0.5 124 0.3 1,302 3.2
3.00% - 3.99% 569 1.3 485 1.1 97 0.2
4.00% - 4.99% 5,629 12.7 7,638 18.2 3,621 8.9
5.00% - 5.99% 11,037 24.9 9,105 21.7 10,667 26.2
6.00% - 6.99% 3,180 7.2 2,703 6.4 5,747 14.1
7.00% - 7.99% 292 0.7 489 1.2 545 1.3
8.00% - 8.99% 825 1.9 1,592 3.8 323 0.8
------- ----- ------- ----- ------- -----
Total certificates of deposit(1) 21,773 49.2 22,136 52.7 22,302 54.7
------- ----- ------- ----- ------- -----
Total deposits $44,229 100.0% $42,002 100.0% $40,792 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
- --------------------------
(1) Includes individual retirement accounts ("IRAs") totaling $2,094,
$2,019 and $1,913 at March 31, 1997, and December 31, 1996 and 1995,
respectively, all of which are in the form of certificates of deposit.
89
<PAGE> 99
The following tables show the average amount of and the average rate
paid on each of the following deposit account categories during the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1996
------------------ -------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand, money market
and NOW $16,504 1.70% $14,870 1.69%
Savings deposits 4,764 3.19% 5,559 3.24%
Certificates of deposit 22,067 5.64% 22,304 5.90%
------- -------
Total deposits $43,335 3.87% $42,733 4.09%
======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995
------------------- -------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD
------- ----- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand, money market
and NOW $13,981 1.72% $13,635 1.57%
Savings deposits 5,369 3.26% 5,214 3.13%
Certificates of deposit 22,073 5.83% 21,263 5.79%
------- -------
Total deposits $41,423 4.11% $40,112 4.01%
======= =======
</TABLE>
CNB does not have a concentration of deposits from any one source, the
loss of which would have a material adverse effect on the business of CNB.
Management believes that substantially all of CNB's depositors are residents in
its primary market area. CNB currently does not accept brokered deposits, but
has outstanding brokered deposits of $197,000 for each period ended March 31,
1997 and December 31, 1996 and 1995. As shown in the tables below, a significant
amount of CNB's certificates of deposit will mature during the year ending March
31, 1998. The high volume of maturities during this period is primarily due to
customer demand for certificates of deposit having original maturities of 12
months or less. Based upon current and anticipated levels of interest rates and
past practice, CNB management anticipates that substantially all of CNB's
certificates of deposit maturing during this time period will be renewed or
replaced by certificates of deposit issued to other customers at competitive
market rates, which may be higher or lower than the rates currently being paid.
Consequently, CNB management does not believe that the maturity of CNB's
certificates of deposit during the year ended March 31, 1998, will have a
material adverse effect on CNB's liquidity. However, if CNB is required to pay
substantially higher rates to obtain the renewal of these or other certificates
of deposit or alternative sources of funds, the higher net interest expense
could have a material adverse effect on CNB's net income.
90
<PAGE> 100
The following tables present by various interest rate categories the
amounts of certificates of deposit at March 31, 1997, and December 31, 1996 and
1995 which mature during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
-----------------------------------------------------
1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1997:
2.00% - 2.99% $ 72 $ 158 $ -- $ -- $ 11 $ 241
3.00% - 3.99% 554 12 -- -- 3 569
4.00% - 4.99% 4,916 367 144 92 110 5,629
5.00% - 5.99% 7,438 2,032 499 575 493 11,037
6.00% - 6.99% 1,486 801 363 126 404 3,180
7.00% - 7.99% -- 98 142 -- 52 292
8.00% - 8.99% 464 66 -- 292 3 825
------- ------ ------ ------ ------ -------
Total certificates of deposit $14,930 $3,534 $1,148 $1,085 $1,076 $21,773
======= ====== ====== ====== ====== =======
YEAR ENDING DECEMBER 31,
-----------------------------------------------------
1997 1998 1999 2000 2001 TOTAL
---- ---- ---- ---- ---- -----
(DOLLARS IN THOUSANDS)
December 31, 1996:
2.00% - 2.99% $ 56 $ 56 $ -- $ -- $ 12 $ 124
3.00% - 3.99% 474 8 -- -- 3 485
4.00% - 4.99% 6,736 328 217 227 130 7,638
5.00% - 5.99% 6,212 1,531 343 561 458 9,105
6.00% - 6.99% 863 1,207 295 -- 338 2,703
7.00% - 7.99% 133 198 79 -- 79 489
8.00% - 8.99% 1,165 408 -- -- 19 1,592
------- ------ ------ ------ ------ -------
Total certificates of deposit $15,639 $3,736 $ 934 $ 788 $1,039 $22,136
======= ====== ====== ====== ====== =======
YEAR ENDING DECEMBER 31,
-----------------------------------------------------
1996 1997 1998 1999 2000 TOTAL
---- ---- ---- ---- ---- -----
(DOLLARS IN THOUSANDS)
December 31, 1995:
2.00% - 2.99% $ 558 $ 470 $ 213 $ -- $ 61 $ 1,302
3.00% - 3.99% 67 -- 30 -- -- 97
4.00% - 4.99% 1,723 794 454 367 283 3,621
5.00% - 5.99% 6,189 2,374 419 934 751 10,667
6.00% - 6.99% 1,225 3,489 530 -- 503 5,747
7.00% - 7.99% 3 356 116 -- 70 545
8.00% - 8.99% 144 147 6 -- 26 323
------- ------ ------ ------ ------ -------
Total certificates of deposit $ 9,909 $7,630 $1,768 $1,301 $1,694 $22,302
======= ====== ====== ====== ====== =======
</TABLE>
91
<PAGE> 101
Jumbo certificates ($100,000 and over) mature as follows (in thousands):
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------- ---------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Due in three months or less $ 312 $1,563 $ 200
Due from three months to one year 3,026 1,954 1,483
Due over one year 625 1,219 1,514
------ ------ ------
$3,963 $4,736 $3,197
====== ====== ======
</TABLE>
The following table sets forth the net deposit flows of Clewiston National Bank
during the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------- -----------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net increase (decrease) before
interest credited $1,778 $2,349 $ (486) $ 758
Net interest credited 449 447 1,696 1,596
------ ------ ------ ------
Net deposit increase $2,227 $2,796 $1,210 $2,354
====== ====== ====== ======
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data concerning CNB
presented in this Proxy Statement have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary impact of inflation on the operations of CNB is reflected
in increased operating costs. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature. As
a result, changes in interest rates have a more significant impact on the
performance of a financial institution than do the effects of changes in the
general rate of inflation and changes in prices. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of
goods and services.
FUTURE ACCOUNTING REQUIREMENTS
SFAS No. 125 and its amendment SFAS No. 127 apply to certain transfers
and servicing of financial assets and extinguishments of liabilities effective
January 1, 1997 (except as deferred by SFAS No. 127). CNB has not transferred
and serviced significant financial assets nor does it anticipate that these
Statements will have any material impact on the financial statements of CNB.
SFAS Nos. 128 and 129 addressing earnings per share and disclosure of
information about the capital structure, respectively, are effective for CNB's
financial statements issued after December 15, 1997. SFAS No. 128 establishes
standards for the computation and presentation of earnings per share ("EPS").
This statement is not expected to have a material impact on the financial
statements of CNB. SFAS No. 129 requires only additional disclosure and will not
have any material impact on the financial statements of CNB.
92
<PAGE> 102
BUSINESS OF CNB
GENERAL
CNB was incorporated as a Florida corporation on April 25, 1990 for the
purpose of owning all the voting shares of Clewiston National Bank. CNB is a
registered bank holding company under the BHC Act. CNB has no significant
operations other than owning all of the outstanding stock of Clewiston National
Bank. Clewiston National Bank, which is a national banking association, is the
only source of revenue for CNB.
Clewiston National Bank provides a range of consumer and commercial
banking services to individuals, businesses and industries. The basic services
offered by Clewiston National Bank include: demand interest bearing and
noninterest bearing accounts, money market deposit accounts, NOW accounts, time
deposits, safe deposit services, credit cards, cash management, direct deposits,
notary services, money orders, night depository, travelers' checks, cashier's
checks, domestic collections, savings bonds, bank drafts, automated teller
services, drive-in tellers, and banking by mail. In addition, Clewiston National
Bank makes secured and unsecured commercial and real estate loans and issues
stand-by letters of credit. Clewiston National Bank provides automated teller
machine (ATM) cards, as a part of the HONOR ATM network, thereby permitting
customers to utilize the convenience of larger ATM networks. Clewiston National
Bank does not have trust powers and, accordingly, no trust services are
provided.
The revenues of Clewiston National Bank are primarily derived from
interest on, and fees received in connection with, real estate and other loans,
and from interest and dividends from investment and mortgage-backed securities,
and short-term investments. The principal sources of funds for Clewiston
National Bank's lending activities are its deposits, repayment of loans, and the
sale and maturity of investment securities. The principal expenses of Clewiston
National Bank are the interest paid on deposits, and operating and general
administrative expenses.
As is the case with banking institutions generally, Clewiston National
Bank's operations are materially and significantly influenced by general
economic conditions and by related monetary and fiscal policies of financial
institution regulatory agencies, including the Federal Reserve and the OCC.
Deposit flows and costs of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other types of loans,
which in turn is affected by the interest rates at which such financing may be
offered and other factors affecting local demand and availability of funds.
Clewiston National Bank faces strong competition in the attraction of deposits
(its primary source of lendable funds) and in the origination of loans. See
"Competition."
LENDING ACTIVITIES
Clewiston National Bank offers a range of lending services, including
real estate, consumer and commercial loans, to individuals and small businesses
and other organizations that are located in or conduct a substantial portion of
their business in Clewiston National Bank's market area. Clewiston National
Bank's total loans at March 31, 1997 were $34.0 million, or 69.3% of total
assets. The interest rates charged on loans vary with the degree of risk,
maturity, and amount of the loan, and are further subject to competitive
pressures, money market rates, availability of funds, and government
regulations. Clewiston National Bank has no foreign loans or loans for highly
leveraged transactions.
Clewiston National Bank's loans are concentrated in three major areas:
commercial loans, real estate loans, and consumer loans. Approximately 26.4% of
Clewiston National Bank's loan portfolio at March 31, 1997 consisted of
commercial loans. A majority of Clewiston National Bank's loans are made on a
secured basis. As
93
<PAGE> 103
of March 31, 1997, approximately 69.3% of the loan portfolio consisted of loans
secured by mortgages on real estate.
Clewiston National Bank's commercial loans include loans to individuals
and small-to-medium sized businesses located primarily in Hendry and Glades
Counties for working capital, equipment purchases, and various other business
purposes. A majority of Clewiston National Bank's commercial loans are secured
by equipment or similar assets, but these loans may also be made on an unsecured
basis. Commercial loans may be made at variable or fixed rates of interest.
Commercial lines of credit are typically granted on a one-year basis, with loan
covenants and monetary thresholds. Other commercial loans with terms or
amortization schedules of longer than one year will normally carry interest
rates which vary with the prime lending rate and will become payable in full and
are generally refinanced in three to five years.
Clewiston National Bank's real estate loans are secured by mortgages
and consist primarily of loans to individuals and businesses for the purchase,
improvement of or investment in real estate and for the construction of
single-family residential units or the development of single-family residential
building lots. These real estate loans may be made at fixed or variable interest
rates. Clewiston National Bank generally does not make fixed-rate commercial
real estate loans for terms exceeding five years. Loans in excess of five years
are generally adjustable. Clewiston National Bank's residential real estate
loans generally are repayable in monthly installments based on up to a 30-year
amortization schedule with variable interest rates.
Clewiston National Bank's consumer loan portfolio consists primarily of
loans to individuals for various consumer purposes, but includes some business
purpose loans which are payable on an installment basis. The majority of these
loans are for terms of less than five years and are secured by liens on various
personal assets of the borrowers, but consumer loans may also be made on an
unsecured basis. Consumer loans are made at fixed and variable interest rates,
and are often based on up to a five-year amortization schedule.
For additional information regarding Clewiston National Bank's loan
portfolio, see "CNB'S Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition ."
DEPOSIT ACTIVITIES
Deposits are the major source of Clewiston National Bank's funds for
lending and other investment activities. Clewiston National Bank considers the
majority of its regular savings, demand, NOW and money market deposit accounts
to be core deposits. These accounts comprised approximately 50.8% of Clewiston
National Bank's total deposits at March 31, 1997. Approximately 49.2% of
Clewiston National Bank's deposits at March 31, 1997, were certificates of
deposit. Generally, Clewiston National Bank attempts to maintain the rates paid
on its deposits at a competitive level. Time deposits of $100,000 and over made
up approximately 9.0% of Clewiston National Bank's total deposits at March 31,
1997. The majority of the deposits of Clewiston National Bank are generated from
Hendry and Glades Counties. Clewiston National Bank no longer accepts brokered
deposits, which represent less than 0.4% of Clewiston National Bank's total
deposits at March 31, 1997. For additional information regarding Clewiston
National Bank's deposit accounts, see "CNB'S Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial
Condition."
EMPLOYEES
At March 31, 1997, CNB and Clewiston National Bank employed 38
full-time (including its executive officers) and five part-time employees. The
employees are not represented by a collective bargaining unit. CNB and Clewiston
National Bank consider relations with employees to be good.
94
<PAGE> 104
PROPERTIES
The main office of CNB and Clewiston National Bank is located at 950
West Ventura Avenue, Clewiston, Florida 33440, in a one-story building of
approximately 5,700 square feet, which is owned by Clewiston National Bank.
Clewiston National Bank also has banking offices located at 401 E. Sugarland
Highway, Clewiston, Florida 33440, in a one-story building of approximately
1,600 square feet, which is leased by Clewiston National Bank (under a lease
which, with renewal options, expires in 2001), a branch at 6th Street and
Highway 27, Moore Haven, Florida 33471, in a one-story building of approximately
2,800 square feet, which is leased by Clewiston National Bank (under a lease
which, with renewal options, expires in 1998), and a branch at 17 N. Lee Street,
LaBelle, Florida 33935, in a one-story building of approximately 1,960 square
feet, which is owned by Clewiston National Bank. Clewiston National Bank also
owns a one-story building of approximately 1,600 square feet located at 100 S.
Berner, Clewiston, Florida 33440, which is leased to a third party with purchase
and renewal options. The lease term expires in 2002.
LITIGATION
CNB and/or Clewiston National Bank are periodically parties or a party
to or otherwise involved in legal proceedings arising in the normal course of
business, such as claims to enforce liens, claims involving the making and
servicing of real property loans, and other issues incident to its business.
Management does not believe that there is any pending or threatened proceeding
against CNB and/or Clewiston National Bank which, if determined adversely, would
have a material adverse effect on the business, results of operations, or
financial position of CNB and/or Clewiston National Bank.
MANAGEMENT
Board of Directors. The Board of Directors of CNB currently consists of
eight directors, each of whom holds office until the next annual meeting of CNB
to be held in 1998. Each director of CNB currently also serves as a director of
Clewiston National Bank. The following table sets forth certain information with
respect to the directors of CNB.
<TABLE>
<CAPTION>
DIRECTOR OR OFFICER PRINCIPAL OCCUPATION
OF CNB OR AND BUSINESS
CLEWISTON NATIONAL BANK EXPERIENCE DURING
NAME AND AGE SINCE PAST FIVE YEARS
- -------------------- ----------------------- ------------------------------
<S> <C> <C>
John Boy, Jr.,43 1985 Accountant/Owner of
Boy & Associates, P.A.
John Corbin, 76 1974 Retired
Curtis S. Fry, 58 1974 Owner of Fry Hardware and Cane
Brake Apartments
</TABLE>
95
<PAGE> 105
<TABLE>
<S> <C> <C>
Frederick W. Gesell, 39 1994 President and Chief Executive Officer
(1997 to Present) and Executive Vice
President, Chief Financial Officer and
Cashier (1994 to 1997) of CNB and National
Bank; Vice President of D'Elegance Management
Ltd., Inc. (1993 to 1994); and Vice President,
Controller, Data Processing Manager, and of
First Community Bank of Palm Beach County
(formerly Bank of Pahokee) 1984 to 1992)
W. R. Howard , Jr., 43 1995 Businessman/Owner of W.R. Howard, Jr., P.E., Inc.
Dan M. McCarthy, 74 1974 Secretary/Treasurer of Glades Gas Co.
Bobby F. Paige, 71 1974 Cattle Rancher
Thomas A. Smith, 60 1987 Businessman/Owner of LaBelle Plant World
</TABLE>
Executive Officers. The following sets forth information regarding the
sole executive officer of Clewiston National Bank. The sole officer of Clewiston
National Bank serves at the pleasure of the Board of Directors of Clewiston
National Bank.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
AND BUSINESS
EXPERIENCE DURING
NAME AND AGE PAST FIVE YEARS
- ------------ --------------------------------------------
<S> <C>
Frederick W. Gesell President and Chief Executive Officer (1997
to Present) and Executive Vice President,
Chief Financial Officer and Cashier (1994 to
1997) of CNB and Clewiston National Bank;
Vice President of D'Elegance Management
Ltd., Inc. (1993 to 1994); and Vice
President, Controller, Data Processing
Manager, and Auditor of First Community Bank
of Palm Beach County (formerly Bank of
Pahokee) (1984 to 1992)
</TABLE>
96
<PAGE> 106
COMPENSATION AND BENEFITS
The table below sets forth certain information with respect to
compensation paid to Mr. Gesell (the President and Chief Executive Officer of
CNB and Clewiston National Bank) during the years presented. No executive
officer of CNB received a total salary and bonus in excess of $100,000 in 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS COMPENSATION COMPENSATION(1)
- ------------------ ---- --------- ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Frederick W. Gesell, 1996 $45,492 $ -0- $ -0- $ -0-
President and Chief
Executive Officer of CNB 1995 $44,845 $ -0- $ -0- $ -0-
and Clewiston National
Bank 1994 $ 8,462(1) $ -0- $ -0- $ -0-
</TABLE>
- ------------------
(1) Represents salary paid to Mr. Gesell after he was employed by Clewiston
National Bank in October 1994.
Directors of CNB receive no directors fees. Non-employee directors of
Clewiston National Bank are paid fees of $300 per meeting of the Board of
Directors.
Pension Plan. Clewiston National Bank sponsors a defined contribution
pension plan that covers substantially all employees. Clewiston National Bank
funds the annual expense through contributions to the plan.
CERTAIN TRANSACTIONS
Clewiston National Bank has had, and expects to have in the future,
banking transactions in the ordinary course of business with certain of its
directors and executive officers and their associates. As of March 31, 1997, the
directors and executive officers of Clewiston National Bank and their
associates, as a group, were indebted to Clewiston National Bank in the
aggregate amount of approximately $1.0 million. All loans included in such
transactions were made in the ordinary course of business, on substantially the
same terms (including interest rate and collateral) as those prevailing at the
time for comparable transactions with other persons, and in the opinion of
management of Clewiston National Bank did not involve more than the normal risk
of collectibility or present other unfavorable features.
MANAGEMENT AND PRINCIPAL STOCK OWNERSHIP
The following table sets forth the beneficial ownership of outstanding
shares of CNB Common Stock as of March 31, 1997 by CNB's current directors, and
by current directors and executive officers as a group. The individuals listed
below, beneficially owning more than 5% of CNB Common Stock on March 31, 1997,
were the only individuals known to CNB to own more than 5% of outstanding shares
as of such date:
97
<PAGE> 107
<TABLE>
<CAPTION>
AMOUNT/NATURE OF PERCENT
NAME OF INDIVIDUAL ---------------- -------
(AND ADDRESS OF 5% OWNER) BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------- ----------------------- --------
<S> <C> <C>
John Boy, Jr. 867 *
John Corbin 6,944(2) 1.7%
Curtis S. Fry, 58 77,898(3) 18.7%
111 North San Benito Street
Clewiston, FL 33440
Frederick W. Gesell 250 *
W. R. Howard, Jr. 278 *
Dan M. McCarthy 10,124(4) 2.4%
Bobby F. Paige, 71 20,837 5.0%
Route 1 Box 101-T
Clewiston, FL 33440
Thomas A. Smith, 60 25,288(5) 6.0%
P. O. Box 399
LaBelle, FL 33935
All directors and executive
officers as a group (eight persons) 142,336 34.2%
</TABLE>
- -----------------------
* Less than 1%
(1) Information related to beneficial ownership is based upon the
information available to CNB.
(2) Includes 3,472 shares held by his spouse.
(3) Consists of 35,114 shares held by a company owned by him, 36,748 shares
held as trustee, and 6,000 shares held jointly with his children.
(4) Consists of 346 shares held by his grandchildren, 1,404 shares held
jointly with his spouse and 8,374 shares held jointly with his
children.
(5) Includes 22,160 shares held jointly with his spouse and 867 shares held
jointly with his son.
COMPETITION
BLF and CNB encounter strong competition both in making loans and
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws which permit multi-bank holding companies as well as an
increasing level of interstate banking have created a highly competitive
environment for commercial banking in Okeechobee, Hendry, Highlands and Glades
Counties. In one or more aspects of their businesses, BLF and CNB compete with
other commercial banks, savings and loan associations, credit unions, finance
companies, mutual funds, insurance companies, brokerage and investment banking
companies and other financial intermediaries operating in Okeechobee, Hendry,
Highlands and Glades Counties and elsewhere. Most of these competitors, some of
which are affiliated with bank holding companies, have substantially greater
resources and lending limits, and may offer certain services that neither BLF
nor CNB currently provide. In addition, many of
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BLF's and CNB's non-bank competitors are not subject to the same extensive
federal regulations that govern bank holding companies and federally insured
banks. Recent federal and state legislation has heightened the competitive
environment in which financial institutions must conduct their business, and the
potential for competition among financial institutions of all types has
increased significantly. See "Supervision, Regulation and Governmental Policy --
Interstate Banking."
To compete, BLF and CNB rely upon specialized services, responsive
handling of customer need, personalized service and personal contacts by their
officers, directors, and staff. The large multi-branch banks compete primarily
by rate and location of branches and smaller independent financial institutions
tend to compete primarily by rate and personalized services.
SUPERVISION, REGULATION AND GOVERNMENTAL POLICY
Banks and their holding companies, and many of their affiliates, are
extensively regulated under both federal and state law. The following is a brief
summary of certain statutes, rules, and regulations affecting BLF, CNB, Big Lake
National Bank and Clewiston National Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of BLF, CNB, Big Lake
National Bank or Clewiston National Bank. Supervision, regulation, and
examination of banks by regulatory agencies are intended primarily for the
protection of depositors, rather than shareholders.
Bank Holding Company Regulation. BLF and CNB are bank holding
companies, registered with the Federal Reserve under the BHC Act. As such, BLF
and CNB are subject to the supervision, examination and reporting requirements
of the BHC Act and the regulations of the Federal Reserve. The BHC Act requires
that a bank holding company obtain the prior approval of the Federal Reserve
before (i) acquiring direct or indirect ownership or control of more than 5% of
the voting shares of any bank, (ii) taking any action that causes a bank to
become a subsidiary of the bank holding company, or (iii) merging or
consolidating with any other bank holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy and consideration of convenience and needs issues includes the parties'
performance under the Community Reinvestment Act of 1977 (the "CRA"), both of
which are discussed below.
Banks are subject to the provisions of the CRA. Under the terms of the
CRA, the appropriate federal bank regulatory agency is required, in connection
with its examination of a bank, to assess such bank's record in meeting the
credit needs of the community served by that bank, including low- and
moderate-income neighborhoods. The regulatory agency's assessment of the bank's
record is made available to the public. Further, such assessment is required of
any bank which has applied to (i) charter a national bank, (ii) obtain deposit
insurance coverage for a newly chartered institution, (iii) establish a new
branch office that will accept deposits, (iv) relocate an office, or (v) merge
or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding company
applying for approval to acquire a bank or other bank holding company, the
Federal Reserve will assess the record of each subsidiary bank of the applicant
bank holding company, and such records may be the basis for denying the
application.
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The BHC Act generally prohibits a bank holding company from engaging in
activities other than banking, or managing or controlling banks or other
permissible subsidiaries, and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is permissible, the Federal Reserve must consider
whether the performance of such an activity can reasonably be expected to
produce benefits to the public, such as greater convenience, increased
competition, or gains in efficiency that outweigh possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest, or unsound banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property, conducting
securities brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions, and certain insurance
underwriting activities have all been determined by regulations of the Federal
Reserve to be permissible activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a holding company or its
subsidiaries to terminate any activity or terminate its ownership or control of
any subsidiary, when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Bank Regulation. Each of BLF and CNB is chartered under the national
banking laws and their deposits are insured by the FDIC to the extent provided
by law. Each bank is subject to comprehensive regulation, examination and
supervision by the OCC and to other laws and regulations applicable to banks.
Such regulations include limitations on loans to a single borrower and to its
directors, officers and employees; restrictions on the opening and closing of
branch offices; the maintenance of required capital and liquidity ratios; the
granting of credit under equal and fair conditions; and the disclosure of the
costs and terms of such credit. BLF and CNB are examined periodically by the
OCC, to whom they submit periodic reports regarding their financial condition
and other matters. The OCC has a broad range of powers to enforce regulations
under its jurisdiction, and to take discretionary actions determined to be for
the protection and safety and soundness of banks, including the institution of
cease and desist orders and the removal of directors and officers. The OCC also
has the authority to approve or disapprove mergers, consolidations, and similar
corporate actions.
There are various statutory limitations on the ability of BLF and CNB
to pay dividends. The OCC also has the general authority to limit the dividend
payment by banks if such payment may be deemed to constitute an unsafe and
unsound practice. For information on the restrictions on the right of Big Lake
National Bank and Clewiston National Bank to pay dividends to the Combined
Corporation, see "Market and Dividend Information."
Under federal law, federally insured banks are subject, with certain
exceptions, to certain restrictions on any extension of credit to their parent
holding companies or other affiliates, on investment in the stock or other
securities of affiliates, and on the taking of such stock or securities as
collateral from any borrower. In addition, banks are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit or the
providing of any property or service.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") imposed major regulatory reforms, stronger capital standards for
savings and loan associations and stronger civil and criminal enforcement
provisions. FIRREA also provides that a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC after August 9, 1989 in connection with (i) the default of
a commonly controlled FDIC insured depository institution, or (ii) any
assistance provided by the FDIC to a commonly controlled FDIC insured
institution in danger of default.
The FDIC Improvement Act of 1993 ("FDICIA") made a number of reforms
addressing the safety and soundness of deposit insurance funds, supervision,
accounting, and prompt regulatory action, and also implemented other regulatory
improvements. FDICIA also recapitalized the Bank Insurance Fund, based on an
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assessment rate schedule that may extend to 15 years. Annual full-scope, on-site
examinations are required of all insured depository institutions. The cost for
conducting an examination of an institution may be assessed to that institution,
with special consideration given to affiliates and any penalties imposed for
failure to provide information requested. Insured state banks also are precluded
from engaging as principal in any type of activity that is impermissible for a
national bank, including activities relating to insurance and equity
investments. The Act also recodified current law restricting extensions of
credit to insiders under the Federal Reserve Act.
Also important in terms of its effect on banks has been the
deregulation of interest rates paid by banks on deposits and the types of
deposit accounts that may be offered by banks. Most regulatory limits on
permissible deposit interest rates and minimum deposit amounts expired several
years ago. The effect of the deregulation of deposit interest rates generally
has been to increase the costs of funds to banks and to make their costs of
funds more sensitive to fluctuations in money market rates. A result of the
pressure on banks interest margins due to deregulation has been a trend toward
expansion of services offered by banks and an increase in the emphasis placed on
fee or non-interest income.
Capital Requirements. Regulatory agencies have approved guidelines to
implement a risk-based capital framework that makes capital requirements more
sensitive to the risk profiles of individual banking companies. These guidelines
define capital as either core (Tier 1) capital or supplementary (Tier 2)
capital. Tier 1 capital consists primarily of shareholders' equity, while Tier 2
capital is comprised of certain debt instruments and a portion of the reserve
for loan losses. Big Lake National Bank and Clewiston National Bank are each
required to have a Tier 1 capital ratio of at least 4.00% and a total risk-based
capital ratio (Tier 1 plus Tier 2) of at least 8.00%. At March 31, 1997, Big
Lake National Bank's Tier 1 and total risk-based capital ratios were 10.94% and
12.19%, respectively. Also at March 31, 1997, Clewiston National Bank's Tier 1
and total risk-based capital ratios were 13.62% and 14.87% respectively.
FDICIA contains "prompt corrective action" provisions pursuant to which
banks are to be classified into one of five categories based upon capital
adequacy, ranging from "well capitalized" to "critically undercapitalized" and
which require (subject to certain exceptions) the appropriate federal banking
agency to take prompt corrective action with respect to an institution which
becomes "significantly undercapitalized" or "critically undercapitalized."
The OCC has issued final regulations to implement the "prompt
corrective action" provisions of FDICIA. In general, the regulations define the
five capital categories as follows: (i) an institution is "well capitalized" if
it has a total risk-based capital ratio of 10% or greater, has a Tier 1
risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or greater
and is not subject to any written capital order or directive to meet and
maintain a specific capital level for any capital measures; (ii) an institution
is "adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, has a Tier 1 risk-based capital ratio of 4% or greater, and has a
leverage ratio of 4% or greater; (iii) an institution is "undercapitalized" if
it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based
capital ratio that is less than 4% or has a leverage ratio that is less than 4%;
(iv) an institution is "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio
that is less than 3% or a leverage ratio that is less than 3%; and (v) an
institution is "critically undercapitalized" if its "tangible equity" is equal
to or less than 2% of its total assets. The OCC also, after an opportunity for a
hearing, has authority to downgrade an institution from "well capitalized" to
"adequately capitalized" or to subject an "adequately capitalized" or
"undercapitalized" institution to the supervisory actions applicable to the next
lower category, for supervisory concerns.
Generally, FDICIA requires that an "undercapitalized" institution must
submit an acceptable capital restoration plan to the appropriate federal banking
agency within 45 days after the institution becomes "undercapitalized" and the
agency must take action on the plan within 60 days. The appropriate federal
banking agency may not accept a capital restoration plan unless, among other
requirements, each company having control of the institution has guaranteed that
the institution will comply with the plan until the institution has been
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adequately capitalized on average during each of the three consecutive calendar
quarters and has provided adequate assurances of performance. The aggregate
liability under this provision of all companies having control of an institution
is limited to the lesser of (i) 5% of the institution's total assets at the time
the institution becomes "undercapitalized" or (ii) the amount which is
necessary, or would have been necessary, to bring the institution into
compliance with all capital standards applicable to the institution as of the
time the institution fails to comply with the plan filed pursuant to FDICIA.
An "undercapitalized" institution may not acquire an interest in any
company or any other insured depository institution, establish or acquire
additional branch offices or engage in any new business unless the appropriate
federal banking agency has accepted its capital restoration plan, the
institution is implementing the plan, and the agency determines that the
proposed action is consistent with and will further the achievement of the plan,
or the appropriate Federal banking agency determines the proposed action will
further the purpose of the "prompt corrective action" sections of FDICIA.
If an institution is "critically undercapitalized," it must comply with
the restrictions described above. In addition, the appropriate Federal banking
agency is authorized to restrict the activities of any "critically
undercapitalized" institution and to prohibit such an institution, without the
appropriate Federal banking agency's prior written approval, from: (i) entering
into any material transaction other than in the usual course of business; (ii)
engaging in any covered transaction with affiliates (as defined in Section
23A(b) of the Federal Reserve Act); (iii) paying excessive compensation or
bonuses; and (iv) paying interest on new or renewed liabilities at a rate that
would increase the institution's weighted average costs of funds to a level
significantly exceeding the prevailing rates of interest on insured deposits in
the institution's normal market areas.
The "prompt corrective action" provisions of FDICIA also provide that
in general no institution may make a capital distribution if it would cause the
institution to become "undercapitalized". Capital distributions include cash
(but not stock) dividends, stock purchases, redemptions, and other distributions
of capital to the owners of an institution.
Additionally, FDICIA requires, among other things, that (i) only a
"well capitalized" depository institution may accept brokered deposits without
prior regulatory approval and (ii) the appropriate federal banking agency
annually examine all insured depository institutions, with some exceptions for
small, "well capitalized" institutions and state-chartered institutions examined
by state regulators. FDICIA also contains a number of consumer banking
provisions, including disclosure requirements and substantiative contractual
limitations with respect to deposit accounts.
As of March 31, 1997, Big Lake National Bank and Clewiston National
Bank met the capital requirements of a "well capitalized" institution.
The OCC has proposed revising its risk-based capital requirements to
ensure that such requirements provide for explicit consideration by commercial
banks of interest rate risk. Under the proposed rule, a bank's interest rate
risk exposure would be quantified using either the measurement system set forth
in the proposal or the bank's internal model for measuring such exposure, if
such model is determined to be adequate by the bank's examiner. If the dollar
amount of a bank's interest rate risk exposure, as measured by either
measurement system, exceeds 1% of the bank's total assets, the bank would be
required under the proposed rule to hold additional capital equal to the dollar
amount of the excess. It is anticipated that the regulatory agencies will issue
a revised proposed rule for further public comment. Pending issuance of such
revised proposal, BLF's and CNB's managements cannot determine what effect, if
any, an interest rate risk component would have on the capital of their
subsidiary banks.
Enforcement Powers. Congress has provided the federal bank regulatory
agencies with an array of powers to enforce laws, rules, regulations and orders.
Among other things, the agencies may require that institutions cease and desist
from certain activities, may preclude persons from participating in the affairs
of insured
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depository institutions, may suspend or remove deposit insurance, and may impose
civil money penalties against institution-affiliated parties for certain
violations.
Maximum Legal Interest Rates. Like the laws of many states, Florida law
contains provisions on interest rates that may be charged by banks and other
lenders on certain types of loans. Numerous exceptions exist to the general
interest limitations imposed by Florida law. The relative importance of these
interest limitation laws to the financial operations of Big Lake National Bank
and Clewiston National Bank will vary from time to time, depending on a number
of factors, including conditions in the money markets, the costs and
availability of funds, and prevailing interest rates.
Bank Branching. Banks in Florida are permitted to branch state wide.
Such branch banking, however, is subject to prior approval by the OCC. Any such
approval would take into consideration several factors, including the bank's
level of capital, the prospects and economics of the proposed branch office, and
other conditions deemed relevant by the OCC for purposes of determining whether
approval should be granted to open a branch office.
Change of Control. Federal law restricts the amount of voting stock of
a bank holding company and a bank that a person may acquire without the prior
approval of banking regulators. The overall effect of such laws is to make it
more difficult to acquire a bank holding company and a bank by tender offer or
similar means than it might be to acquire control of another type of
corporation. Consequently, shareholders of CNB and BLF may be less likely to
benefit from the rapid increases in stock prices that may result from tender
offers or similar efforts to acquire control of other companies. Federal law
also imposes restrictions on acquisitions of stock in a bank holding company and
a state bank. Under the federal Change in Bank Control Act and the regulations
thereunder, a person or group must give advance notice to the Federal Reserve
before acquiring control of any bank holding company and the OCC before
acquiring control of any national bank (such as Big Lake National Bank and
Clewiston National Bank). Upon receipt of such notice, the OCC may approve or
disapprove the acquisition. The Change in Bank Control Act creates a rebuttable
presumption of control if a member or group acquires a certain percentage or
more of a bank holding company's or state bank's voting stock, or if one or more
other control factors set forth in the Act are present.
Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1996, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state will be
permissible one year after enactment. Interstate branching and consolidation of
existing bank subsidiaries in different states will be permissible beginning
June 1, 1997. The Florida legislature also recently enacted a law that allows
out-of-state bank holding companies (located in states that allow Florida bank
holding companies to acquire banks and bank holding companies in that state) to
acquire Florida banks and Florida bank holding companies. The law, which became
effective May 1, 1997, essentially provides for out-of-state entry by
acquisition only (and not by interstate branching) and requires the acquired
Florida bank to have been in existence for at least two years.
Effect of Governmental Policies. The earnings and businesses of BLF,
Big Lake National Bank, CNB, and Clewiston National Bank are affected by the
policies of various regulatory authorities of the United States, especially the
Federal Reserve. The Federal Reserve, among other things, regulates the supply
of credit and deals with general economic conditions within the United States.
The instruments of monetary policy employed by the Federal Reserve for those
purposes influence in various ways the overall level of investments, loans,
other extensions of credit, and deposits, and the interest rates paid on
liabilities and received on assets.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of BLF consists of 1,000,000 shares of BLF
Common Stock. As of the date of this Proxy Statement, there were 308,711 shares
of BLF Common Stock outstanding and held by approximately 226 shareholders of
record.
After the Merger, the Combined Corporation Articles will govern the
outstanding shares of Combined Corporation Stock, which will consist of the
shares of BLF Common Stock outstanding at the Effective Time and the shares of
Combined Corporation Stock issued to CNB shareholders in the Merger.
The following discussion is a brief summary of certain rights relating
to Combined Corporation Stock, as determined by the Combined Corporation
Articles and the Combined Corporation's Bylaws. The following discussion is not
intended to be a complete description of such capital stock and is qualified in
its entirety by reference to governing laws and the Articles of Incorporation of
BLF and the Combined Corporation Bylaws (copies of which are filed as exhibits
to the Registration Statement).
COMMON STOCK
Holders of shares of Combined Corporation Stock are entitled to receive
such dividends as may from time to time be declared by the Board of Directors of
the Combined Corporation out of funds legally available therefor. Holders of
Combined Corporation Stock are entitled to one vote per share on all matters on
which the holders are entitled to vote and do not have any cumulative rights.
Holders of Combined Corporation Stock have no preemptive, conversion, redemption
or sinking fund rights. In the event of a liquidation, dissolution or winding-up
of the Combined Corporation, holders of Combined Corporation Stock are entitled
to share equally and ratably in the assets of the Combined Corporation, if any,
remaining after the payment of all debts and liabilities of the Combined
Corporation and the liquidation preferences of any outstanding shares of
Combined Corporation preferred stock. The outstanding shares of Combined
Corporation Stock after the Merger will be fully paid and nonassessable. The
rights, preferences and privileges of holders of Combined Corporation Stock will
be subject to any classes or series of Combined Corporation preferred stock that
the Combined Corporation may issue in the future.
PREFERRED STOCK
The Combined Corporation Articles provide that the Board of Directors
of the Combined Corporation is authorized, without further action by the holders
of Combined Corporation Stock, to provide for the issuance of shares of
preferred stock in one or more classes or series and to fix the designations,
powers, preferences and relative, participating, optional and other rights,
qualifications, limitations and restrictions thereof, including the dividend
rate, conversion rights, voting rights, redemption price and liquidation
preference, and to fix the number of shares to be included in any such classes
or series. Any preferred stock so issued may rank senior to the Combined
Corporation Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
preferred stock may have class or series voting rights. Upon completion of the
Merger, the Combined Corporation will not have any shares of preferred stock
outstanding. Issuance of preferred stock, while providing the Combined
Corporation with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of Combined
Corporation Stock. See "Effect of the Merger on Rights of Shareholders."
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INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
The Bylaws of the Combined Corporation authorize it to indemnify any
director, officer, employee, or agent of the Combined Corporation against
judgments, fines, penalties, amounts paid in settlement, and expenses incurred
in any pending, threatened, or completed civil, criminal, administrative, or
investigative proceeding (except an action by the Combined Corporation) against
him in his capacity as a director, officer, employee, or agent of the Combined
Corporation, or another company if serving in such capacity at the Combined
Corporation's request, if he: (i) acted in good faith, (ii) acted in a manner in
which he reasonably believed to be in, and not opposed to, the best interests of
the Combined Corporation, and (iii) with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. In addition, the
Combined Corporation may indemnify any director, officer, employee, or agent
against expenses incurred in defense or settlement of any proceeding against him
in his official capacity, brought by the Combined Corporation, if he: (i) acted
in good faith, (ii) acted in a manner in which he reasonably believed to be in,
or not opposed to, the best interests of the Combined Corporation, and (iii) is
not adjudged to be liable (unless the Court finds that he is nevertheless
reasonably entitled to indemnity for expenses for which the Court deems proper).
The Combined Corporation must pay the actual and reasonable expenses of any
director, officer, employee, or agent who is successful on the merits or
otherwise in defense of any proceeding against him in his capacity as such.
The Bylaws of the Combined Corporation also authorize it to make any
other or further indemnification or advancement of expenses of any of its
directors, officers, employees or agents, except for acts or omissions which
constitute (i) a violation of the criminal law (unless the individual had
reasonable cause to believe his conduct was lawful or no reasonable cause to
believe it was unlawful), (ii) a transaction in which the individual derived an
improper personal benefit, (iii) in the case of a director, a circumstance under
which certain liability provisions of the Florida Act are applicable (related to
payment of dividends or other distributions or repurchases of shares in
violation of such Act, or (iv) willful misconduct or a conscious disregard for
the best interests of the Combined Corporation in a proceeding by the Combined
Corporation or by a Combined Corporation shareholder. The Combined Corporation's
Bylaws permit the Combined Corporation to, and it may, purchase and maintain
insurance for the purpose of indemnifying its directors, officers, employees,
and agents.
LEGAL MATTERS
Certain legal matters in connection with the shares of the Combined
Corporation Stock to be issued upon consummation of the Merger will be passed
upon for the Combined Corporation by Smith, Mackinnon, Greeley, Bowdoin &
Edwards, P.A. Certain legal matters in connection with the Merger will be passed
upon for CNB by Humphrey & Knott, P.A.
EXPERTS
The financial statements of BLF as of December 31, 1996 and 1995, and
for the years then ended appearing in this Proxy Statement were audited by
Stevens, Thomas, Schemer & Sparks, P.A., independent auditors, as stated in
their report herein.
The consolidated financial statements of CNB at December 31, 1996 and
1995, and for the years then ended appearing in this Proxy Statement were
audited by Stevens, Thomas, Schemer & Sparks, P.A., independent auditors, as
stated in their report herein.
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INDEX TO FINANCIAL STATEMENTS
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets, March 31, 1997 and 1996............................................F-1
Consolidated Condensed Statements of Income for the three months ended
March 31, 1997 and 1996................................................................................F-2
Consolidated Condensed Statements of Cash Flows for the three months
ended March 31, 1997 and 1996..........................................................................F-3
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report..............................................................................F-4
Consolidated Statements of Financial Condition, December 31, 1996 and 1995 ...............................F-5
Consolidated Statements of Income for the years ended December 31, 1996 and 1995..........................F-7
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996 and 1995.............................................................................F-8
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995......................F-9
Parent Company Only Balance Sheets, December 31, 1996 and 1995...........................................F-11
Parent Company Only Statements of Income for the years ended December 31,
1996 and 1995.........................................................................................F-12
Parent Company Only Statements of Cash Flows for the years ended December 31,
1996 and 1995.........................................................................................F-13
Notes to Financial Statements............................................................................F-14
CNB FINANCIAL CORPORATION AND SUBSIDIARY
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets, March 31, 1997 and 1996...........................................F-32
Consolidated Condensed Statements of Income for the three months ended
March 31, 1997 and 1996...............................................................................F-33
Consolidated Condensed Statements of Cash Flows for the three months
ended March 31, 1997 and 1996.........................................................................F-34
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report.............................................................................F-35
Consolidated Statements of Financial Condition, December 31, 1996 and 1995 ..............................F-36
Consolidated Statements of Income for the years ended December 31, 1996 and 1995.........................F-37
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996 and 1995............................................................................F-38
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995.....................F-39
Parent Company Only Balance Sheets, December 31, 1996 and 1995...........................................F-40
Parent Company Only Statements of Income for the years ended December 31,
1996 and 1995.........................................................................................F-41
Parent Company Only Statements of Changes in Stockholders' Equity for the years
ended December 31, 1996 and 1995......................................................................F-42
Parent Company Only Statements of Cash Flows for the years ended December 31,
1996 and 1995.........................................................................................F-43
Notes to Financial Statements............................................................................F-44
</TABLE>
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BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,018 $ 2,048
Federal funds sold 2,766 1,795
Investment securities:
Available-for-sale at fair value 14,871 18,120
Held-to-maturity at amortized cost 801 801
Loans receivable less allowance for credit losses 39,564 30,703
Accrued interest receivable 423 429
Bank premises and equipment - net 1,460 1,409
Intangible assets 680 763
Other assets 227 304
--------- ---------
TOTAL $ 62,810 $ 56,372
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 11,915 $ 8,554
Interest-bearing 45,461 42,822
--------- ---------
Total deposits 57,376 51,376
Accrued interest on deposits 334 351
Other accrued expenses and liabilities 146 272
--------- ---------
Total liabilities 57,856 51,999
--------- ---------
Commitments and contingencies -- --
--------- ---------
Stockholders' equity:
Common stock 3 3
Additional paid-in-capital 3,068 3,068
Retained earnings 2,073 1,461
Treasury stock at cost (59) (59)
Unrealized loss on available-for-sale securities (131) (100)
--------- ---------
Total stockholders' equity 4,954 4,373
--------- ---------
TOTAL $ 62,810 $ 56,372
========= =========
Book value per common share $ 16.05 $ 14.17
========= =========
Common shares outstanding 308,711 308,711
========= =========
</TABLE>
F-1
<PAGE> 117
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Interest and fees on loans $ 887 $ 704
Investment income on investment securities 236 230
Other interest income 34 72
-------- --------
Total interest income 1,157 1,006
Interest expense on deposits 442 450
-------- --------
Net interest income before provision for credit losses 715 556
Provision for credit losses 24 36
-------- --------
Net interest income 691 520
-------- --------
Fees and service charges 156 130
Other income 24 9
-------- --------
Total other income 180 139
-------- --------
Other expenses:
Salaries and employee benefits 297 256
Expenses of bank premises and fixed assets 77 70
Other operating expenses 238 183
-------- --------
Total other expenses 612 509
-------- --------
Income before provision for income taxes 259 150
Provision for income taxes 87 51
-------- --------
Net income $ 172 $ 99
======== ========
Earnings per share $ 0.56 $ 0.32
======== ========
Weighted average common shares outstanding during period 308,711 308,711
======== ========
</TABLE>
F-2
<PAGE> 118
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 367 $ 38
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in:
Federal funds sold (1,774) 7,829
Investment securities 248 (7,175)
Loans (3,326) (2,069)
Purchases of premises and equipment, net (38) (22)
Net increase in other real estate -- (30)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (4,890) (1,467)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 3,131 583
Cash paid in lieu of fractional shares -- (2)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,131 581
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,392) (848)
CASH AND CASH EQUIVALENTS AT JANUARY 1 3,410 2,896
------- -------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 2,018 $ 2,048
======= =======
</TABLE>
F-3
<PAGE> 119
[STEVENS, THOMAS, SCHEMER & SPARKS, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Big Lake Financial Corporation
Okeechobee, Florida
We have audited the accompanying consolidated statements of condition of Big
Lake Financial Corporation and Subsidiary (the "Company") as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended. We have audited
the accompanying parent company only balance sheets of Big Lake Financial
Corporation ("BLFC") as of December 31, 1996 and 1995, and the related parent
company only statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated and parent company only
financial statements are the responsibility of 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 audits to obtain
reasonable assurance about whether the consolidated and parent company only
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated and parent company only financial statements. An audit 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 and parent company only financial statements
referred to above present fairly, in all material respects, the financial
position of the Company and BLFC as of December 31, 1996 and 1995, and the
results of its consolidated and parent company only operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Jacksonville, Florida
January 24, 1997
F-4
<PAGE> 120
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks $ 3,410,003 $ 2,896,165
Federal funds sold 992,000 9,624,000
Investment securities (Notes 1 and 2)
Available-for-sale at fair value 15,214,809 10,368,162
Held-to-maturity at amortized cost 800,740 1,554,160
Loans less allowance for credit losses of $469,673
and $363,128, respectively (Notes 1, 3, and 4) 36,262,111 28,662,594
Premises and equipment - net (Notes 1 and 5) 1,449,755 1,413,991
Other assets (Notes 1, 6, and 19) 1,388,625 1,304,940
----------- -----------
TOTAL $59,518,043 $55,824,012
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 121
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deposits:
Noninterest-bearing $ 10,082,781 $ 6,845,549
Interest-bearing:
NOW and Super NOW 6,859,782 8,210,196
Money market 4,297,139 3,470,381
Savings 6,491,938 6,465,878
Time of $100,000 or more (Note 7) 3,901,915 4,709,360
Other time 22,611,618 21,092,044
------------ ------------
Total deposits 54,245,173 50,793,408
Accrued expenses and other liabilities (Note 8) 419,048 644,722
------------ ------------
Total liabilities 54,664,221 51,438,130
------------ ------------
Commitments and contingencies (Note 12) -- --
------------ ------------
Stockholders' equity (Notes 14 and 17):
Common stock; $.01 par value; 1,000,000 shares
authorized; shares issued and outstanding of
313,435 in 1996 and 306,035 in 1995 3,134 3,060
Capital surplus 3,069,763 2,995,837
Retained earnings 1,911,446 1,436,331
------------ ------------
Subtotal 4,984,343 4,435,228
Less treasury stock at cost (Note 18) (59,050) (59,050)
Unrealized gain (loss) on available-for-sale securities
(net of deferred income taxes of $(43,120) in 1996
and $5,854 in 1995) (Note 2) (71,471) 9,704
------------ ------------
Total stockholders' equity 4,853,822 4,385,882
------------ ------------
TOTAL $ 59,518,043 $ 55,824,012
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 122
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,087,645 $ 2,521,396
Investment securities:
Available-for-sale 993,409 429,852
Nontaxable held-to-maturity 48,334 33,727
Federal funds sold 99,830 210,267
----------- -----------
Total interest income 4,229,218 3,195,242
Interest expense - deposits and federal funds purchased (1,735,966) (1,210,586)
----------- -----------
Net interest income 2,493,252 1,984,656
Provision for credit losses (Note 4) (132,000) (70,000)
----------- -----------
Net interest income after provision for credit losses 2,361,252 1,914,656
----------- -----------
Other income:
Customer service fees 548,848 441,141
Gain (loss) on sale of other real estate (7,810) 18,329
Miscellaneous income 47,517 58,045
----------- -----------
Total other income 588,555 517,515
----------- -----------
Other expenses:
Salaries and employee benefits 1,062,595 788,855
Occupancy expense 136,160 106,884
Furniture and equipment expense 142,229 161,164
Miscellaneous expenses 771,030 516,841
----------- -----------
Total other expenses 2,112,014 1,573,744
----------- -----------
Income before provision for income taxes 837,793 858,427
Provision for income taxes (Notes 1 and 9) (286,743) (307,901)
----------- -----------
Net income $ 551,050 $ 550,526
=========== ===========
Earnings per share (Note 1) $ 1.79 $ 1.78
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 123
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
BIG LAKE FINANCIAL CORPORATION (PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN(LOSS) ON
COMMON STOCK TREASURY AVAILABLE- TOTAL
------------ CAPITAL RETAINED STOCK AT FOR-SALE STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS COST SECURITIES EQUITY
------- ------ ---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 298,808 $2,988 $2,925,232 $ 958,071 $(59,050) $(82,831) $ 3,744,410
Stock dividend
declared (Note 15) 7,227 72 70,605 (70,677) -- -- --
Cash paid in lieu
of fractional
shares (Note 15) -- -- -- (1,589) -- -- (1,589)
Net changes in
appreciation on
available-for-sale
securities (Note 2) -- -- -- -- -- 92,535 92,535
Net income -- -- -- 550,526 -- -- 550,526
------- ------ ---------- ----------- -------- -------- -----------
Balance,
December 31, 1995 306,035 3,060 2,995,837 1,436,331 (59,050) 9,704 4,385,882
Stock dividend
declared (Note 15) 7,400 74 73,926 (74,000) -- -- --
Cash paid in lieu
of fractional
shares (Note 15) -- -- -- (1,935) -- -- (1,935)
Net changes in
appreciation on
available-for-sale
securities (Note 2) -- -- -- -- -- (81,175) (81,175)
Net income -- -- -- 551,050 -- -- 551,050
------- ------ ---------- ----------- -------- -------- -----------
Balance,
December 31, 1996 313,435 $3,134 $3,069,763 $ 1,911,446 $(59,050) $(71,471) $ 4,853,822
======= ====== ========== =========== ======== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 124
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 551,050 $ 550,526
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 189,686 117,456
Provision for credit losses 132,000 70,000
Deferred income taxes (2,491) (27,350)
Net (gain) loss on sale of other real estate 7,810 (18,329)
Net premium amortization and discount accretion 291 13,762
(Increase) decrease in:
Accrued interest receivable (111,467) (88,541)
Other assets (89,851) (8,205)
Increase (decrease) in accrued expenses and
other liabilities (236,380) 484,776
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 440,648 1,094,095
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in federal funds sold 8,632,000 (7,145,000)
Proceeds from sales and maturities of investment securities 8,012,039 2,975,494
Purchase of investment securities (12,235,706) (8,256,013)
Net increase in loans (7,731,517) (4,152,117)
Purchases of premises and equipment (141,712) (360,994)
Increase in other real estate (54,547) (199,948)
Proceeds from sale of other real estate 142,803 129,832
Premium paid on acquisition of Lake Placid Branch -- (784,265)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (3,376,640) (17,793,011)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits other than time 2,739,636 3,827,588
Net increase in time deposits 712,129 13,666,453
Cash paid in lieu of fractional shares (1,935) (1,589)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,449,830 17,492,452
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 513,838 793,536
CASH AND CASH EQUIVALENTS AT JANUARY 1 2,896,165 2,102,629
------------ ------------
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 3,410,003 $ 2,896,165
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 125
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash received during the year for:
Interest $ 4,118,042 $3,120,463
=========== ==========
Cash paid during the year for:
Interest $ 1,791,814 $ 911,252
=========== ==========
Income taxes $ 528,331 $ 168,772
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Unrealized gain (loss) on available-for-sale
securities during the year $ (130,150) $ 148,363
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 126
BIG LAKE FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents $ 105,178 $ 76,969
Investment in subsidiary, at equity 4,173,830 3,714,878
Land 200,000 200,000
Building 576,637 576,637
Less accumulated depreciation (201,823) (182,602)
----------- -----------
TOTAL $ 4,853,822 $ 4,385,882
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ -- $ --
----------- -----------
Stockholders' equity (Notes 14 and 17):
Common stock; $.01 par value; 1,000,000 shares
authorized; shares issued and outstanding of
313,435 in 1996 and 306,035 in 1995 3,134 3,060
Capital surplus 3,069,763 2,995,837
Retained earnings 1,911,446 1,436,331
----------- -----------
Subtotal 4,984,343 4,435,228
Less treasury stock at cost (Note 18) (59,050) (59,050)
Unrealized gain (loss) on available-for-sale
securities (Note 2) (71,471) 9,704
----------- -----------
Total stockholders' equity 4,853,822 4,385,882
----------- -----------
TOTAL $ 4,853,822 $ 4,385,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 127
BIG LAKE FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue
Rental income $ 45,600 $ 40,002
Interest income 2,166 1,728
-------- --------
Total revenue 47,766 41,730
-------- --------
Expenses
Accounting and audit fees 10,198 15,800
Depreciation 19,221 19,221
Other expenses 7,424 5,019
-------- --------
Total expenses 36,843 40,040
-------- --------
Income before income taxes and equity in
undistributed earnings of subsidiary 10,923 1,690
Equity in undistributed earnings of subsidiary 540,127 548,836
-------- --------
Income before income taxes 551,050 550,526
Income taxes allocated (Note 9) -- --
-------- --------
Net income $551,050
========
Earnings per share (Note 1) $ 1.79 $ 1.78
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 128
BIG LAKE FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net income $ 551,050 $ 550,526
Adjustments to reconcile net income to net cash
provided by investing activities:
Depreciation 19,221 19,221
Equity in undistributed earnings of subsidiary (540,127) (548,836)
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 30,144 20,911
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid in lieu of fractional shares (1,935) (1,589)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (1,935) (1,589)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 28,209 19,322
CASH AND CASH EQUIVALENTS AT JANUARY 1 76,969 57,647
--------- ---------
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 105,178 $ 76,969
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash received during the year for:
Interest $ 2,166 $ 1,728
========= =========
Cash paid during the year for:
Interest $ -- $ --
========= =========
Income taxes $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 129
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Big Lake Financial Corporation and
Subsidiary (the "Company") conform to generally accepted accounting principles
and prevailing practices within the banking industry. The Company carries its
assets and liabilities on the historical cost basis (except as discussed in Note
1, "Investment Securities") and follows the accrual method of accounting.
Big Lake National Bank (the "Bank"), which opened in July 1986, is a national
banking association with its main office at 1409 South Parrott Avenue,
Okeechobee, Florida. In addition, the Bank has one branch located in Okeechobee,
Florida, which opened in November 1992. On December 15, 1995, the Bank purchased
certain assets and assumed deposit liabilities and related accrued interest of
the Lake Placid Branch of First of America Bank - Florida, FSB (see Note 19 for
additional discussion of this acquisition).
At December 31, 1996, the Bank's primary trade area encompassed Okeechobee and
Highlands County. The majority of the Bank's loans are currently to customers
located in Okeechobee County.
Basis of Consolidation
The consolidated financial statements include the accounts of Big Lake Financial
Corporation and its wholly-owned subsidiary, Big Lake National Bank, after
elimination of all material intercompany accounts and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for credit losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans ("Other Real Estate Owned"). In connection with the
determination of the allowances for credit losses on loans and foreclosed real
estate, management obtains independent appraisals for significant properties.
F-14
<PAGE> 130
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances for losses on loans and foreclosed real estate. Such agencies may
require the Bank to recognize additions to the allowances based on their
judgments about information available to them at the time of their examination.
Management does not anticipate that the allowances for credit losses on loans
and foreclosed real estate will change materially in the near term.
Investment Securities
The Company has adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
SFAS 115 applies to all debt securities and to equity securities that have
readily determinable fair values. SFAS 115 requires the Company to carry its
securities classified "available-for-sale" at fair market value. The Bank's
investments in securities are classified in two categories and accounted for as
follows:
Available-for-Sale. Securities available-for-sale consist of bonds,
notes, debentures, and certain equity securities not classified as
trading securities or as securities held-to-maturity.
Held-to-Maturity. Bonds, notes, and debentures for which the Bank has
the positive intent and ability to hold to maturity are reported at
cost and adjusted for amortization of premiums and accretion of
discounts. Such adjustments are recognized in interest income using the
interest method over the period to maturity.
Unrealized holding gains and losses, net of tax, on securities
available-for-sale are reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses on the sale of securities
available-for-sale are determined using the specific-identification method.
F-15
<PAGE> 131
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgage-backed Securities
Mortgage-backed securities represent participating interests in pools of
long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are carried at unpaid principal balances,
adjusted for unamortized premiums and unearned discounts. Premiums and discounts
are amortized using methods approximating the interest method over the remaining
period to contractual maturity, adjusted for anticipated prepayments. Should any
be sold, cost of securities sold is determined using the specific identification
method.
Loans
Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts. Unearned discounts on
installment loans are recognized as income over the term of the loans using a
method that approximates the interest method. Nonrefundable loan fees and
certain direct loan origination costs are deferred and the net amount is
recognized into income over the life of the loans as a yield adjustment.
The Company has adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS 114"). For loans
considered impaired under SFAS 114, the Company is required to compute the
present value of expected cash flows from the impaired loan and adjust credit
losses accordingly. A loan is impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. At December 31, 1996
and 1995, the Bank had no material amounts of loans classified as impaired under
SFAS 114.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more. Any
unpaid interest previously accrued on those loans is reversed from income.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other nonaccrual loans is recognized only to the extent of interest payments
received.
F-16
<PAGE> 132
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense, and reduced by charge-offs, net of recoveries.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation. The
provision for depreciation is computed by the straight-line method over the
estimated useful lives of the assets. For income tax purposes, the Company
utilizes straight-line and accelerated depreciation methods.
Other Real Estate Owned
Foreclosed real estate includes formally foreclosed property and in-substance
foreclosed property. In- substance foreclosed properties are those properties
for which the Bank has taken possession, regardless of whether formal
foreclosure proceedings have taken place.
At the time of foreclosure, foreclosed real estate is recorded at the lower of
the Bank's cost or the asset's fair value less costs to sell, which becomes the
property's new basis. Any write-downs based on the asset's fair value at date of
acquisition are charged to the allowance for loan losses. After foreclosure,
these assets are carried at the lower of their new cost basis or fair value less
cost to sell. Costs incurred in maintaining foreclosed real estate and
subsequent write-downs to reflect declines in the fair value of the property are
included in income (loss) on foreclosed real estate.
Interest Income on Loans
Interest on loans is accrued and credited to income based on the principal
amount outstanding. The accrual of interest on loans is discontinued when, in
the opinion of management, there is an indication that the borrower may be
unable to meet payments as they become due. Upon such discontinuance, all unpaid
accrued interest is reversed.
F-17
<PAGE> 133
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Employee Benefits
Profit-sharing costs are charged to salaries and employee benefits expense and
are funded as accrued.
Income Taxes
Deferred income taxes are provided for temporary differences between items of
income or expense reported in the financial statements and those reported for
income tax purposes. The principal temporary differences are depreciation and
amortization, loan loss provisions, the use of cash basis accounting for income
tax purposes, and unrealized gain (loss) on securities available-for-sale.
Earnings Per Share
Earnings per share of common stock is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the period.
For purposes of computing earnings per share, the shares of common stock issued
for the stock dividend (see Note 15) have been treated as outstanding from
January 1, 1995. The weighted-average number of shares outstanding for both 1996
and 1995 used in the computation was 308,711, net of treasury stock of 4,724
shares (see Note 18). The dilutive effect of the exercisable stock options
discussed at Note 16 has not been considered in the computation of earnings per
share. Management considers the potential dilution to be immaterial.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit and commercial
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
Cash and Cash Equivalents
For the purpose of presentation in the consolidated statements of cash flows,
cash and cash equivalents are defined as those amounts included in the
statements of financial condition caption "Cash and Due from Banks."
Intangible Assets
Intangible assets (consisting of core deposit premium and goodwill) are
amortized on a straight-line basis over seven and fifteen years, respectively
(see Note 6). For income tax purposes, intangibles are amortized over fifteen
years on a straight-line basis.
F-18
<PAGE> 134
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
Certain amounts in 1995 have been reclassified to conform with 1996
presentation.
NOTE 2 - INVESTMENT SECURITIES
The carrying amounts of investment securities as shown in the Consolidated
Statements of Financial Condition of the Company and their approximate fair
values at December 31 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Available-for-sale securities:
December 31, 1996:
U.S. Government and
agency securities $15,236,900 $ 5,424 $ 120,015 $15,122,309
Other securities 92,500 -- -- 92,500
----------- -------- ----------- -----------
$15,329,400 $ 5,424 $ 120,015 $15,214,809
=========== ======== =========== ===========
December 31, 1995:
U.S. Government and
agency securities $10,260,104 $ 20,188 $ 4,630 $10,275,662
Other securities 92,500 -- -- 92,500
----------- -------- ----------- -----------
$10,352,604 $ 20,188 $ 4,630 $10,368,162
=========== ======== =========== ===========
Held-to-maturity securities:
December 31, 1996:
State and municipal securities $ 800,740 $ 25,352 $ 2,638 $ 823,454
=========== ======== =========== ===========
December 31, 1995:
State and municipal securities $ 1,554,160 $ 41,220 $ -- $ 1,595,380
=========== ======== =========== ===========
</TABLE>
Securities carried at approximately $2,064,857 at December 31, 1996, and
$2,152,081 at December 31, 1995, were pledged to secure public deposits and for
other purposes required or permitted by law.
F-19
<PAGE> 135
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - INVESTMENT SECURITIES (Continued)
The scheduled maturities of available-for-sale and held-to-maturity securities
at December 31, 1996, were:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
------------------ -----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 499,160 $ 501,279 $ -- $ --
Due from one year to five years 14,737,740 14,621,030 599,786 609,367
Due from five years to ten years -- -- 49,820 49,643
Due after ten years 92,500 92,500 151,134 164,444
----------- ----------- -------- --------
$15,329,400 $15,214,809 $800,740 $823,454
=========== =========== ======== ========
</TABLE>
NOTE 3 - LOANS
The components of loans in the Consolidated Statements of Financial Condition
were:
<TABLE>
<CAPTION>
1996 1995
---- ----
---- ----
<S> <C> <C>
Loans secured by 1 to 4-family
residential properties $ 17,994,976 $ 14,247,137
Loans secured by multi-family
and non-farm, non-residential
properties 10,365,268 7,287,885
Other loans secured by real estate 1,031,132 889,696
Commercial and industrial loans 1,945,067 1,965,340
Consumer loans 5,426,916 4,673,227
Other loans 29,727 25,069
Less unearned and deferred income (61,302) (62,632)
------------ ------------
Total loans 36,731,784 29,025,722
Allowance for credit losses (469,673) (363,128)
------------ ------------
Net loans $ 36,262,111 $ 28,662,594
============ ============
</TABLE>
Nonaccrual loans are loans on which interest is not being recognized or is being
recognized only when received. Reduced-rate loans are loans on which the
original contractual interest rate has been reduced because of the borrower's
weakened financial condition.
F-20
<PAGE> 136
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3 - LOANS (Continued)
Nonaccrual loans totalled $111,163 and $30,342 at December 31, 1996 and 1995,
respectively, or .30% and .10% of total loans. The reduction in interest income
associated with nonaccrual loans was not material in 1996 or 1995.
NOTE 4 - ALLOWANCE FOR CREDIT LOSSES
An analysis of the changes in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Balance at January 1 $363,128 $323,046
-------- --------
Credits charged off (46,914) (35,547)
Recoveries 21,459 5,629
-------- --------
Net credits charged off (25,455) (29,918)
-------- --------
Provision for credit losses 132,000 70,000
-------- --------
Balance at December 31 $469,673 $363,128
======== ========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
The components of premises and equipment included in the Consolidated Statements
of Financial Condition at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 438,115 $ 438,115
Buildings 1,014,000 1,014,000
Furniture, fixtures, and equipment 862,752 726,495
Other fixed assets 15,924 10,791
------------ ------------
Total 2,330,791 2,189,401
Less accumulated depreciation (881,036) (775,410)
------------ ------------
Premises and equipment - net $ 1,449,755 $ 1,413,991
============ ============
</TABLE>
F-21
<PAGE> 137
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 5 - PREMISES AND EQUIPMENT (Continued)
Depreciation expense amounted to $105,948 and $117,456 for the years ended
December 31, 1996 and 1995, respectively.
The Company did not have any material noncancellable leases at December 31, 1996
or 1995.
NOTE 6 - OTHER ASSETS
The components of other assets in the Consolidated Statements of Financial
Condition at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrued interest receivable $ 440,427 $ 328,960
Other real estate owned -- 96,066
Repossessed equipment -- 1,725
Prepaid expenses 182,248 90,676
Income taxes receivable 59,644 --
Deferred income tax asset 2,527 --
Core deposit premium (net of accumulated amortization
of $58,975) 353,851 412,826
Goodwill (net of accumulated amortization of $24,763) 346,676 371,439
Miscellaneous 3,252 3,248
---------- ----------
$1,388,625 $1,304,940
========== ==========
</TABLE>
The amortization for core deposit premium and goodwill began in 1996 and
amounted to $83,738.
NOTE 7 - DEPOSITS
Included in interest-bearing deposits are certificates of deposit issued in
amounts of $100,000 or more. These certificates and their remaining maturities
at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Three months or less $1,834,974 $1,802,448
Over three through twelve months 1,766,941 2,606,912
Over twelve months 300,000 300,000
---------- ----------
$3,901,915 $4,709,360
========== ==========
</TABLE>
F-22
<PAGE> 138
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - ACCRUED EXPENSES AND OTHER LIABILITIES
The components of accrued expenses and other liabilities in the Consolidated
Statements of Financial Condition at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrued interest payable $ 304,963 $ 360,811
Accounts payable and other accrued expenses 106,144 48,899
Income taxes payable -- 179,455
Deferred income tax liability -- 48,938
Miscellaneous 7,941 6,619
---------- ----------
$ 419,048 $ 644,722
========== ==========
</TABLE>
NOTE 9 - INCOME TAXES
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Currently payable:
Federal $ 234,044 $ 284,168
State 40,063 48,644
---------- ----------
274,107 332,812
---------- ----------
Deferred income taxes:
Federal 10,789 (21,270)
State 1,847 (3,641)
---------- ----------
12,636 (24,911)
---------- ----------
Total $ 286,743 $ 307,901
========== ==========
</TABLE>
F-23
<PAGE> 139
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9 - INCOME TAXES (Continued)
The following is a reconciliation of income tax rates that would result if
federal and state statutory rates were applied to income before income tax
expense using the regular tax system:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Statutory rate 34.0% 34.0%
Increase (decrease) resulting from:
Effect of tax-exempt income (2.0%) (1.3%)
State tax - net of federal benefit 3.5% 3.5%
Other (net) (1.3%) (.3%)
------ ------
34.2% 35.9%
====== ======
</TABLE>
The components of the deferred income tax asset (liability) included in the
statements of financial condition were:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred income tax asset:
Federal $ 87,363 $ 22,873
State 14,954 3,915
---------- ----------
102,317 26,788
---------- ----------
Deferred income tax liability:
Federal (85,204) (64,658)
State (14,586) (11,068)
---------- ----------
(99,790) (75,726)
---------- ----------
Net deferred income tax asset (liability) $ 2,527 $ (48,938)
========== ==========
</TABLE>
F-24
<PAGE> 140
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9 - INCOME TAXES (Continued)
The tax effects of each type of income and expense item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net unrealized gain (loss) on
securities available-for-sale $ 43,120 $ (5,854)
Depreciation (43,245) (45,399)
Cash versus accrual for tax (56,545) (20,348)
Allowance for credit losses 47,863 86,788
Other 11,334 (64,125)
---------- ----------
Net deferred income tax asset (liability) $ 2,527 $ (48,938)
========== ==========
</TABLE>
The Company has adopted an income tax allocation agreement, which calls for
allocating income tax expense between members of the consolidated group as if
each member filed a separate income tax return. In 1996 and 1995, no allocation
of income tax expense was made to the parent company since the amounts were
immaterial.
NOTE 10 - EMPLOYEE BENEFIT PLAN
The Bank sponsors a 401(k) Profit Sharing Plan that covers substantially all
employees. Bank contributions under this plan are made at the discretion of the
Board of Directors. During 1996 and 1995, the employer contribution approved by
the Board of Directors amounted to 50% of a participant's contributions, subject
to a maximum of 3% of the participant's salary. The 401(k) Profit Sharing Plan
is a prototype plan and has been approved by the Internal Revenue Service.
The Bank funds the annual expense through contributions to the plan. The
matching contribution for 1996 is estimated at $14,000. The amount of matching
contribution paid in 1996 for 1995 totalled $7,161. The amounts included in
salaries and employee benefits as pension expense for 1996 and 1995 totalled
$7,011 and $7,261, respectively.
F-25
<PAGE> 141
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 11 - RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors, executive officers,
significant shareholders and their affiliates (Related Parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features.
The aggregate extensions of credit to such related parties at December 31, 1996
and 1995, were $1,331,755 and $1,268,845, respectively. During 1996, extensions
of credit to such parties amounted to $738,831 and repayments amounted to
$675,921. Unfunded commitments to the same parties totalled $566,367 at December
31, 1996.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company's consolidated financial statements do not reflect various
commitments and contingent liabilities that arise in the normal course of
business and involve elements of credit risk, interest rate risk, and liquidity
risk. These commitments and contingent liabilities of the Bank, which include
unfunded commitments to related parties (see Note 11), are commitments to extend
credit and commercial and standby letters of credit. A summary of the Bank's
commitments and contingent liabilities at December 31, 1996, follows:
<TABLE>
<S> <C>
Commitments to extend credit $2,413,648
Commercial and standby letters of credit 73,680
----------
$2,487,328
==========
</TABLE>
F-26
<PAGE> 142
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
Commitments to extend credit and commercial letters of credit all include
exposure to some credit loss in the event of non-performance of the customer.
The Bank's credit policies and procedures for credit commitments and financial
guarantees are the same as those for extension of credit instruments that are
recorded in the Consolidated Statements of Financial Condition. In the opinion
of management, these instruments do not generally present any significant
liquidity risk to the Bank. The Bank's experience has been that approximately
70% to 80% of loan commitments are drawn upon by customers. The Bank did not
incur any losses on its commitments in either 1996 or 1995.
The Company is a party to litigation and claims arising in the normal course of
business. Management, after consultation with legal counsel, believes that the
liabilities, if any, arising from such litigation and claims will not be
material to the financial position of the Company.
The Bank has confirmed overnight Federal Funds accommodation lines of credit in
the amounts of $650,000 with Independent Bankers' Bank of Florida ("IBB") and
$500,000 with Compass Bank. The accommodation lines are unsecured and subject to
ongoing financial analysis and market conditions. Therefore, the accommodation
lines are not a contractual commitment by IBB or Compass Bank.
The Bank has entered into a purchase/resale agreement with IBB that allows the
Bank to sell certain types of securities, in lieu of borrowing, on the condition
that those securities be resold to the Bank at an agreed upon future time and
price. At December 31, 1996, no such securities had been sold by the Bank under
the purchase/resale agreement.
NOTE 13 - CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Bank's market area.
Substantially all such customers are depositors of the Bank. The concentrations
of credit by type of loan are set forth in Note 3. The distribution of
commitments to extend credit approximates the distribution of loans outstanding.
Letters of credit were granted to commercial borrowers. The Bank, as a matter of
policy, does not extend credit to any single borrower or group of related
borrowers in excess of its legal lending limit.
F-27
<PAGE> 143
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 14 - REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that it
may declare without prior regulatory approval. At December 31, 1996,
approximately $1,454,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
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 - actions 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 judgments 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 in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency ("OCC") categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Bank's category.
F-28
<PAGE> 144
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 14 - REGULATORY MATTERS (Continued)
The Bank's actual capital amounts (dollars in thousands) and ratios are also
presented in the table below:
<TABLE>
<CAPTION>
To be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------ ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets) $3,952 12.12% >=$2,609 >=8.0% >=$3,262 >=10.0%
Tier I Capital (to Risk Weighted Assets) $3,544 10.87% >=$1,305 >=4.0% >=$1,957 >= 6.0%
Tier I Capital (to Average Assets) $3,544 7.37% >=$1,442 >=4.0% >=$2,403 >= 5.0%
As of December 31, 1995:
Total Capital (to Risk Weighted Assets) $3,271 11.69% >=$2,239 >=8.0% >=$2,799 >=10.0%
Tier I Capital (to Risk Weighted Assets) $2,921 10.43% >=$1,120 >=4.0% >=$1,680 >= 6.0%
Tier I Capital (to Average Assets) $2,921 6.74% >=$1,299 >=4.0% >=$2,165 >= 5.0%
</TABLE>
NOTE 15 - STOCK DIVIDEND
On February 21, 1996, the Company's Board of Directors declared a stock dividend
payable at a rate of 2.5% of shares issued and outstanding to stockholders of
record on February 29, 1996, payable on or before March 21, 1996. Cash in lieu
of fractional shares was paid at the rate of $14.56 per share, which was the
estimated fair market value at that time. The total cash paid in lieu of
fractional shares amounted to $1,935.
On February 15, 1995, the Company's Board of Directors declared a stock dividend
payable at a rate of 2.5% of shares issued and outstanding to stockholders of
record on February 16, 1995, payable on or before March 16, 1995. Cash in lieu
of fractional shares was paid at the rate of $12.73 per share, which was the
estimated fair market value at that time. The total cash paid in lieu of
fractional shares amounted to $1,589.
F-29
<PAGE> 145
BIG LAKE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED AND PARENT COMPANY ONLY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 16 - STOCK OPTION PLAN
The Company has adopted a Stock Option Plan (as amended) that permits certain
directors to purchase additional shares of the Company's common stock at a
purchase price of $10.00 per share. The number of shares permitted for purchase
by each participant originated at 2,750 shares, and has been adjusted for
subsequent stock dividends according to the terms of the plan. At December 31,
1996, the approximate number of shares under this plan totalled 3,035 shares per
participant. Options totalling approximately 18,213 shares are outstanding and
exercisable until the expiration date, which has been extended until June 30,
1998.
NOTE 17 - PREFERRED STOCK
In addition to the 1,000,000 shares of authorized common stock, the Company's
articles of incorporation authorize up to 500,000 shares of non-voting preferred
stock at $1.00 par value. The Board of Directors are further authorized to
establish designations, powers, preferences, rights, and other terms for
preferred stock by resolution.
On March 26, 1986, the Board of Directors, designated 2,000 shares as Redeemable
Preferred Stock, Series 1 ("Series 1"). Series 1 shares have no voting or
conversion rights and pay no dividends. However, Series 1 shares have preference
on liquidation at the rate of $10 per share after January 1, 1987.
No shares of preferred stock, including Series 1 shares, have been issued.
NOTE 18 - TREASURY STOCK
Treasury stock is shown at cost, and as of December 31, 1996 and 1995, consisted
of 4,724 shares of common stock at a recorded cost of $12.50 per share. There
were no treasury stock transactions during 1996 or 1995.
F-30
<PAGE> 146
NOTE 19 - BRANCH ACQUISITION
In 1995, the Company entered into negotiations with First of America Bank -
Florida, FSB ("FOAB"), to acquire certain assets and assume deposit liabilities
and related accrued interest of FOAB's Lake Placid Branch ("Branch"). The Branch
acquisition was approved by the OCC and the Company's Board of Directors, and
consummated on December 15, 1995. A summary of the transaction follows:
<TABLE>
<S> <C>
Liabilities Assumed:
Deposits $11,203,790
Accrued interest payable 86,589
-----------
11,290,379
-----------
Less Assets Purchased:
Branch cash on hand 36,910
Personal property 15,664
Real property 275,542
Core deposit premium 412,826
Goodwill 371,439
Loans and accrued interest 3,939
-----------
1,116,320
-----------
Less Expenses at Closing: 1,789
-----------
Cash Received at Closing $10,172,270
===========
</TABLE>
F-31
<PAGE> 147
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,335 $ 2,089
Interest-bearing deposits -- 486
Federal funds sold 4,668 4,359
Investment securities available-for-sale at fair value 6,078 6,497
Mortgage-backed securities available-for-sale at fair value 299 343
Loans receivable less allowance for credit losses 33,494 31,658
Accrued interest receivable 325 314
Bank premises and equipment - net 1,008 1,096
Other real estate owned 202 697
Other assets 694 669
--------- ---------
TOTAL $ 49,103 $ 48,208
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 8,224 $ 6,482
Interest-bearing 36,005 37,106
--------- ---------
Total deposits 44,229 43,588
Accrued interest on deposits 205 219
Other accrued expenses and liabilities 462 362
--------- ---------
Total liabilities 44,896 44,169
--------- ---------
Commitments and contingencies -- --
--------- ---------
Stockholders' equity:
Common stock 4 4
Additional paid-in-capital 1,196 1,196
Retained earnings 3,046 2,874
Unrealized loss on available-for-sale securities (39) (35)
--------- ---------
Total stockholders' equity 4,207 4,039
--------- ---------
TOTAL $ 49,103 $ 48,208
========= =========
Book value per common share $ 10.11 $ 9.70
========= =========
Common shares outstanding 416,279 416,279
========= =========
</TABLE>
F-32
<PAGE> 148
CNB FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the three months ended
March 31,
-------------------
1997 1996
<S> <C> <C>
Interest and fees on loans $ 787 $ 760
Investment income on investment and mortgage-backed securities 96 103
Other interest income 43 65
-------- --------
Total interest income 926 928
Interest expense on deposits 420 437
-------- --------
Net interest income before provision for credit losses 506 491
Provision for credit losses 6 10
-------- --------
Net interest income 500 481
-------- --------
Fees and service charges 102 111
Other income 14 23
-------- --------
Total other income 116 134
-------- --------
Other expenses:
Salaries and employee benefits 266 256
Expenses of bank premises and fixed assets 59 74
Other operating expenses 152 147
-------- --------
Total other expenses 477 477
-------- --------
Income before provision for income taxes 139 138
Provision for income taxes 46 48
-------- --------
Net income $ 93 $ 90
======== ========
Earnings per share $ 0.22 $ 0.22
======== ========
Weighted average common shares outstanding during period 416,279 416,279
======== ========
</TABLE>
F-33
<PAGE> 149
CNB FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 379 $ 600
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in:
Federal funds sold (3,630) (2,464)
Investment securities 588 (473)
Loans 512 (740)
Purchases of premises and equipment, net (21) (12)
Net increase in other real estate (142) (468)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (2,693) (4,157)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 2,227 2,796
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,227 2,796
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (87) (761)
CASH AND CASH EQUIVALENTS AT JANUARY 1 2,422 2,850
------- -------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 2,335 $ 2,089
======= =======
</TABLE>
F-34
<PAGE> 150
[STEVENS, THOMAS, SCHEMER & SPARKS, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CNB Financial Corporation
Clewiston, Florida
We have audited the accompanying consolidated statements of condition of CNB
Financial Corporation and Subsidiary (the "Company") and the balance sheets of
CNB Financial Corporation (parent company only) as of December 31, 1996 and
1995, and the related consolidated and parent company only statements of income,
changes in stockholders' equity, and cash flows for the years then ended. These
consolidated and parent company only financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated and parent company only financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated and parent company only financial statements
referred to above present fairly, in all material respects, the financial
position of the CNB Financial Corporation and Subsidiary and CNB Financial
Corporation (parent company only) as of December 31, 1996 and 1995, and the
results of its consolidated and parent company only operations and their
consolidated and parent company only cash flows for the years then ended in
conformity with generally accepted accounting principles.
As more fully described in Note 16, subsequent to the issuance of the Company's
and parent company only 1996 financial statements and our report thereon dated
February 13, 1997, the Bank was required to make a regulatory addition to the
allowance for credit losses. In our original report we expressed an unqualified
opinion on the 1996 financial statements, and our opinion on the revised
statements, as expressed herein, remains unqualified.
Jacksonville, Florida
February 13, 1997, except as to the fourth paragraph above
and Note 16, which are as of April 4, 1997
F-35
<PAGE> 151
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks $ 2,422,099 $ 2,849,864
Interest-bearing deposits with banks -- 485,721
Federal funds sold 1,038,000 1,895,000
Investment securities available-for-sale, at fair value 6,995,921 6,439,009
Loans less allowance for credit losses of $474,613
in 1996, and $435,670 in 1995 34,154,467 31,396,007
Accrued interest receivable 412,293 380,159
Premises and equipment - net 1,012,577 1,115,443
Foreclosed real estate 60,484 229,120
Other assets 704,021 539,333
------------ -----------
TOTAL $ 46,799,862 $45,329,656
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits $ 13,713,125 $12,070,505
Savings and NOW accounts 6,153,065 6,420,423
Other time deposits 22,135,728 22,301,138
------------ -----------
Total deposits 42,001,918 40,792,066
Accrued expenses and other liabilities 663,638 536,699
------------ -----------
Total liabilities 42,665,556 41,328,765
------------ -----------
Commitments and contingencies -- --
------------ -----------
Stockholders' equity:
Common stock; $.01 par value; 10,000,000 shares
authorized; 416,279 shares issued and outstanding 4,163 4,163
Capital surplus 1,195,837 1,195,837
Unrealized gains (losses) on securities available-for-sale (19,105) 16,945
Retained earnings 2,953,411 2,783,946
------------ -----------
Total stockholders' equity 4,134,306 4,000,891
------------ -----------
TOTAL $ 46,799,862 $45,329,656
============ ===========
</TABLE>
See accompanying notes to financial statements
F-36
<PAGE> 152
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME:
Loans receivable $3,019,399 $ 2,798,685
Securities available-for-sale 415,151 449,894
Federal funds sold 182,873 155,305
Deposits with banks 12,049 18,893
---------- -----------
Total interest income 3,629,472 3,422,777
---------- -----------
INTEREST EXPENSE:
Deposits 1,700,843 1,609,774
Federal funds purchased -- 378
---------- -----------
Total interest expense 1,700,843 1,610,152
---------- -----------
NET INTEREST INCOME 1,928,629 1,812,625
PROVISION FOR LOAN LOSSES 128,003 94,322
---------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,800,626 1,718,303
---------- -----------
NON-INTEREST INCOME:
Customer service fees 402,333 484,855
Other income 137,578 33,202
Security losses -- (901)
---------- -----------
Total non-interest income 539,911 517,156
---------- -----------
NON-INTEREST EXPENSES:
Salaries 790,547 792,201
Employee benefits 200,671 214,122
Occupancy expense 131,240 78,347
Furniture and fixtures expense 155,292 206,593
Deposit insurance premium 29,051 65,534
Other expenses 849,635 535,661
---------- -----------
Total non-interest expenses 2,156,436 1,892,458
---------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 184,101 343,001
PROVISION FOR INCOME TAXES 14,636 107,524
---------- -----------
NET INCOME $ 169,465 $ 235,477
========== ===========
EARNINGS PER SHARE $ .41 $ .57
========== ===========
</TABLE>
See accompanying notes to financial statements
F-37
<PAGE> 153
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
NET TOTAL
COMMON STOCK CAPITAL UNREALIZED RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS GAINS/LOSSES EARNINGS EQUITY
------ ------ ------- ------------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 396,583 $3,966 $ 1,196,034 $(64,832) $2,548,469 $ 3,683,637
Net income -- -- -- -- 235,477 235,477
Increase in unrealized gain
on investment securities
available-for-sale, net of
deferred taxes -- -- -- 81,777 -- 81,777
Stock split effected by a
dividend 19,696 197 (197) -- -- --
------- ------ ----------- -------- ---------- -----------
Balance,
December 31, 1995 416,279 4,163 1,195,837 16,945 2,783,946 4,000,891
Net income -- -- -- -- 169,465 169,465
Increase in unrealized loss
on investment securities
available-for-sale, net of
deferred taxes -- -- -- (36,050) -- (36,050)
------- ------ ----------- -------- ---------- -----------
Balance,
December 31, 1996 416,279 $4,163 $ 1,195,837 $(19,105) $2,953,411 $ 4,134,306
======= ====== =========== ======== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE> 154
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 169,465 $ 235,477
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 118,145 141,783
Amortization 5,063 15,191
Provision for credit losses 128,003 94,322
Provision for losses on foreclosed properties 6,174 --
Net loss on sale of foreclosed properties 6,973 2,066
Deferred income taxes (71,460) 13,766
Net realized loss on available-for-sale securities -- 901
Net premium amortization and discount accretion (3,301) (44,709)
Increase in accrued interest receivable (32,134) (118,588)
(Increase) decrease in other assets (79,720) 100,651
Increase (decrease) in accrued expenses and other liabilities 126,939 (83,516)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 374,147 357,344
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing deposits with banks 485,721 (485,721)
Net decrease in federal funds sold 857,000 1,198,000
Proceeds from sales of available-for-sale securities -- 1,500,313
Proceeds from the maturity of available-for-sale securities 5,378,765 4,649,876
Purchase of available-for-sale securities (5,986,996) (7,068,295)
Net increase in loans (2,938,123) (2,139,375)
Net purchases of premises and equipment (15,279) (27,305)
Proceeds from sale of foreclosed properties 207,148 93,052
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,011,764) (2,279,455)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing demand,
savings, and NOW deposit accounts 1,375,262 (668,348)
Net increase (decrease) in time deposits (165,410) 3,012,680
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,209,852 2,354,332
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (427,765) 432,221
CASH AND CASH EQUIVALENTS AT JANUARY 1 2,849,864 2,417,643
----------- -----------
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 2,422,099 $ 2,849,864
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,695,716 $ 1,596,723
=========== ===========
Income taxes $ 169,330 $ 67,078
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 155
CNB FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash $ 12,674 $ 12,874
Investment in subsidiary, at equity 4,107,223 3,970,526
Other assets 14,409 17,491
---------- ----------
TOTAL $4,134,306 $4,000,891
========== ==========
</TABLE>
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Stockholders' equity:
Common stock; $.01 par value; 10,000,000 shares
authorized; 416,279 shares issued and outstanding $ 4,163 $ 4,163
Capital surplus 1,195,837 1,195,837
Unrealized gains (losses) on securities available-
for-sale (19,105) 16,945
Retained earnings 2,953,411 2,783,946
----------- ----------
TOTAL $ 4,134,306 $4,000,891
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE> 156
CNB FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend and other income:
Dividend income from subsidiary $ -- $ --
Expenses
Other expenses 5,263 16,505
--------- ---------
Loss before income taxes and equity in
undistributed earnings of subsidiary (5,263) (16,505)
Equity in undistributed earnings of subsidiary 172,747 245,771
--------- ---------
Income before income taxes 167,484 229,266
Income taxes (1,981) (6,211)
--------- ---------
Net income $ 169,465 $ 235,477
========= =========
Earnings per share $ .41 $ .57
========= =========
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 157
CNB FINANCIAL CORPORATION AND SUBSIDIARY
(PARENT COMPANY ONLY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK NET TOTAL
------------ CAPITAL UNREALIZED RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS GAINS/LOSSES EARNINGS EQUITY
------- ------- ----------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 396,583 $3,966 $ 1,196,034 $(64,832) $2,548,469 $ 3,683,637
Net income -- -- -- -- 235,477 235,477
Increase in unrealized gain
on investment securities
available-for-sale, net of
deferred taxes -- -- -- 81,777 -- 81,777
Stock split effected by a
dividend 19,696 197 (197) -- -- --
------- ------ ----------- -------- ---------- -----------
Balance,
December 31, 1995 416,279 4,163 1,195,837 16,945 2,783,946 4,000,891
Net income -- -- -- -- 169,465 169,465
Increase in unrealized loss
on investment securities
available-for-sale, net of
deferred taxes -- -- -- (36,050) -- (36,050)
------- ------ ----------- -------- ---------- -----------
Balance,
December 31, 1996 416,279 $4,163 $ 1,195,837 $(19,105) $2,953,411 $ 4,134,306
======= ====== =========== ======== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE> 158
CNB FINANCIAL CORPORATION
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net income $ 169,465 $ 235,477
Adjustments to reconcile net income to net income
provided by investing activities:
Amortization 5,063 15,191
Equity in undistributed earnings (172,747) (245,771)
Increase in other assets (1,981) (6,210)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (200) (1,313)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid -- --
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (200) (1,313)
CASH AND CASH EQUIVALENTS AT JANUARY 1 12,874 14,187
--------- ---------
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 12,674 $ 12,874
========= =========
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE> 159
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of CNB Financial Corporation and
Subsidiary (the "Company") conform to generally accepted accounting principles
and prevailing practices within the banking industry. The Company carries its
assets and liabilities on the historical cost basis, except for investment
securities available-for-sale and foreclosed real estate, and follows the
accrual method of accounting.
The Bank is a national banking association with its main office at 950 W.
Ventura Avenue, Clewiston, Florida. In addition, the Bank has one branch each
located in Clewiston, LaBelle, and Moore Haven, Florida.
The Bank's primary trade area encompasses Hendry, Glades, and Palm Beach
Counties. The majority of the Bank's loans are currently to customers located in
Hendry and Glades Counties.
Basis for Consolidation
The consolidated financial statements include the accounts of CNB Financial
Corporation and its subsidiary, Clewiston National Bank (the Bank), after
elimination of all material intercompany accounts and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for credit losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for credit losses on loans and foreclosed real estate, management obtains
independent appraisals for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances for losses on loans and foreclosed real estate. Such agencies may
require the Bank to recognize additions to the allowances based on their
judgments about information available to them at the time of their examination.
Management does not anticipate that the allowances for credit losses on loans
and foreclosed real estate will change materially in the near term.
(Continued)
F-44
<PAGE> 160
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities Available-for-Sale
Available-for-sale securities consist of bonds, notes, debentures, and certain
equity securities not classified as trading securities nor as held-to-maturity
securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of stockholders'
equity until realized.
Gains and losses on the sale of available-for-sale securities are determined
using the specific-identification method.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.
Loans Receivable
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
Loan origination fees and certain direct origination costs approximated the
direct costs of recording the loans. The direct costs were netted against the
related fees.
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
For impairment recognized in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan, the entire change in present value of
expected cash flows is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of bad debt
expense that otherwise would be reported.
(Continued)
F-45
<PAGE> 161
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations and
changes in the valuation allowance are included in loss on foreclosed real
estate.
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Premises and Equipment
Land is carried at cost. Bank premises, furniture and equipment, and leasehold
improvements are carried at cost, less accumulated depreciation and amortization
computed principally by the straight-line method.
Earnings Per Share
Earnings per share of common stock is computed by dividing net income by the
weighted average of shares of common stock outstanding during the period. The
average number of shares outstanding were as follows:
1996 - 416,279 1995 - 416,279
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit, commitments
under credit card arrangements, and commercial and standby letters of credit.
Such financial instruments are recorded in the financial statements when they
become payable.
Reclassifications
Certain amounts in 1995 have been reclassified to conform with 1996
presentation.
Cash and Cash Equivalents
For the purpose of presentation in the statements of cash flows, cash and cash
equivalents are defined as those amounts included in the statements of condition
caption "Cash and due from banks."
(Continued)
F-46
<PAGE> 162
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - INVESTMENT SECURITIES
Investment securities consisted of the following:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Approximate
Cost Gain Loss Fair Value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1996:
U.S. Treasury securities and
other government agencies $6,798,867 $10,992 $(41,888) $6,767,971
State and political subdivisions 180,000 2,047 (97) 181,950
Other securities 46,000 -- -- 46,000
---------- ------- -------- ----------
Total $7,024,867 $13,039 $(41,985) $6,995,921
========== ======= ======== ==========
December 31, 1995:
U.S. Treasury securities and
other government agencies $5,936,417 $14,757 $ -- $5,951,174
State and political subdivisions 430,918 10,917 -- 441,835
Other securities 46,000 -- -- 46,000
---------- ------- -------- ----------
Total $6,413,335 $25,674 $ -- $6,439,009
========== ======= ======== ==========
</TABLE>
Securities with amortized cost of $5,427,849 and $5,238,463, with approximate
fair values of $5,390,651 and $5,261,921 at December 31, 1996 and 1995,
respectively, were pledged to secure public deposits and for other purposes
required or permitted by law.
Gross realized losses on sales of available-for-sale securities were $901 in
1995. There were no gross realized gains or losses in 1996.
The maturities of investment securities at December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Amortized Approximate
Cost Fair Value
--------- -----------
<S> <C> <C>
Available-for-Sale:
Due in one year or less $2,085,212 $2,086,927
Due from one year to five years 4,646,180 4,618,097
Due from five years to ten years -- --
Due after ten years 247,475 244,897
---------- ----------
Total 6,978,867 6,949,921
Other securities 46,000 46,000
---------- ----------
Total $7,024,867 $6,995,921
========== ==========
</TABLE>
(Continued)
F-47
<PAGE> 163
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3 - LOANS
The components of loans in the statements of condition were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Loans secured by 1 to 4-family residential properties $ 18,197,612 $ 16,530,898
Loans secured by multi-family and non-farm,
non-residential properties 1,855,552 1,595,356
Other loans secured by real estate 3,598,066 4,406,995
Commercial and industrial loans 5,156,444 3,569,109
Consumer loans 4,887,310 5,653,950
Other loans 977,667 133,398
Unearned income (43,571) (58,029)
------------ ------------
Total loans 34,629,080 31,831,677
Allowance for credit losses (474,613) (435,670)
------------ ------------
Net loans $ 34,154,467 $ 31,396,007
============ ============
</TABLE>
An analysis of the changes in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Balance at January 1 $ 435,670 $ 418,090
------------ ------------
Credits charged off 157,912 (99,921)
Recoveries 68,852 23,179
------------ ------------
Net credits charged off (89,060) (76,742)
------------ ------------
Provision for credit losses 128,003 94,322
------------ ------------
Balance at December 31 $ 474,613 $ 435,670
============ ============
</TABLE>
Impairment of loans having recorded investments of $372,388 in 1996, and
$669,908 in 1995, has been recognized in conformity with FASB Statement No. 114.
The average recorded investment in such impaired loans during 1996 and 1995 was
$377,725 and $883,026, respectively. The total allowance for loan losses related
to these loans was $10,425 and $114,607 in 1996 and 1995, respectively.
Loans having carrying values of $51,658 and $254,843 were transferred to
foreclosed real estate in 1996 and 1995, respectively.
The Bank is not committed to lend additional funds to debtors whose loans have
been modified.
(Continued)
F-48
<PAGE> 164
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 4 - PREMISES AND EQUIPMENT
The components of premises and equipment included in the statements of condition
at December 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 339,280 $ 381,687
Buildings 725,396 703,496
Furniture, fixtures, and equipment 1,303,277 1,279,750
Other fixed assets 195,078 182,334
----------- -----------
Total 2,563,031 2,547,267
Accumulated depreciation (1,550,454) (1,431,824)
----------- -----------
Premises and equipment - net $ 1,012,577 $ 1,115,443
=========== ===========
</TABLE>
Depreciation expense amounted to $118,145 and $141,783 for the years ended
December 31, 1996 and 1995, respectively.
The Bank leases property at two branch locations under noncancelable operating
leases expiring in 1997 and 2001. Minimum future rental payments under the
leases as of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $28,512
1998 14,124
1999 14,124
2000 14,124
2001 3,531
</TABLE>
Lease payments charged to operations for the above leases were approximately
$24,717 and $21,214 for the years ended December 31, 1996 and 1995,
respectively.
(Continued)
F-49
<PAGE> 165
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 5- OTHER ASSETS
The components of other assets in the statements of condition at December 31,
1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts receivable $131,790 $ 91,748
Cash surrender value of insurance - deferred
compensation plan 138,055 107,299
Prepaid expenses 107,947 99,855
Refundable income taxes 96,387 27,424
Deferred income tax benefit 207,828 117,797
Miscellaneous 22,014 95,210
-------- --------
Total $704,021 $539,333
======== ========
</TABLE>
NOTE 6 - DEPOSITS
Included in interest-bearing deposits are certificates of deposit issued in
amounts of $100,000 or more. These certificates and their remaining maturities
at December 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Three months or less $ 862,580 $ 100,000
Over three through twelve months 553,690 877,321
Over twelve months 221,675 1,113,601
---------- ----------
Total $1,637,945 $2,090,922
========== ==========
</TABLE>
NOTE 7 - LOAN ORIGINATION
Direct costs of salary and employee benefits of $35,397 and $54,666 were netted
against related fees in 1996 and 1995, respectively.
(Continued)
F-50
<PAGE> 166
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - INCOME TAXES
The provision for income taxes for the years ended December 31, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current $ 86,096 $ 93,758
Deferred (71,460) 13,766
-------- --------
Total $ 14,636 $107,524
======== ========
</TABLE>
The effective tax rate is less than the statutory federal income tax rate of 34%
for the year ended December 31, 1996 and 1995 for the following reasons:
<TABLE>
<CAPTION>
1996 1995
--------------------- ----------------------
Amount % Amount %
-------- ---- --------- ----
<S> <C> <C> <C> <C>
Provision at federal income tax rate $ 62,594 34.0 $ 116,620 34.0
Surtax exemption -- -- -- --
Alternative minimum tax (48,257) (26.2) -- --
Tax exempt income (4,223) (2.3) (6,715) (2.0)
State income tax net of federal benefit 6,281 3.4 2,004 0.6
Other (net) (1,759) (1.0) (4,385) (1.3)
-------- ---- --------- ----
Total $ 14,636 7.9 $ 107,524 31.3
======== ==== ========= ====
</TABLE>
(Continued)
F-51
<PAGE> 167
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - INCOME TAXES (Continued)
The components of the deferred income tax benefit included in the statement of
condition were:
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred tax assets:
<S> <C> <C>
Loan loss reserve $117,112 $ 92,151
Interest on non-accrual loans 3,406 23,395
Other real estate owned 1,634 3,054
Repossessed equipment -- 166
Deferred compensation payable 142,190 79,311
Net unrealized depreciation on available-for-sale securities 9,842 --
-------- --------
Total 274,184 198,077
-------- --------
Deferred tax liability:
Depreciation 64,033 71,551
Chargeoffs on foreclosed properties 2,323 --
Net unrealized appreciation on available-for-sale securities -- 8,729
-------- --------
Total 66,356 80,280
-------- --------
Net deferred tax assets $207,828 $117,797
======== ========
</TABLE>
The Company has an income tax allocation agreement with the Bank which calls for
the allocation of income tax expense between members of the consolidated group
as if each member filed a separate income tax return. The allocation of the
income tax expense to the Company was a tax benefit of $1,981 and $6,211 for
1996 and 1995, respectively.
At December 31, 1996, the Bank had an alternative minimum tax credit carryover
of approximately $33,065 available to offset regular income tax in a year(s)
when regular tax exceeds the alternative minimum tax. The
carryover period is indefinite.
NOTE 9 - PENSION PLAN
The Bank sponsors a defined contribution pension plan that covers substantially
all employees. The Bank funds the annual expense through contributions to the
plan. Pension expense for the years ended December 31, 1996 and 1995 amounted to
$43,024 and $38,759, respectively. A favorable determination letter has been
received from the Internal Revenue Service that the plan is qualified.
(Continued)
F-52
<PAGE> 168
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 10 - DEFERRED COMPENSATION ARRANGEMENT
The Bank has agreements with its electing directors to compensate them for their
service to the Bank in lieu of receiving current director fees. An agreement is
executed with each electing director whereby the director agrees to serve the
Bank for five years. The Bank will pay the director an agreed upon future annual
income for ten years beginning at age 65. In the event of death, the specified
monthly payments will be paid to the director's beneficiary(ies). The
arrangement is funded with key man life insurance.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors, executive officers,
significant shareholders and their affiliates (Related Parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. The aggregate extensions of credit to
such related parties at December 31, 1996 and 1995 were $1,351,001 and
$1,255,017, respectively. During 1996, new credit to such parties amounted to
$579,977 and repayments and reductions amounted to $483,993. Unfunded
commitments to the same parties totaled $76,242 at December 31, 1996.
NOTE 12 - STOCK OPTIONS
The Bank has granted stock options to its President under an employment
agreement dated May 14, 1994, equal to 5% of the stock outstanding at the date
of the agreement. The options increase 1.5% each year for the next five years,
for a total of 12.5%. The options are exercisable at any time during the tenure
of the President and/or within 120 days of his leaving the employment of the
Bank. The options are exercised at the lower of book value of the Bank at May
14, 1994; at December 31, 1994; or at December 31, 1995. At December 31, 1996,
the number of shares under option amounted to approximately 23,233. No options
were exercised during 1996, 1995, or 1994.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Bank's financial statements do not reflect various commitments and
contingent liabilities that arise in the normal course of business and involve
elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities which include unfunded commitments to
related parties (see Note 11) are commitments to extend credit, commercial
letters of credit and standby letters of credit.
(Continued)
F-53
<PAGE> 169
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
A summary of the Bank's commitments and contingent liabilities at December 31,
1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Commitments to extend credit $3,645,045
Credit card arrangements 360,941
Commercial and standby letters of credit 78,664
----------
Total $4,084,650
==========
</TABLE>
Commitments to extend credit, credit card arrangements, commercial letters of
credit and standby letters of credit all include exposure to some credit loss in
the event of nonperformance of the customer. The Bank's credit policies and
procedures for credit commitments and financial guarantees are the same as those
for extension of credit instruments that are recorded in the statements of
condition. In the opinion of management, these instruments do not generally
present any significant liquidity risk to the Bank. The Bank's experience has
been that approximately 70% of loan commitments are drawn upon by customers. The
Bank did not incur any losses on its commitments in either 1996 or 1995.
The Bank is a party to litigation and claims arising in the normal course of
business. Management, after consultation with legal counsel, believes that the
liabilities, if any, arising from such litigation and claims will not be
material to the financial position.
NOTE 14 - CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Bank's market area.
Substantially all such customers are depositors of the Bank. The concentrations
of credit by type of loan are set forth in Note 3. The distribution of
commitments to extend credit approximates the distribution of loans outstanding.
Commercial and standby letters of credit were granted primarily to commercial
borrowers. The Bank, as a matter of policy, does not extend credit to any single
borrower or group of related borrowers in excess of its legal lending limit.
NOTE 15 - REGULATORY MATTERS
The Bank, as a national bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency ("OCC"). Under such restrictions, the Bank
may not, without the prior approval of the Comptroller of the Currency, declare
dividends in excess of the sum of the current year's earnings (as defined) plus
the retained earnings (as defined) from the prior two years. The dividends, as
of December 31, 1996, that the Bank could declare, without the approval of the
Comptroller of the Currency, amounted to approximately $648,481.
(Continued)
F-54
<PAGE> 170
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 15 - REGULATORY MATTERS (Continued)
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 - actions 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 judgments 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 in the regulations) to
riskweighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the OCC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that notification
that management believes have changed the Bank's category.
The Bank's actual capital amounts (dollars in thousands) and ratios are also
presented in the table below:
<TABLE>
<CAPTION>
To be Well Capitalized
For Capital For Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets) $4,517 14.49% >=$2,494 >=8.0% >=$3,117 >=10.0%
Tier I Capital (to Risk Weighted Assets) $4,126 13.24% >=$1,287 >=4.0% >=$1,870 >= 6.0%
Tier I Capital (to Average Assets) $4,126 8.85% >=$1,865 >=4.0% >=$2,331 >= 5.0%
As of December 31, 1995:
Total Capital (to Risk Weighted Assets) $4,328 14.47% >=$2,392 >=8.0% >=$2,990 >=10.0%
Tier I Capital (to Risk Weighted Assets) $3,954 13.22% >=$1.196 >=4.0% >=$1,794 >= 6.0%
Tier I Capital (to Average Assets) $3,954 8.92% >=$1,793 >=4.0 >=$2,241 >= 5.0%
</TABLE>
(Continued)
F-55
<PAGE> 171
CNB FINANCIAL CORPORATION AND SUBSIDIARY
CNB FINANCIAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 16 - SUBSEQUENT EVENTS
The Company has signed an agreement with Big Lake Financial Corporation to
merge. The merger is anticipated to be accounted for as a purchase by Big Lake
Financial Corporation and is expected to be consummated in 1997 subject to
regulatory and stockholders' approval. The terms of the merger are outlined in
the agreement. The purchase is based on the fair market value of the Company
determined by an independent expert.
Subsequent to the issuance of the Company and parent company only financial
statements for 1996 and our report thereon dated February 13, 1997, the Company
was required to make a regulatory addition to the allowance for credit losses
totalling $83,672 as of December 31, 1996. The addition resulted from the Office
of the Controller of the Currency regulatory audit of the Clewiston National
Bank in 1997, as of December 31, 1996, and was based on their judgments about
information available to them at the time of their examination. The regulatory
addition has the effect of reducing net loans by $83,672, increasing other
assets by $9,456, and reducing net income by $74,216 ($.18 per share).
(Concluded)
F-56
<PAGE> 172
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
BIG LAKE FINANCIAL CORPORATION
CNB FINANCIAL CORPORATION
BIG LAKE NATIONAL BANK
AND
CLEWISTON NATIONAL BANK
<PAGE> 173
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE - THE MERGER.................................................................................. 2
1.1 Consummation of Merger; Closing Date.................................................... 2
1.2 Effect of Merger........................................................................ 2
1.3 Further Assurances...................................................................... 3
1.4 Directors and Officers.................................................................. 3
1.5 Name of Combined Corporation............................................................ 3
ARTICLE TWO - CLEWISTON NATIONAL BANK..................................................................... 4
2.1 Effect of Merger........................................................................ 4
2.2 Directors and Officers; Compensation.................................................... 4
ARTICLE THREE - CONVERSION OF SHARES...................................................................... 4
3.1. Manner of Conversion of CNB Shares...................................................... 4
3.2 CNB Stock Options and Related Matters................................................... 5
3.3 Fractional Shares....................................................................... 5
3.4 Effectuating Conversion................................................................. 5
3.5 Laws of Escheat......................................................................... 7
3.6 BLF Shares.............................................................................. 7
ARTICLE FOUR - REPRESENTATIONS AND WARRANTIES OF CNB
AND CLEWISTON NATIONAL BANK............................................................................... 7
4. Representations and Warranties of CNB and Clewiston National Bank ...................... 7
4(a) Organization, Qualification, and Corporate Power........................................ 8
4(b) Capitalization.......................................................................... 9
4(c) CNB Subsidiaries........................................................................ 9
4(d) Authorization of Transaction............................................................ 9
4(e) Noncontravention........................................................................ 10
4(f) Financial Statements.................................................................... 10
4(g) Undisclosed Liabilities................................................................. 11
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4(h) Brokers' Fees........................................................................... 11
4(i) Taxes................................................................................... 11
4(j) Allowance for Loan or Credit Losses..................................................... 12
4(k) Properties; Insurance................................................................... 12
4(l) Material Contracts...................................................................... 13
4(m) Material Contract Defaults.............................................................. 13
4(n) Compliance with Laws.................................................................... 13
4(o) Employee Benefit Plans.................................................................. 14
4(p) Legal Proceedings....................................................................... 16
4(q) Absence of Certain Changes or Events.................................................... 16
4(r) Reports................................................................................. 17
4(s) Statements True and Correct............................................................. 17
4(t) Environmental Matters................................................................... 17
4(u) Labor Matters........................................................................... 19
ARTICLE FIVE - REPRESENTATIONS AND WARRANTIES OF BLF
AND BIG LAKE NATIONAL BANK................................................................................ 19
5. Representations and Warranties of BLF and Big Lake National Bank ....................... 19
5(a) Organization, Qualification, and Corporate Power........................................ 19
5(b) Capitalization.......................................................................... 20
5(c) BLF Subsidiaries........................................................................ 20
5(d) Authorization of Transaction............................................................ 21
5(e) Noncontravention........................................................................ 21
5(f) Financial Statements.................................................................... 22
5(g) Undisclosed Liabilities................................................................. 22
5(h) Brokers' Fees........................................................................... 22
5(i) Taxes................................................................................... 22
5(j) Allowance for Loan or Credit Losses..................................................... 23
5(k) Properties; Insurance................................................................... 23
5(l) Material Contracts...................................................................... 24
5(m) Material Contract Defaults.............................................................. 24
5(n) Compliance with Laws.................................................................... 24
5(o) Employee Benefit Plans.................................................................. 25
5(p) Legal Proceedings....................................................................... 27
5(q) Absence of Certain Changes or Events.................................................... 27
5(r) Reports................................................................................. 27
5(s) Statements True and Correct............................................................. 28
5(t) Environmental Matters................................................................... 28
5(u) Labor Matters........................................................................... 29
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE SIX - COVENANTS AND AGREEMENTS.................................................................... 30
6. Covenants............................................................................... 30
6(a) Current Information..................................................................... 30
6(b) Regulatory Matters and Approvals........................................................ 30
6(c) Tax Opinion............................................................................. 32
6(d) Conduct of Business Prior to the Effective Time of the Merger .......................... 32
6(e) Forbearance............................................................................. 32
6(f) Issuance of Securities.................................................................. 34
6(g) No Acquisitions......................................................................... 34
6(h) Other Actions........................................................................... 34
6(i) Government Filings...................................................................... 35
6(j) Tax-Free Reorganization Treatment....................................................... 35
6(k) Full Access............................................................................. 35
6(l) Notice of Material Adverse Developments................................................. 35
6(m) Exclusivity............................................................................. 36
6(n) Filings with the State Offices.......................................................... 36
6(o) Press Releases.......................................................................... 36
6(p) Agreements of Affiliates................................................................ 37
6(q) Miscellaneous Agreements and Consents................................................... 37
6(r) Indemnification......................................................................... 37
6(s) Fairness Opinions....................................................................... 38
6(t) Employee Benefit Plans.................................................................. 38
6(u) CNB Employment Agreement and Directors Deferred Plan ................................... 38
ARTICLE SEVEN - CONDITIONS TO THE OBLIGATIONS OF
CNB AND BLF............................................................................................... 38
7. Conditions to Obligation to Close....................................................... 38
7(a) Conditions to Obligation of BLF and Big Lake National Bank ............................. 38
7(b) Conditions to Obligation of CNB and Clewiston National Bank ............................ 41
ARTICLE EIGHT - TERMINATION............................................................................... 44
8. Termination............................................................................. 44
8(a) Termination of Agreement................................................................ 44
8(b) Effect of Termination................................................................... 45
8(c) Acquisition Proposal Termination and Fee................................................ 45
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE NINE - MISCELLANEOUS.............................................................................. 46
9. Miscellaneous........................................................................... 46
9(a) Survival................................................................................ 46
9(b) No Third Party Beneficiaries............................................................ 46
9(c) Entire Agreement........................................................................ 46
9(d) Successors and Assigns.................................................................. 46
9(e) Counterparts............................................................................ 46
9(f) Headings................................................................................ 47
9(g) Notices................................................................................. 47
9(h) Governing Law........................................................................... 48
9(i) Amendments and Waivers.................................................................. 48
9(j) Severability............................................................................ 48
9(k) Expenses................................................................................ 48
9(l) Construction............................................................................ 49
9(m) Incorporation of Exhibits and Schedules................................................. 49
9(n) Jurisdiction and Venue.................................................................. 49
9(o) Remedies Cumulative..................................................................... 49
</TABLE>
<PAGE> 177
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
BIG LAKE FINANCIAL CORPORATION
CNB FINANCIAL CORPORATION
BIG LAKE NATIONAL BANK
AND
CLEWISTON NATIONAL BANK
This Amended and Restated Agreement and Plan of Reorganization (the
"Agreement") is dated as of February 19, 1997, and amended and restated as of
June 19, 1997, by and between Big Lake Financial Corporation, a Florida
corporation ("BLF"), CNB Financial Corporation, a Florida corporation ("CNB"),
Big Lake National Bank, a national banking association ("Big Lake National
Bank"), and Clewiston National Bank, a national banking association ("Clewiston
National Bank"). F, CNB, Big Lake National Bank, and Clewiston National Bank
are individually referred to in this Agreement as a "Party" and collectively
as the "Parties."
WITNESSETH THAT:
WHEREAS, the respective Boards of Directors of CNB and BLF deem it in
the best interests of CNB and BLF, respectively, and of their respective
shareholders, that CNB and BLF merge pursuant to this Agreement in a transaction
that qualifies as a reorganization pursuant to Section 368(a) of the Internal
Revenue Code of 1986 (the "Internal Revenue Code") (the "Merger");
WHEREAS, the Boards of Directors of CNB and BLF have approved this
Agreement and the Merger and the CNB Board has directed that this Agreement and
the Merger be submitted to CNB shareholders for approval and adoption in
accordance with the laws of the State of Florida and the United States;
WHEREAS, CNB owns all the issued and outstanding capital stock of
Clewiston National Bank, and BLF owns all of the issued and outstanding capital
stock of Big Lake National Bank; and
WHEREAS, as a result of the Merger, Clewiston National Bank will become
a wholly-owned subsidiary of BLF.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
Parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Consummation of Merger; Closing Date. (a) Subject to the
provisions hereof, CNB shall be merged with and into BLF (which has heretofore
and shall hereinafter be referred to
<PAGE> 178
as the "Merger") pursuant to Sections 607.1101 and 607.1103 of the Florida
Business Corporation Act, and BLF shall be the surviving corporation (sometimes
hereinafter referred to as "Combined Corporation" when reference is made to it
after the Effective Time of the Merger (as defined below)). The Merger shall
become effective on the date and at the time on which the Articles of Merger
relating to the Merger have been duly filed with the Secretary of State of
Florida, unless a later date is specified in such Articles of Merger (such time
is hereinafter referred to as the "Effective Time of the Merger"). Subject to
the terms and conditions hereof, unless otherwise agreed upon by CNB and BLF,
the Effective Time of the Merger shall occur on the 10th business day following
the later to occur of (i) the effective date (including the expiration of any
applicable waiting period) of the last required Consent (as defined below) of
any Regulatory Authority (as defined below) having authority over the
transactions contemplated pursuant to this Agreement, (ii) the date on which the
shareholders of CNB approve the transactions contemplated by this Agreement, and
(iii) the date of the satisfaction or waiver of all other conditions precedent
to the transactions contemplated by this Agreement. As used in this Agreement,
"Consent" shall mean a consent, approval, authorization, waiver, clearance,
exemption or similar affirmation by any person pursuant to any contract, permit,
law, regulation or order, and "Regulatory Authorities" shall mean, collectively,
the Federal Trade Commission (the "FTC"), the United States Department of
Justice (the "Justice Department"), the Board of Governors of the Federal
Reserve System (the "FRB"), the Federal Deposit Insurance Corporation (the
"FDIC"), the Office of the Comptroller of the Currency (the "OCC"), the Florida
Department of Banking and Finance (the "Florida Department"), the National
Association of Securities Dealers, Inc., all national securities exchanges and
the Securities and Exchange Commission (the "SEC").
(b) The closing of the Merger (the "Closing") shall take place
at such location as the Parties hereto shall determine at 10:00 a.m. local time
on the day that the Effective Time of the Merger occurs, or such other date,
time and place as the Parties may agree (the "Closing Date"). Subject to the
provisions of this Agreement, at the Closing there shall be delivered to each of
the Parties hereto the opinions, certificates and other documents and
instruments required to be so delivered pursuant to this Agreement.
(c) The executive offices of the Combined Corporation shall be
located at 1409 South Parrott Avenue, Okeechobee, Florida 34974.
Section 1.2 Effect of Merger. At the Effective Time of the Merger, CNB
shall be merged with and into BLF and the separate existence of CNB shall cease.
The Articles of Incorporation and Bylaws of BLF shall continue to be the
Articles of Incorporation and the Bylaws of the Combined Corporation until
further amended as provided therein and in accordance with applicable law.
Except as otherwise provided in this Agreement, the Combined Corporation shall
have all the rights, privileges, immunities and powers and shall be subject to
all the duties and liabilities of a corporation organized under the laws of the
State of Florida and shall thereupon and thereafter possess all other
privileges, immunities and franchises of a private, as well as of a public
nature, of each of the constituent corporations. All property (real, personal
and mixed) and all debts on whatever account, including subscriptions to shares,
and all choses in action, all and every other interest, of or belonging to or
due to each of the constituent corporations so merged shall be taken and deemed
to be transferred to and vested in the Combined Corporation without further act
or deed. The title to any real estate, or any interest therein, vested in any of
the constituent corporations shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided in this Agreement, the
Combined Corporation shall thenceforth be responsible
2
<PAGE> 179
and liable for all the liabilities and obligations of each of the constituent
corporations so merged and any claim existing or action or proceeding pending by
or against either of the constituent corporations may be prosecuted as if the
Merger had not taken place or the Combined Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of any
constituent corporation shall be impaired by the Merger.
Section 1.3 Further Assurances. From and after the Effective Time of
the Merger, as and when requested by the Combined Corporation, the officers and
directors of CNB last in office shall execute and deliver or cause to be
executed and delivered in the name of CNB such deeds and other instruments and
take or cause to be taken such further or other actions as shall be necessary in
order to vest or perfect in or confirm of record or otherwise to the Combined
Corporation title to and possession of all of the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of CNB.
Section 1.4 Directors and Officers. From and after the Effective Time
of the Merger, the directors of the Combined Corporation (the "Combined
Corporation Board") shall consist of John Boy, Jr., Curtis S. Fry and Tom Smith
(or, if any one or more of such individuals shall be unwilling or unable to
serve as a director of the Combined Corporation as of the Effective Time, then
such individual or individuals, as the case may be, as the Board of Directors of
CNB shall designate to fill such vacancy or vacancies) and the seven individuals
serving as directors of BLF as of the date of this Agreement (or, if any one or
more of such individuals shall be unwilling or unable to serve as a director of
the Combined Corporation as of the Effective Time, then such individual or
individuals, as the case may be, as the Board of Directors of BLF shall
designate to fill such vacancy or vacancies). From and after the Effective Time
of the Merger and until the first annual meeting of the Directors of the
Combined Corporation (subject to the terms of applicable employment agreements),
other management of the Combined Corporation shall consist of: Chairman,
President and Chief Executive Officer (Edwin E. Walpole, III), and Executive
Vice President and Chief Administrative Officer (Joe G. Mullins).
Section 1.5 Name of Combined Corporation. The name of the Combined
Corporation shall be Big Lake Financial Corporation.
ARTICLE II
CLEWISTON NATIONAL BANK
Section 2.1 Effect of Merger. At the Effective Time of the Merger,
Clewiston National Bank shall become a wholly-owned subsidiary of BLF. The
Articles of Association and Bylaws of Clewiston National Bank shall continue to
be the Articles of Association and Bylaws of Clewiston National Bank until
further amended as provided therein and in accordance with applicable law.
Section 2.2 Directors and Chairman; Compensation. From and after the
Effective Time of the Merger, the directors of Clewiston National Bank shall
consist of the individuals serving as directors of Clewiston National Bank as of
the Effective Time (or, if any one or more of such individuals shall be
unwilling or unable to serve as a director of Clewiston National Bank as of the
Effective Time of the Merger, then such individual or individuals, as the case
may be, as the Board of Directors of Clewiston National Bank shall designate to
fill such vacancy or vacancies) and Edwin
3
<PAGE> 180
E. Walpole, III and Joe G. Mullins (or, if any one or more individuals shall be
unwilling or unable to serve as a director of Clewiston National Bank as of the
Effective Time of the Merger, then such individual or individuals, as the case
may be, as the Board of Directors of BLF shall designate to fill such vacancy or
vacancies). From and after the Effective Time of the Merger and until the first
annual meeting of the directors of Clewiston National Bank, the Chairman of
Clewiston National Bank shall consist of Curtis S. Fry.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Manner of Conversion of CNB Shares. Subject to the
provisions hereof, as of the Effective Time of the Merger and by virtue of the
Merger and without any further action on the part of the holder of any shares of
common stock of CNB, par value $.01 per share (the "CNB Shares"):
(a) All CNB Shares which are held by CNB as treasury stock,
if any, shall be canceled and retired and no consideration shall be paid or
delivered in exchange therefor.
(b) Subject to the terms and conditions of this Agreement,
including, without limitation, Section 3.3 hereof and except with regard to
Dissenting CNB Shares (as hereinafter defined), each CNB Share outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive .40 shares of common stock of BLF, par value $.01 per share
(the "BLF Shares"). The applicable amount of BLF Shares issuable in the Merger
for each CNB Share pursuant to the preceding sentence, as may be adjusted as
provided herein, shall be hereinafter referred to as the "Conversion Ratio." The
Conversion Ratio, including the number of BLF Shares issuable in the Merger,
shall be subject to an appropriate adjustment in the event of any stock split,
reverse stock split, dividend payable in BLF Shares, reclassification or similar
distribution whereby BLF issues BLF Shares or any securities convertible into or
exchangeable for BLF Shares without receiving any consideration in exchange
therefor, provided that the record date of such transaction is a date after the
date of the agreement and prior to the Effective Time of the Merger.
(c) Each outstanding CNB Share, the holder of which has
perfected dissenters rights in accordance with Sections 607.1301 through
607.1320, inclusive, of the Florida Business Corporation Act (the "Dissent
Provisions"), to the extent applicable, and has not effectively withdrawn or
lost such holder's right to such appraisal (the "Dissenting CNB Shares"), shall
not be converted into or represent a right to receive the BLF Shares issuable in
the Merger but the holder thereof shall be entitled only to such rights as are
granted by the Dissent Provisions. CNB shall give BLF prompt notice upon receipt
by CNB of any written objection to the Merger and any written demands for
payment of the fair or appraised value of CNB Shares, and of withdrawals of such
demands, and any other instruments provided to CNB pursuant to the Dissent
Provisions (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). Each Dissenting Shareholder who becomes entitled,
pursuant to the Dissent Provisions, to payment of fair value of any CNB Shares
held by such Dissenting Shareholder shall receive payment therefor from the
Combined Corporation (but only after the amount thereof shall have been agreed
upon or at the times and in the amounts required by the Dissent Provisions) and
all of such Dissenting Shareholder's CNB Shares shall be canceled. If any
Dissenting Shareholder shall have failed to
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perfect or shall have effectively withdrawn or lost such right to demand payment
of fair or appraised value, the CNB Shares held by such Dissenting Shareholder
shall thereupon be deemed to have been converted into the right to receive the
consideration to be issued in the Merger as provided by this Agreement.
Section 3.2 CNB Stock Options and Related Matters. As of the Effective
Time of the Merger, CNB will have no CNB Shares issuable pursuant to the
exercise of stock purchase options.
Section 3.3 Fractional Shares. Notwithstanding any other provision of
this Agreement, if a holder of CNB Shares converted pursuant to the Merger is
otherwise entitled to receive a fraction of a BLF Share (after taking into
account all certificates delivered by such holder), then, in lieu thereof, such
fraction shall be rounded up to the next whole share if such fraction is .500 or
greater and such fraction shall be rounded down to the next whole share if such
fraction is .499 or less.
Section 3.4 Effectuating Conversion. (a) Big Lake Financial
Corporation, or such other institution as the Combined Corporation may
designate, shall serve as the exchange agent (the "Exchange Agent"). The
Exchange Agent may employ sub-agents in connection with performing its duties.
After the Effective Time of the Merger, the Combined Corporation shall cause the
Exchange Agent to deliver the consideration to be paid by the Combined
Corporation for the CNB Shares. As promptly as practicable after the Effective
Time of the Merger, the Exchange Agent shall send or cause to be sent to each
former holder of record of CNB Shares transmittal materials (the "Letter of
Transmittal") for use in exchanging their certificates formerly representing CNB
Shares for the consideration provided for in this Agreement. The Letter of
Transmittal shall contain instructions with respect to the surrender of
certificates representing CNB Shares and the receipt of the consideration
contemplated by this Agreement and shall require each holder of CNB Shares to
transfer good and marketable title to such CNB Shares to the Combined
Corporation, free and clear of all liens, claims and encumbrances. Amounts that
would have been payable to Dissenting Shareholders for CNB Shares but for the
fact of their dissent in accordance with the provisions of Section 3.1(c) hereof
shall be returned by the Exchange Agent to the Combined Corporation as promptly
as is practicable.
(b) At the Effective Time of the Merger, the stock transfer
books of CNB shall be closed as to holders of CNB Shares immediately prior to
the Effective Time of the Merger and no transfer of CNB Shares by any such
holder shall thereafter be made or recognized and each outstanding certificate
formerly representing CNB Shares shall, without any action on the part of any
holder thereof, no longer represent CNB Shares. If, after the Effective Time of
the Merger, certificates are properly presented to the Exchange Agent, such
certificates shall be exchanged for the consideration contemplated by this
Agreement into which the CNB Shares represented thereby were converted in the
Merger.
(c) In the event that any holder of CNB Shares is unable to
deliver the certificate which represents such holder's CNB Shares, the Combined
Corporation, in the absence of actual notice that any CNB Shares theretofore
represented by any such certificate have been acquired by a bona fide purchaser,
may, in its discretion, deliver to such holder the consideration contemplated by
this Agreement to which such holder is entitled in accordance with the
provisions of this Agreement upon the presentation of all of the following:
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(i) An affidavit or other evidence to the
reasonable satisfaction of the Combined Corporation that any such certificate
has been lost, wrongfully taken or destroyed;
(ii) Such security or indemnity as may be
reasonably requested by the Combined Corporation to indemnify and hold the
Combined Corporation harmless; and
(iii) Evidence to the satisfaction of the Combined
Corporation that such holder is the owner of the CNB Shares theretofore
represented by each certificate claimed by such holder to be lost, wrongfully
taken or destroyed and that such holder is the person who would be entitled to
present each such certificate for exchange pursuant to this Agreement.
(d) In the event that the delivery of the consideration
contemplated by this Agreement is to be made to a person other than the person
in whose name any certificate representing CNB Shares surrendered is registered,
such certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer), with the signature(s) appropriately
guaranteed, and otherwise in proper form for transfer, and the person requesting
such delivery shall pay any transfer or other taxes required by reason of the
delivery to a person other than the registered holder of such certificate
surrendered or establish to the satisfaction of the Combined Corporation that
such tax has been paid or is not applicable.
(e) No holder of CNB Shares shall be entitled to receive
any dividends or distributions declared or made with respect to the BLF Shares
with a record date before the Effective Time of the Merger. Neither the
consideration contemplated by this Agreement, nor any dividend or other
distribution with respect to BLF Shares where the record date thereof is on or
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered certificate or certificates representing CNB Shares as provided
for by this Agreement. Subject to applicable laws, following surrender of any
such certificate or certificates, there shall be paid to the holder of the
certificate or certificates then representing BLF Shares issued in the Merger,
without interest at the time of such surrender, the consideration contemplated
by this Agreement, and the amount of any dividends or other distributions with
respect to BLF Shares to which such holder is entitled as a holder of BLF
Shares.
Section 3.5 Laws of Escheat. If any of the consideration due or other
payments to be paid or delivered to the holders of CNB Shares is not paid or
delivered within the time period specified by any applicable laws concerning
abandoned property, escheat or similar laws, and if such failure to pay or
deliver such consideration occurs or arises out of the fact that such property
is not claimed by the proper owner thereof, the Combined Corporation or the
Exchange Agent shall be entitled to dispose of any such consideration or other
payments in accordance with applicable laws concerning abandoned property,
escheat or similar laws. Any other provision of this Agreement notwithstanding,
none of CNB, BLF, the Combined Corporation, the Exchange Agent, nor any other
person acting on their behalf shall be liable to a holder of CNB Shares for any
amount paid or property delivered in good faith to a public official pursuant to
and in accordance with any applicable abandoned property, escheat or similar
law.
Section 3.6 BLF Shares. The BLF Shares issued and outstanding at the
Effective Time of the Merger shall remain outstanding and unchanged after the
Merger as outstanding shares of stock of the Combined Corporation.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CNB
AND CLEWISTON NATIONAL BANK
Section 4. Representations and Warranties of CNB and Clewiston
National Bank. CNB and Clewiston National Bank represent and warrant to BLF and
Big Lake National Bank that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and shall be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement through this Article IV),
except (i) representations and warranties which are confined to a specified date
shall speak only as of such date, (ii) as expressly contemplated by this
Agreement, and (iii) as set forth in the disclosure schedule prepared by CNB and
delivered prior to or as of the date of this Agreement (the "CNB Disclosure
Schedule") or the Schedules attached hereto. The CNB Disclosure Schedule shall
be arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article IV.
(a) Organization, Qualification, and Corporate Power. CNB
is a corporation duly organized, validly existing, and in good standing under
the laws of Florida and is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). Clewiston National
Bank is a national banking association chartered as a commercial bank under the
National Bank Act, duly organized, validly existing, and in good standing under
the laws of Florida. Clewiston National Bank is duly authorized to engage in the
business of banking in Florida as an insured bank under the Federal Deposit
Insurance Act, as amended (the "FDIA"). Each Subsidiary of CNB, other than
Clewiston National Bank, is a corporation duly organized, validly existing, and
in good standing under the laws of Florida. For purposes of this Agreement, the
term "Subsidiary" means all those corporations, associations or other entities
of which the entity in question owns or controls 5% or more of the outstanding
equity securities either directly or through an unbroken chain of entities as to
each of which 5% or more of the outstanding equity securities is owned directly
or indirectly by its parent; provided, however, there shall not be included any
such entity acquired through foreclosure, any such entity which owns or operates
an automatic teller machine interchange network, any such entity the equity
securities of which are owned or controlled in a fiduciary capacity or any such
entity which is a general industry association or group. Each of CNB and its
Subsidiaries is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification except where
the lack of such qualification would not have a material adverse effect on its
(i) business, financial condition or results of operations, or (ii) ability to
consummate the transactions contemplated by this Agreement (together, its
"Condition"); it being understood and agreed that, for purposes of this
Agreement, a material adverse effect on the Condition of a Party shall not
include a decline in results of operations resulting from any change in law,
rule, regulation or generally accepted accounting principles ("GAAP") which
impacts banks or bank holding companies generally in a substantially similar
manner. Each of CNB and its Subsidiaries has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. True and complete copies of the Articles of
Incorporation and the Bylaws of CNB and Clewiston National Bank are attached
hereto as Schedule 4(a). CNB and each of its Subsidiaries has in effect all
federal, state, local and foreign governmental, regulatory and other
authorizations, permits and licenses necessary for it to own or
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lease its properties and assets and to carry on its business as now conducted,
the absence of which would have a material adverse effect on the Condition of
CNB and its Subsidiaries on a consolidated basis.
(b) Capitalization. The authorized capital stock of CNB
consists of 10,000,000 CNB Shares, of which 416,279 CNB Shares are issued and
outstanding on the date of this Agreement. There are no other classes of capital
stock of CNB authorized. CNB holds no CNB Shares as treasury stock. All of the
issued and outstanding CNB Shares have been duly authorized and are validly
issued, fully paid and nonassessable. None of the outstanding CNB Shares has
been issued in violation of any preemptive rights of the current or past
stockholders of CNB. The authorized capital stock of Clewiston National Bank
consists of 62,500 Clewiston National Bank Shares, of which 62,500 Clewiston
National Bank shares are issued and outstanding on the date of this Agreement,
all of which are owned by CNB. There are no other classes of capital stock of
Clewiston National Bank authorized. Clewiston National Bank holds no Clewiston
National Bank Shares as treasury stock. There are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights, or other agreements or commitments to which CNB or any CNB
Subsidiary is a party or which are binding upon CNB or any CNB Subsidiary or, to
the Knowledge of CNB and Clewiston National Bank, any other party providing for
the issuance, voting, transfer, disposition, or acquisition of any of the
capital stock of CNB or any CNB Subsidiary. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
CNB or any Subsidiary of CNB. For purposes of this Agreement, the term
"Knowledge" means actual knowledge after reasonable investigation of the
Chairman, President, Chief Financial Officer, Chief Accounting Officer or any
Executive or Senior Vice President of such Party.
(c) CNB Subsidiaries. Each CNB Subsidiary is disclosed on
the CNB Disclosure Schedule. All shares of the issued and outstanding capital
stock of each CNB Subsidiary are owned by CNB or a CNB Subsidiary. The
outstanding shares of capital stock or other equity interests of each CNB
Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable. All shares of capital stock or other equity interests of each CNB
Subsidiary owned by CNB or any of its Subsidiaries are set forth in the CNB
Disclosure Schedule and are owned by such person, either directly or indirectly,
free and clear of all liens, encumbrances or claims. None of the outstanding
shares of the capital stock of any CNB Subsidiary has been issued in violation
of any preemptive rights of the current or past stockholders of such CNB
Subsidiary. Except for shares of capital stock owned by CNB or any CNB
Subsidiary, there are no shares of capital stock of any CNB Subsidiary
outstanding.
(d) Authorization of Transaction. Each of CNB and Clewiston
National Bank has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its obligation
hereunder; provided, however, that CNB cannot consummate the Merger unless and
until all requisite approvals are received from the Regulatory Authorities and
the approval of the shareholders of CNB have been obtained. Subject to the
foregoing sentence, (i) this Agreement has been duly executed and delivered by
CNB and Clewiston National Bank and this Agreement constitutes a valid and
binding agreement of CNB and Clewiston National Bank, enforceable against them
in accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies, (ii) the
performance by CNB and Clewiston National Bank of their obligations under this
Agreement and the consummation of the Merger and the other transactions provided
for under this Agreement have been duly and validly
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authorized by all necessary corporate action on the part of CNB and Clewiston
National Bank, and (iii) the Boards of Directors of CNB and Clewiston National
Bank have approved the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions provided for under
this Agreement. Other than to or from the Regulatory Authorities or to or from
the Internal Revenue Service ("IRS") or the Pension Benefit Guaranty Corporation
("PBGC") with respect to any employee benefit plans, none of CNB or any of its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the Condition of CNB and its Subsidiaries on a consolidated basis.
(e) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) subject to the receipt of the approvals
contemplated in Section 4(d) above, violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which any of CNB and its
Subsidiaries is subject or any provision of the Articles of Incorporation or
Bylaws of any of CNB and its Subsidiaries or (ii) with the passing of time or
the giving of notice or both, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other obligation to which any of CNB and its Subsidiaries is a party or by which
it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets) except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the Condition of CNB and its Subsidiaries on a
consolidated basis. For purposes of this Agreement, the term "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge, or other
lien, other than (a) mechanics, materialmen, and similar liens, (b) liens for
taxes not yet due and payable or for taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) liens arising under workers
compensation, unemployment insurance, social security, retirement, and similar
legislation, (d) liens on goods in transit incurred pursuant to documentary
letters of credit, (e) purchase money liens and liens securing rental payments
under capital lease arrangements, and (f) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
For purposes of this Agreement, the term "Ordinary Course of Business" means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency).
(f) Financial Statements. CNB has delivered to BLF prior to
the execution of this Agreement copies of the following financial statements of
CNB (collectively referred to herein as the "CNB Financial Statements"): audited
consolidated balance sheets of CNB and its Subsidiaries at December 31, 1995 and
1996, and the related consolidated statements of (A) income, (B) shareholders'
equity and (C) cash flows for the years then ended and the notes thereto as
reported upon by Stevens, Thomas, Schemer & Sparks, P.A., independent certified
public accountants.
The CNB Financial Statements (as of the dates thereof and for the
periods covered thereby): (i) have been prepared from the books and records of
CNB, which in all material respects account for those transactions which in
accordance with good business practices and applicable banking and
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other legal requirements are required to be accounted for, and (ii) present
fairly in all material respects the consolidated financial position and the
results of operations and cash flows of CNB and its Subsidiaries as of the dates
and for the periods indicated, in accordance with GAAP, applied on a basis
consistent with prior periods except as disclosed in the notes thereto or, in
the case of unaudited quarterly statements, subject to normal recurring year-end
adjustments that are not material and the absence of certain footnote and cash
flow information.
(g) Undisclosed Liabilities. None of CNB and its
Subsidiaries has any liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for taxes, except for (i) liabilities for future
disbursements on letters of credit, lines of credit and similar instruments or
unfunded loan commitments, (ii) liabilities accrued or reserved against in the
balance sheet dated as of December 31, 1996 included in the CNB Financial
Statements or reflected in the notes thereto, and (iii) liabilities which have
arisen after December 31, 1996 in the Ordinary Course of Business or in
connection with the transactions provided for in this Agreement (none of which
relates to any breach of contract, breach of warranty, tort, infringement, or
violation of law or arose out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand and none of which,
individually or in the aggregate, materially and adversely affect the Condition
of CNB and its Subsidiaries on a consolidated basis). Since December 31, 1996,
neither CNB nor any of its Subsidiaries has incurred or paid any obligation or
liability which would be material to the Condition of CNB and its Subsidiaries
on a consolidated basis, except in the Ordinary Course of Business.
(h) Brokers' Fees. None of CNB and its Subsidiaries, or
any of their officers, directors or employees, has any liability or obligation
to pay any fees or commissions to, or has employed, any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(i) Taxes.
(i) All federal, state, local and foreign tax
returns required to be filed by or on behalf of CNB or any of its Subsidiaries
have been timely filed or requests for extensions have been timely filed,
granted and have not expired, for periods ending on or before December 31, 1996,
and all such returns filed are true, complete and accurate in all material
respects. CNB has timely paid or caused to be paid all taxes shown to be due on
such tax returns. There is no audit examination, deficiency or refund litigation
or matter in controversy with respect to any taxes currently pending involving
CNB or any of its Subsidiaries. All material tax, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid, accrued or provided for.
(ii) Neither CNB nor any of its Subsidiaries have
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect.
(iii) Adequate provision for any federal, state,
local or foreign taxes due or to become due for CNB or any of its Subsidiaries
for any period or periods through and including December 31, 1996, has been made
and is reflected on the December 31, 1996 financial statements included in the
CNB Financial Statements.
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(iv) Deferred taxes of CNB and its Subsidiaries
have been provided for in the CNB Financial Statements in accordance with GAAP,
subject in the case of interim financial statements to normal recurring year-end
adjustments.
(v) All taxes which CNB and each of its
Subsidiaries is required by law to withhold or to collect for payment have been
duly withheld and collected, and have been paid to the proper governmental
entity or are being withheld by CNB, the failure of which would have a material
adverse effect on the Condition of CNB and its Subsidiaries on a consolidated
basis.
(j) Allowance for Loan or Credit Losses. The allowance for
loan or credit losses ("Allowance") shown on the consolidated balance sheets of
CNB and its Subsidiaries as of December 31, 1996 included in the CNB Financial
Statements was, and the Allowance shown on the consolidated balance sheets of
CNB and its Subsidiaries as of dates subsequent to the execution of this
Agreement will to the Knowledge of CNB and Clewiston National Bank be, in each
case as of the dates thereof, adequate to provide for losses relating to or
inherent in the loan and lease portfolios (including accrued interest
receivable) of CNB and its Subsidiaries and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
CNB and its Subsidiaries, except where the failure of the Allowance to be so
adequate would not have a material adverse effect on the Condition of CNB and
its Subsidiaries on a consolidated basis.
(k) Properties; Insurance. CNB or a CNB Subsidiary has good
and marketable title free and clear of all material liens, encumbrances,
charges, defaults or equities of whatever character to all of the respective
properties and assets, tangible or intangible, reflected in the CNB Financial
Statements, except for liens disclosed in such Financial Statements, those
arising in the Ordinary Course of Business after December 31, 1996 or liens
which are not reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Condition of CNB and its Subsidiaries on a
consolidated basis. All buildings, and all fixtures, equipment and other
property and assets which are material to its business on a consolidated basis
and which are held under leases or subleases by CNB or a CNB Subsidiary are held
under valid instruments enforceable in accordance with their respective terms
(except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought). The real property owned and used as facilities by CNB or the
CNB Subsidiaries has never been used for the handling, treatment, storage or
disposal of any hazardous or toxic substance as defined under any applicable
state or federal law. The policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of CNB or its Subsidiaries
provide adequate coverage against loss, and the fidelity bonds in effect as to
which such entities are named insureds are believed by management of CNB to be
sufficient. Substantially all of CNB's and its Subsidiaries' equipment in
regular use has been well maintained and is in good and serviceable condition,
reasonable wear and tear excepted.
(l) Material Contracts. Neither CNB nor any CNB Subsidiary
nor any of their respective assets, businesses or operations as of the date of
this Agreement is a party to, or is bound or affected by, or receives benefits
under, any of the following (whether written or oral and excluding agreements
for the extension of credit by CNB or any CNB Subsidiary made in the Ordinary
Course of Business): (i) any employment agreement or understanding (including
any understandings or obligations with respect to severance or termination pay
liabilities or fringe
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benefits) with any present or former officer, director, or employee, including
in any such person's capacity as a consultant (other than those which are
terminable at will without any further amount being payable thereunder), (ii)
any other agreement with any officer, director, employee, or affiliate, (iii)
any agreement with any labor union, (iv) any agreement which limits the ability
of CNB or any CNB Subsidiary to compete in any line of business or which
involves any restriction of the geographical area in which CNB or any CNB
Subsidiary may carry on its business (other than as may be required by law or
applicable regulatory authorities), or (v) any agreement, contract, arrangement
or commitment with annual payments aggregating $20,000 or more.
(m) Material Contract Defaults. Neither CNB nor any CNB
Subsidiary is, or has received any written notice or has any Knowledge that any
other party is, in default in any material respect under any contract, lease,
sublease, license, franchise, permit, indenture, agreement, or mortgage for
borrowed money, or instrument of indebtedness (except, as to the foregoing,
extensions of credit by Clewiston National Bank in the Ordinary Course of
Business), and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default.
(n) Compliance with Laws.
(i) Each of CNB and its Subsidiaries is in
compliance in all respects with all laws, regulations, reporting and licensing
requirements and orders applicable to its business or to its employees
conducting its business, with any Regulatory Agreements (as hereinafter defined)
applicable to CNB or its Subsidiaries, and with its internal policies and
procedures, the breach or violation of which would have a material adverse
effect on the Condition of CNB and its Subsidiaries on a consolidated basis.
(ii) Neither CNB nor any of its Subsidiaries has
received any written notification or communication from any Regulatory
Authorities (A) asserting that any of CNB or its Subsidiaries is not in
substantial compliance with any of the statutes, regulations, or ordinances
which such Regulatory Authority enforces which as a result of such noncompliance
would have a material adverse effect on the Condition of CNB and its
Subsidiaries on a consolidated basis, (B) threatening to revoke any license,
franchise, permit or governmental authorization which is material to the
Condition of CNB and its Subsidiaries on a consolidated basis, (C) requiring or
threatening to require CNB or any of its Subsidiaries, or indicating that CNB or
any of its Subsidiaries may be required, to enter into or be subject to a cease
and desist order, agreement, memorandum of understanding or any other agreement
or undertaking (or to cause its Board of Directors to adopt any resolutions)
restricting or limiting or purporting to restrict or limit in any manner the
operations of CNB or any of its Subsidiaries, including, without limitation, any
restriction on the payment of dividends, or (D) directing, restricting or
limiting, or purporting to direct, restrict or limit in any manner the
operations of CNB or any of its Subsidiaries, including, without limitation, any
restriction on the payment of dividends (any such notice, communication, order,
agreement, memorandum, resolutions or undertaking described in this sentence
herein referred to as a "Regulatory Agreement"). Neither CNB nor any of its
Subsidiaries has consented to, entered into, agreed to enter into, or been made
subject to, any Regulatory Agreement.
(o) Employee Benefit Plans.
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(i) The CNB Disclosure Schedule lists every
pension, retirement, profit- sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other incentive
plan, any other written or unwritten employee program, arrangement, agreement or
understanding, whether arrived at through collective bargaining or otherwise,
any medical, vision, dental or other health plan, any life insurance plan, any
golden parachute or other executive compensation plan, or any other employee
benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan" as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a "Benefit Plan"
or, collectively, "Benefit Plans"), currently or expected to be adopted,
maintained by, sponsored in whole or in part by, or contributed to by CNB or any
ERISA Affiliate (as herein defined) for the benefit of its employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
and under which any of its employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries are eligible to participate
(collectively, the "CNB Benefit Plans"). No CNB Benefit Plan is or has been a
multi-employer plan within the meaning of Section 3(37) and Section 4001(a)(3)
of ERISA. For purposes of this Section 4(o), the term "ERISA Affiliate" means
each trade or business (whether or not incorporated) which together with CNB is
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code.
(ii) True, correct and complete copies of all
written CNB Benefit Plans and descriptions of all unwritten CNB Benefit Plans
listed in the CNB Disclosure Schedule and all trust agreements or other funding
arrangements, including insurance contracts, all amendments thereto and, where
applicable, with respect to any such plans or plan amendments, all determination
letters, rulings, opinion letters, information letters, or advisory opinions
issued by the IRS or the United States Department of Labor after December 31,
1974, annual reports or returns, audited or unaudited financial statements,
actuarial valuations, and summary annual reports for the most recent three plan
years, the most recent summary plan descriptions and any material modifications
thereto, have previously been delivered to BLF or will be attached to the CNB
Disclosure Schedule.
(iii) All the CNB Benefit Plans and the related
trusts are in material compliance with, and have been administered in material
compliance with, the provisions of ERISA, the provisions of the Internal Revenue
Code and all other applicable laws, rules and regulations and collective
bargaining agreements. Any required governmental approvals for the CNB Benefit
Plans have been obtained, including, but not limited to, favorable determination
letters on the qualification of the ERISA Plans and tax exemption of related
trusts, as applicable, under the Internal Revenue Code, and all such
governmental approvals continue in full force and effect. Neither CNB nor any
administrator or fiduciary of any CNB Benefit Plan or agent or delegate of any
of the foregoing has engaged in any transaction or acted or failed to act in any
manner which could subject CNB, BLF or any affiliate thereof to any direct or
indirect liability for a breach of any fiduciary, co-fiduciary or other duty
under ERISA. To the knowledge of CNB's management after due inquiry, no oral or
written representation or communication with respect to any aspect of the CNB
Benefit Plans has been made to employees of CNB prior to the Effective Time of
the Merger which is not in accordance with the written or otherwise pre-existing
terms and provisions of such CNB Benefit Plans in effect at the time of such
communication. There are no unresolved claims or disputes under the terms of, or
in connection with, the CNB Benefit Plans and no action, legal or otherwise, has
been commenced with respect to any claim under the terms of, or in connection
with, the CNB Benefit Plans.
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(iv) No "party in interest" (as defined in Section
3(14) of ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of
the Internal Revenue Code) of any CNB Benefit Plan has engaged in any
"prohibited transaction (within the meaning of Section 4975(c) of the Internal
Revenue Code or Section 406 of ERISA). There has been no (A) "reportable event"
(as defined in Section 4043 of ERISA), or event described in Section 4062(e) or
Section 4063(a) of ERISA, or (B) termination or partial termination, withdrawal
or partial withdrawal with respect to any of the ERISA Plans which: (1) CNB
maintains or contributes to or has maintained or contributed to or was required
to maintain or contribute to for the benefit of employees of CNB; or (2) which
has been maintained or contributed to or was required to be maintained or
contributed to by any member of a controlled group of trades or business as
defined in ERISA Section 4001(a)(14) which has, since January 1, 1975, included
CNB.
(v) For any given ERISA Plan relating to CNB and
its Subsidiaries, all assets of such plan are carried at their fair market
value, to the extent required by the plan document and applicable law, and the
fair market value of such plan's assets equals or exceeds the present value of
all benefits (whether vested or not) accrued to date by all present or former
participants in such plan. No CNB Benefit Plan is subject to the rules of the
PBGC.
(vi) As of the Effective Time, CNB will not have
any material current or future liability under any CNB Benefit Plan that was not
reflected in the CNB Financial Statements.
(vii) No CNB Benefit Plan provides for welfare
benefits (as defined in ERISA Section 3(1)) to employees after retirement other
than as may be required by Section 601 et seq. of ERISA.
(viii) Each CNB Benefit Plan may be terminated by
the Combined Corporation in its sole discretion on or after the Closing Date
without liability of any kind or description arising from either such
termination or any action attributable to the Combined Corporation.
(ix) The execution of, or performance of the
transactions contemplated by, this Agreement will not create, accelerate or
increase any obligations under the CNB Benefit Plans, and will not require or
cause to be payable any payment which is or would be an "excess parachute
payment" under Section 28OG of the Internal Revenue Code.
(p) Legal Proceedings. There are no actions, suits or
proceedings instituted or pending or, to the Knowledge of CNB, threatened (or
unasserted but considered probable of assertion and which if asserted would have
at least a reasonable probability of an unfavorable outcome) against CNB or any
CNB Subsidiary, or against any property, asset, interest or right of any of
them, that have a reasonable probability either individually or in the aggregate
of having a material adverse effect on the Condition of CNB and the CNB
Subsidiaries on a consolidated basis.
(q) Absence of Certain Changes or Events. Since December
31, 1996, the businesses of CNB and each CNB Subsidiary have been operated only
in the ordinary course consistent with past practices and since such date there
has not been, occurred or arisen: (i) any damage, destruction, loss or casualty
whether or not covered by insurance which has had or is reasonably likely to
have a material adverse affect on the Condition of CNB and the CNB Subsidiaries
on a consolidated basis; (ii) any declaration, setting aside or payment of any
dividend
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or distribution (whether in cash, stock or property) in respect of the CNB
Shares or any redemption or other acquisition of the CNB Shares by CNB or any
split, combination or reclassification of CNB Shares declared or made; (iii) any
extraordinary losses required by GAAP to be disclosed as such that have been
suffered and not adequately reserved against, whether or not in the Ordinary
Course of Business; (iv) any material assets mortgaged, pledged or subjected to
any lien, charge or other encumbrance; (v) any agreement to do any of the
foregoing; or (vi) any other event, development or condition of any character
including any change in results of operations, financial condition, method of
accounting or accounting practices, nature of business, or manner of conducting
the businesses of CNB and its Subsidiaries that has had, or is reasonably likely
to have, a material adverse effect on the Condition of CNB and the CNB
Subsidiaries on a consolidated basis.
(r) Reports. Since December 31, 1996, CNB and each CNB
Subsidiary has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with any
Regulatory Authority. Each such report and statement, including the financial
statements, exhibits and schedules thereto, at the time of filing thereof
complied in all material respects with the laws and rules and regulations
applicable to it and did not contain any untrue statement of material fact or
omit to state any material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not false or
misleading.
(s) Statements True and Correct. No representation or
warranty made by CNB in this Agreement nor any written statement or certificate
included in an Exhibit or Schedule by CNB in connection with this Agreement nor
any written statement or certificate to be furnished by CNB to BLF pursuant to
this Agreement, contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by CNB for inclusion in the definitive
proxy materials to be mailed to CNB shareholders in connection with the Special
CNB Meeting (as defined in Section 6(b)(iii)), and any other documents to be
filed with any Regulatory Authority in connection with the transactions
contemplated hereby, will at the respective time such documents are filed fail
to comply in all material respects with the laws and rules and regulations
applicable to CNB and its Subsidiaries, contain any untrue statement of a
material fact, or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. All documents that CNB is responsible for filing with any
Regulatory Authority in connection with the Merger and the Bank Merger will
comply as to form in all material respects with the provisions of applicable
law.
(t) Environmental Matters.
(i) To the Knowledge of CNB, each of CNB, its
Subsidiaries, the Participation Facilities, and the Loan Properties (each as
hereinafter defined) are, and have been, in compliance with all applicable laws,
rules, regulations, standards and requirements of the United States
Environmental Protection Agency ("EPA") and of state and local agencies with
jurisdiction over pollution or protection of the environment, except for
violations which, either individually or in the aggregate, do not or would not
result in a material adverse effect on the Condition of CNB and its Subsidiaries
on a consolidated basis.
(ii) To the Knowledge of CNB, there is no suit,
claim, action or proceeding pending or threatened, before any court,
governmental agency or board or other forum in which
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CNB or any of its Subsidiaries or any Participation Facility has been or, with
respect to threatened proceedings, may be, named as a defendant (A) for alleged
noncompliance (including by any predecessor), with any environmental law, rule
or regulation or (B) relating to the release into the environment of any
Hazardous Material (as hereinafter defined) or oil whether or not occurring at
or on a site owned, leased or operated by CNB or any of its Subsidiaries or any
Participation Facility except as would not, either individually or in the
aggregate, result in a material adverse effect on the Condition of CNB and its
Subsidiaries on a consolidated basis.
(iii) To the Knowledge of CNB, there is no suit,
claim, action or proceeding pending or threatened, before any court,
governmental agency or board or other forum in which any Loan Property has been
or, with respect to threatened proceedings, may be, named as a defendant (A) for
alleged noncompliance (including by any predecessor) with any environmental law,
rule or regulation or (B) relating to the release into the environment of any
Hazardous Material or oil whether or not occurring at or on a site owned, leased
or operated by a Loan Property, except where such noncompliance or release does
not or would not result, either individually or in the aggregate, in a material
adverse effect on the Condition of CNB and its Subsidiaries on a consolidated
basis.
(iv) To the Knowledge of CNB, there is no
reasonable basis for any suit, claim, action or proceeding as described in
subsection (ii) or (iii) of this Section 4(t) except as would not, individually
or in the aggregate, have a material adverse effect on the Condition of CNB and
its Subsidiaries on a consolidated basis.
(v) During the period of (A) CNB's or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, (B) CNB's or any of its Subsidiaries' participation in the
management of any Participation Facilities, or (C) CNB's or any of its
Subsidiaries' holding of a Security Interest in a Loan Property, to the
Knowledge of CNB, there has been no release of Hazardous Material or oil in, on,
under or affecting such properties, except where such release does not or would
not result, either individually or in the aggregate, in a material adverse
effect on the Condition of CNB and its Subsidiaries on a consolidated basis.
Prior to the period of (A) CNB's or any of its Subsidiaries' ownership or
operation of any of their respective current properties, (B) CNB's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(C) CNB or any of its Subsidiaries' holding of a Security Interest in a Loan
Property, to the Knowledge of CNB, there was no release of Hazardous Material or
oil in, on, under or affecting any such property, Participation Facility or Loan
Property, except where such release does not or would not result, either
individually or in the aggregate, in a material adverse effect on the condition
of CNB and its Subsidiaries on a consolidated basis.
(vi) The following definitions apply for purposes
of this Section 4(t): (A) "Loan Property" means any real property in which CNB
holds a Security Interest and, where required by the context, said term means
the owner or operator of such property; (B) "Participation Facility" means any
facility in which CNB participates in the management and where required by the
context, said term means the owner or operator of such property; and (C)
"Hazardous Material" means any pollutant, contaminant, or hazardous substance
under the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. ss.9601 et seq. or any similar state law.
(u) Labor Matters. Except as set forth in the CNB
Disclosure Schedule, neither CNB nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it or
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any of its Subsidiaries the subject of any material proceeding asserting that
it or any Subsidiary has committed an unfair labor practice or seeking to
compel it to bargain with any labor organization as to wages or conditions of
employment nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to its knowledge, threatened, any of which
would have a material adverse effect on the Condition of CNB and its
Subsidiaries on a consolidated basis.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BLF
AND BIG LAKE NATIONAL BANK
Section 5. Representations and Warranties of BLF and Big Lake National
Bank. BLF and Big Lake National Bank represent and warrant to CNB that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and shall be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement through this Article V), except (i) representations and
warranties which are confined to a specified date shall speak only as of such
date, (ii) as expressly contemplated by this Agreement, and (iii) as set forth
in the disclosure schedule prepared by BLF and delivered prior to or as of the
date of this Agreement (the "BLF Disclosure Schedule") or the Schedules
attached hereto. The BLF Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
V.
(a) Organization, Qualification, and Corporate Power. BLF is
a corporation duly organized, validly existing, and in good standing under the
laws of Florida and is duly registered as a bank holding company under the BHC
Act. As of the date of this Agreement and as set forth in Section 5(b), BLF
owned all of the issued and outstanding capital stock of Big Lake National
Bank. Big Lake National Bank is a Florida banking corporation chartered as a
commercial bank under the authority of Chapter 658, Florida Statutes, duly
organized, validly existing, and in good standing under the laws of Florida.
Big Lake National Bank is duly authorized to engage in the business of banking
in Florida as an insured bank under the FDIA. Each Subsidiary of BLF, other
than Big Lake National Bank, is a corporation duly organized, validly existing,
and in good standing under the laws of Florida. Each of BLF and its
Subsidiaries is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification except where
the lack of such qualification would not have a material adverse effect on its
Condition. Each of BLF and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. True and complete copies of the Articles
of Incorporation and the Bylaws of BLF and Big Lake National Bank are attached
hereto as Schedule 5(a). BLF and each of its Subsidiaries has in effect all
federal, state, local and foreign governmental, regulatory and other
authorizations, permits and licenses necessary for it to own or lease its
properties and assets and to carry on its business as now conducted, the
absence of which would have a material adverse effect on the Condition of BLF
and its Subsidiaries on a consolidated basis.
(b) Capitalization. The authorized capital stock of BLF
consists of (i) 1,000,000 BLF Shares, of which 313,435 BLF Shares are issued
and outstanding on the date of this Agreement, and (ii) 500,000 shares of
preferred stock, par value $1.00 per share, none of which are issued or
outstanding as of the date of this Agreement. There are no other classes of
capital stock of BLF
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authorized. BLF holds 4,724 BLF Shares as treasury stock. All of the issued and
outstanding BLF Shares have been duly authorized and are validly issued, fully
paid and nonassessable. None of the outstanding BLF Shares has been issued in
violation of any preemptive rights of the current or past stockholders of BLF.
The authorized capital stock of Big Lake National Bank consists of 100,000 Big
Lake National Bank Shares, all of which are issued and outstanding on the date
of this Agreement. There are no other classes of capital stock of Big Lake
National Bank authorized. Big Lake National Bank holds no Big Lake National
Bank Shares as treasury stock. Except with respect to the 18,213 BLF Shares
issuable pursuant to the exercise of stock options ("BLF Options") granted by
BLF under stock option plans of BLF (the "BLF Stock Option Plans"), which BLF
Options are listed and described in Schedule 5(b), there are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights, or other agreements or commitments to which BLF
or any BLF Subsidiary is a party or which are binding upon BLF or any BLF
Subsidiary or, to the Knowledge of BLF and Big Lake National Bank, any other
party providing for the issuance, voting, transfer, disposition, or acquisition
of any of the capital stock of BLF or any BLF Subsidiary. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to BLF or any Subsidiary of BLF.
(c) BLF Subsidiaries. Each BLF Subsidiary is disclosed on the
BLF Disclosure Schedule. Except as set forth in Section 5(b), all shares of the
issued and outstanding capital stock of each BLF Subsidiary are owned by BLF or
a BLF Subsidiary. The outstanding shares of capital stock or other equity
interests of each BLF Subsidiary have been duly authorized and are validly
issued, fully paid and nonassessable. All shares of capital stock or other
equity interests of each BLF Subsidiary owned by BLF or any of its Subsidiaries
are set forth in the BLF Disclosure Schedule and are owned by such person,
either directly or indirectly, free and clear of all liens, encumbrances or
claims. None of the outstanding shares of the capital stock of any BLF
Subsidiary has been issued in violation of any preemptive rights of the current
or past stockholders of such BLF Subsidiary. All shares of capital stock of
each BLF Subsidiary is owned by BLF or an BLF Subsidiary, and there are no
other shares of capital stock of any BLF Subsidiary outstanding.
(d) Authorization of Transaction. Each of BLF and Big Lake
National Bank has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its obligation
hereunder; provided, however, that BLF cannot consummate the Merger unless and
until all requisite approvals are received from the Regulatory Authorities.
Subject to the foregoing sentence, (i) this Agreement has been duly executed
and delivered by BLF and Big Lake National Bank and this Agreement constitutes
a valid and binding agreement of BLF and Big Lake National Bank, enforceable
against them in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies, (ii) the performance by BLF and Big Lake National Bank of their
obligations under this Agreement and the consummation of the Merger and the
other transactions provided for under this Agreement have been or will be duly
and validly authorized by all necessary corporate action on the part of BLF and
Big Lake National Bank, and (iii) the Boards of Directors of BLF and Big Lake
National Bank have approved the execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
provided for under this Agreement. Other than to or from the Regulatory
Authorities or to or from the IRS or the PBGC with respect to any employee
benefit plans, none of BLF or any of its Subsidiaries needs to give any notice
to, make any filing with, or obtain any authorization, consent or approval of
any government or governmental agency in order for the Parties to consummate
the transactions contemplated by this Agreement, except where the
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failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a material adverse effect on the Condition of BLF and
its Subsidiaries on a consolidated basis.
(e) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) subject to the receipt of the approvals contemplated in
Section 5(d) above, violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which any of BLF and its
Subsidiaries is subject or any provision of the Articles of Incorporation or
Bylaws of any of BLF and its Subsidiaries or (ii) with the passing of time or
the giving of notice or both, conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other obligation to which any of BLF and its Subsidiaries is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets) except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the Condition of BLF and its Subsidiaries on a
consolidated basis.
(f) Financial Statements. BLF has delivered to CNB prior to
the execution of this Agreement copies of the following financial statements of
BLF (collectively referred to herein as the "BLF Financial Statements"):
audited consolidated balance sheets of BLF and its Subsidiaries at December 31,
1995 and 1996, and the related consolidated statements of (A) income, (B)
shareholders' equity and (C) cash flows for the years then ended and the notes
thereto as reported upon by Stevens, Thomas, Schemer & Sparks, P.A.,
independent certified public accountants.
The BLF Financial Statements (as of the dates thereof and for the
periods covered thereby): (i) have been prepared from the books and records of
BLF, which in all material respects account for those transactions which in
accordance with good business practices and applicable banking and other legal
requirements are required to be accounted for, and (ii) present fairly in all
material respects the consolidated financial position and the results of
operations and cash flows of BLF and its Subsidiaries as of the dates and for
the periods indicated, in accordance with GAAP, applied on a basis consistent
with prior periods except as disclosed in the notes thereto or, in the case of
unaudited quarterly statements, subject to normal recurring year-end
adjustments that are not material and the absence of certain footnote and cash
flow information.
(g) Undisclosed Liabilities. None of BLF and its Subsidiaries
has any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated, and whether due or to become due),
including any liability for taxes, except for (i) liabilities for future
disbursements on letters of credit, lines of credit and similar instruments or
unfunded loan commitments, (ii) liabilities accrued or reserved against in the
balance sheet dated as of December 31, 1996 included in the BLF Financial
Statements or reflected in the notes thereto, and (iii) liabilities which have
arisen after December 31, 1996 in the Ordinary Course of Business or in
connection with the transactions provided for in this Agreement (none of which
relates to any breach of contract, breach of warranty, tort, infringement, or
violation of law or arose out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand and none of which,
individually or in the aggregate, materially and adversely affect the Condition
of BLF and its Subsidiaries on a consolidated basis). Since December 31, 1996,
neither BLF nor any of its
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Subsidiaries has incurred or paid any obligation or liability which would be
material to the Condition of BLF and its Subsidiaries on a consolidated basis,
except in the Ordinary Course of Business.
(h) Brokers' Fees. None of BLF and its Subsidiaries, or
any of their officers, directors or employees, has any liability or obligation
to pay any fees or commissions to, or has employed, any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(i) Taxes.
(i) All federal, state, local and foreign tax
returns required to be filed by or on behalf of BLF or any of its Subsidiaries
have been timely filed or requests for extensions have been timely filed,
granted and have not expired, for periods ending on or before December 31,
1996, and all such returns filed are true, complete and accurate in all
material respects. BLF has timely paid or caused to be paid all taxes shown to
be due on such tax returns. There is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes currently pending
involving BLF or any of its Subsidiaries. All material tax, interest,
additions, and penalties due with respect to completed and settled examinations
or concluded litigation have been paid, accrued or provided for.
(ii) Neither BLF nor any of its Subsidiaries
have executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect.
(iii) Adequate provision for any federal, state,
local or foreign taxes due or to become due for BLF or any of its Subsidiaries
for any period or periods through and including December 31, 1996, has been
made and is reflected on the December 31, 1996 financial statements included in
the BLF Financial Statements.
(iv) Deferred taxes of BLF and its Subsidiaries
have been provided for in the BLF Financial Statements in accordance with GAAP,
subject in the case of interim financial statements to normal recurring
year-end adjustments.
(v) All taxes which BLF and each of its
Subsidiaries is required by law to withhold or to collect for payment have been
duly withheld and collected, and have been paid to the proper governmental
entity or are being withheld by BLF, the failure of which would have a material
adverse effect on the Condition of BLF and its Subsidiaries on a consolidated
basis.
(j) Allowance for Loan or Credit Losses. The Allowance
shown on the consolidated balance sheets of BLF and its Subsidiaries as of
December 31, 1996 included in the BLF Financial Statements was, and the
Allowance shown on the consolidated balance sheets of BLF and its Subsidiaries
as of dates subsequent to the execution of this Agreement will to the Knowledge
of BLF and Big Lake National Bank be, in each case as of the dates thereof,
adequate to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivable) of BLF and its Subsidiaries
and other extensions of credit (including letters of credit and commitments to
make loans or extend credit) by BLF and its Subsidiaries, except where the
failure
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of the Allowance to be so adequate would not have a material adverse effect on
the Condition of BLF and its Subsidiaries on a consolidated basis.
(k) Properties; Insurance. BLF or a BLF Subsidiary has good
and marketable title free and clear of all material liens, encumbrances,
charges, defaults or equities of whatever character to all of the respective
properties and assets, tangible or intangible, reflected in the BLF Financial
Statements, except for liens disclosed in such Financial Statements, those
arising in the Ordinary Course of Business after December 31, 1996 or liens
which are not reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Condition of BLF and its Subsidiaries on a
consolidated basis. All buildings, and all fixtures, equipment and other
property and assets which are material to its business on a consolidated basis
and which are held under leases or subleases by BLF or a BLF Subsidiary are
held under valid instruments enforceable in accordance with their respective
terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be brought). The real property owned and used
as facilities by BLF or the BLF Subsidiaries has never been used for the
handling, treatment, storage or disposal of any hazardous or toxic substance as
defined under any applicable state or federal law. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of BLF or its Subsidiaries provide adequate coverage against loss,
and the fidelity bonds in effect as to which such entities are named insureds
are believed by management of BLF to be sufficient. Substantially all of BLF's
and its Subsidiaries' equipment in regular use has been well maintained and is
in good and serviceable condition, reasonable wear and tear excepted.
(l) Material Contracts. Neither BLF nor any BLF Subsidiary
nor any of their respective assets, businesses or operations as of the date of
this Agreement is a party to, or is bound or affected by, or receives benefits
under, any of the following (whether written or oral and excluding agreements
for the extension of credit by BLF or any BLF Subsidiary made in the Ordinary
Course of Business): (i) any employment agreement or understanding (including
any understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer, director,
or employee, including in any such person's capacity as a consultant (other
than those which are terminable at will without any further amount being
payable thereunder), (ii) any other agreement with any officer, director,
employee, or affiliate, (iii) any agreement with any labor union, (iv) any
agreement which limits the ability of BLF or any BLF Subsidiary to compete in
any line of business or which involves any restriction of the geographical area
in which BLF or any BLF Subsidiary may carry on its business (other than as may
be required by law or applicable regulatory authorities), or (v) any agreement,
contract, arrangement or commitment with annual payments aggregating $20,000 or
more.
(m) Material Contract Defaults. Neither BLF nor any BLF
Subsidiary is, or has received any written notice or has any Knowledge that any
other party is, in default in any material respect under any contract, lease,
sublease, license, franchise, permit, indenture, agreement, or mortgage for
borrowed money, or instrument of indebtedness (except, as to the foregoing,
extensions of credit by Big Lake National Bank in the Ordinary Course of
Business), and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default.
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(n) Compliance with Laws.
(i) Each of BLF and its Subsidiaries is in
compliance in all respects with all laws, regulations, reporting and licensing
requirements and orders applicable to its business or to its employees
conducting its business, with any Regulatory Agreements applicable to BLF or
its Subsidiaries, and with its internal policies and procedures, the breach or
violation of which would have a material adverse effect on the Condition of BLF
and its Subsidiaries on a consolidated basis.
(ii) Neither BLF nor any of its Subsidiaries
has received any written notification or communication from any Regulatory
Authorities (A) asserting that any of BLF or its Subsidiaries is not in
substantial compliance with any of the statutes, regulations, or ordinances
which such Regulatory Authority enforces which as a result of such
noncompliance would have a material adverse effect on the Condition of BLF and
its Subsidiaries on a consolidated basis, (B) threatening to revoke any
license, franchise, permit or governmental authorization which is material to
the Condition of BLF and its Subsidiaries on a consolidated basis, (C)
requiring or threatening to require BLF or any of its Subsidiaries, or
indicating that BLF or any of its Subsidiaries may be required, to enter into
or be subject to a cease and desist order, agreement, memorandum of
understanding or any other agreement or undertaking (or to cause its Board of
Directors to adopt any resolutions) restricting or limiting or purporting to
restrict or limit in any manner the operations of BLF or any of its
Subsidiaries, including, without limitation, any restriction on the payment of
dividends, or (D) directing, restricting or limiting, or purporting to direct,
restrict or limit in any manner the operations of BLF or any of its
Subsidiaries, including, without limitation, any restriction on the payment of
dividends. Neither BLF nor any of its Subsidiaries has consented to, entered
into, agreed to enter into, or been made subject to, any Regulatory Agreement.
(o) Employee Benefit Plans.
(i) The BLF Disclosure Schedule lists every
Benefit Plan currently or expected to be adopted, maintained by, sponsored in
whole or in part by, or contributed to by BLF or any ERISA Affiliate (as herein
defined) for the benefit of its employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries and under which any
of its employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate (collectively,
the "BLF Benefit Plans"). No BLF Benefit Plan is or has been a multi-employer
plan within the meaning of Section 3(37) and Section 4001(a)(3) of ERISA. For
purposes of this Section 5(o), the term "ERISA Affiliate" means each trade or
business (whether or not incorporated) which together with BLF is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code.
(ii) True, correct and complete copies of all
written BLF Benefit Plans and descriptions of all unwritten BLF Benefit Plans
listed in the BLF Disclosure Schedule and all trust agreements or other funding
arrangements, including insurance contracts, all amendments thereto and, where
applicable, with respect to any such plans or plan amendments, all
determination letters, rulings, opinion letters, information letters, or
advisory opinions issued by the IRS or the United States Department of Labor
after December 31, 1974, annual reports or returns, audited or unaudited
financial statements, actuarial valuations, and summary annual reports for the
most recent three plan years, the most recent summary plan descriptions and any
material modifications thereto, have previously been delivered to CNB or will
be attached to the BLF Disclosure Schedule.
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(iii) All the BLF Benefit Plans and the related
trusts are in material compliance with, and have been administered in material
compliance with, the provisions of ERISA, the provisions of the Internal
Revenue Code and all other applicable laws, rules and regulations and
collective bargaining agreements. Any required governmental approvals for the
BLF Benefit Plans have been obtained, including, but not limited to, favorable
determination letters on the qualification of the ERISA Plans and tax exemption
of related trusts, as applicable, under the Internal Revenue Code, and all such
governmental approvals continue in full force and effect. Neither BLF nor any
administrator or fiduciary of any BLF Benefit Plan or agent or delegate of any
of the foregoing has engaged in any transaction or acted or failed to act in
any manner which could subject BLF, CNB or any affiliate thereof to any direct
or indirect liability for a breach of any fiduciary, co-fiduciary or other duty
under ERISA. To the knowledge of BLF's management after due inquiry, no oral or
written representation or communication with respect to any aspect of the BLF
Benefit Plans has been made to employees of BLF prior to the Effective Time of
the Merger which is not in accordance with the written or otherwise
pre-existing terms and provisions of such BLF Benefit Plans in effect at the
time of such communication. There are no unresolved claims or disputes under
the terms of, or in connection with, the BLF Benefit Plans and no action, legal
or otherwise, has been commenced with respect to any claim under the terms of,
or in connection with, the BLF Benefit Plans.
(iv) No "party in interest" (as defined in
Section 3(14) of ERISA) or "disqualified person" (as defined in Section
4975(e)(2) of the Internal Revenue Code) of any BLF Benefit Plan has engaged in
any "prohibited transaction (within the meaning of Section 4975(c) of the
Internal Revenue Code or Section 406 of ERISA). There has been no (A)
"reportable event" (as defined in Section 4043 of ERISA), or event described in
Section 4062(e) or Section 4063(a) of ERISA, or (B) termination or partial
termination, withdrawal or partial withdrawal with respect to any of the ERISA
Plans which: (1) BLF maintains or contributes to or has maintained or
contributed to or was required to maintain or contribute to for the benefit of
employees of BLF; or (2) which has been maintained or contributed to or was
required to be maintained or contributed to by any member of a controlled group
of trades or business as defined in ERISA Section 4001(a)(14) which has, since
January 1, 1975, included BLF.
(v) For any given ERISA Plan relating to BLF
and its Subsidiaries, all assets of such plan are carried at their fair market
value, to the extent required by the plan document and applicable law, and the
fair market value of such plan's assets equals or exceeds the present value of
all benefits (whether vested or not) accrued to date by all present or former
participants in such plan. No BLF Benefit Plan is subject to the rules of the
PBGC.
(vi) As of the Effective Time, BLF will not have
any material current or future liability under any BLF Benefit Plan that was
not reflected in the BLF Financial Statements.
(vii) No BLF Benefit Plan provides for welfare
benefits (as defined in ERISA Section 3(1)) to employees after retirement other
than as may be required by Section 601 et seq. of ERISA.
(viii) Each BLF Benefit Plan may be terminated by
the Combined Corporation in its sole discretion on or after the Closing Date
without liability of any kind or description arising from either such
termination or any action attributable to the Combined Corporation.
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(ix) The execution of, or performance of the
transactions contemplated by, this Agreement will not create, accelerate or
increase any obligations under the BLF Benefit Plans, and will not require or
cause to be payable any payment which is or would be an "excess parachute
payment" under Section 28OG of the Internal Revenue Code.
(p) Legal Proceedings. There are no actions, suits or
proceedings instituted or pending or, to the Knowledge of BLF, threatened (or
unasserted but considered probable of assertion and which if asserted would have
at least a reasonable probability of an unfavorable outcome) against BLF or any
BLF Subsidiary, or against any property, asset, interest or right of any of
them, that have a reasonable probability either individually or in the aggregate
of having a material adverse effect on the Condition of BLF and the BLF
Subsidiaries on a consolidated basis.
(q) Absence of Certain Changes or Events. Since December
31, 1996, the businesses of BLF and each BLF Subsidiary have been operated only
in the ordinary course consistent with past practices and since such date there
has not been, occurred or arisen: (i) any damage, destruction, loss or casualty
whether or not covered by insurance which has had or is reasonably likely to
have a material adverse affect on the Condition of BLF and the BLF Subsidiaries
on a consolidated basis; (ii) any declaration, setting aside or payment of any
dividend or distribution (whether in cash, stock or property) in respect of the
BLF Shares or any redemption or other acquisition of the BLF Shares by BLF or
any split, combination or reclassification of BLF Shares declared or made; (iii)
any extraordinary losses required by GAAP to be disclosed as such that have been
suffered and not adequately reserved against, whether or not in the Ordinary
Course of Business; (iv) any material assets mortgaged, pledged or subjected to
any lien, charge or other encumbrance; (v) any agreement to do any of the
foregoing; or (vi) any other event, development or condition of any character
including any change in results of operations, financial condition, method of
accounting or accounting practices, nature of business, or manner of conducting
the businesses of BLF and its Subsidiaries that has had, or is reasonably likely
to have, a material adverse effect on the Condition of BLF and the BLF
Subsidiaries on a consolidated basis.
(r) Reports. Since December 31, 1996, BLF and each BLF
Subsidiary has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with any
Regulatory Authority. Each such report and statement, including the financial
statements, exhibits and schedules thereto, at the time of filing thereof
complied in all material respects with the laws and rules and regulations
applicable to it and did not contain any untrue statement of material fact or
omit to state any material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not false or
misleading.
(s) Statements True and Correct. No representation or
warranty made by BLF in this Agreement nor any written statement or certificate
included in an Exhibit or Schedule by BLF in connection with this Agreement nor
any written statement or certificate to be furnished by BLF to CNB pursuant to
this Agreement, contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by BLF for inclusion in the definitive
proxy materials to be mailed to CNB shareholders in connection with the Special
BLF Meeting (as defined in Section 6(b)(iii)), and any other documents to be
filed with any Regulatory Authority in connection with the transactions
contemplated hereby, will at the respective time such documents are filed fail
to comply in all material respects with the laws and rules and
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regulations applicable to BLF and its Subsidiaries, contain any untrue
statement of a material fact, or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. All documents that BLF is responsible for
filing with any Regulatory Authority in connection with the Merger and the Bank
Merger will comply as to form in all material respects with the provisions of
applicable law.
(t) Environmental Matters.
(i) To the Knowledge of BLF, each of BLF, its
Subsidiaries, the Participation Facilities, and the Loan Properties are, and
have been, in compliance with all applicable laws, rules, regulations, standards
and requirements of the EPA and of state and local agencies with jurisdiction
over pollution or protection of the environment, except for violations which,
either individually or in the aggregate, do not or would not result in a
material adverse effect on the Condition of BLF and its Subsidiaries on a
consolidated basis.
(ii) To the Knowledge of BLF, there is no suit,
claim, action or proceeding pending or threatened, before any court,
governmental agency or board or other forum in which BLF or any of its
Subsidiaries or any Participation Facility has been or, with respect to
threatened proceedings, may be, named as a defendant (A) for alleged
noncompliance (including by any predecessor), with any environmental law, rule
or regulation or (B) relating to the release into the environment of any
Hazardous Material or oil whether or not occurring at or on a site owned, leased
or operated by BLF or any of its Subsidiaries or any Participation Facility
except as would not, either individually or in the aggregate, result in a
material adverse effect on the Condition of BLF and its Subsidiaries on a
consolidated basis.
(iii) To the Knowledge of BLF, there is no suit,
claim, action or proceeding pending or threatened, before any court,
governmental agency or board or other forum in which any Loan Property has been
or, with respect to threatened proceedings, may be, named as a defendant (A) for
alleged noncompliance (including by any predecessor) with any environmental law,
rule or regulation or (B) relating to the release into the environment of any
Hazardous Material or oil whether or not occurring at or on a site owned, leased
or operated by a Loan Property, except where such noncompliance or release does
not or would not result, either individually or in the aggregate, in a material
adverse effect on the Condition of BLF and its Subsidiaries on a consolidated
basis.
(iv) To the Knowledge of BLF, there is no
reasonable basis for any suit, claim, action or proceeding as described in
subsection (ii) or (iii) of this Section 5(t) except as would not, individually
or in the aggregate, have a material adverse effect on the Condition of BLF and
its Subsidiaries on a consolidated basis.
(v) During the period of (A) BLF's or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, (B) BLF's or any of its Subsidiaries' participation in the
management of any Participation Facilities, or (C) BLF's or any of its
Subsidiaries' holding of a Security Interest in a Loan Property, to the
Knowledge of BLF, there has been no release of Hazardous Material or oil in, on,
under or affecting such properties, except where such release does not or would
not result, either individually or in the aggregate, in a material adverse
effect on the Condition of BLF and its Subsidiaries on a consolidated basis.
Prior to the period of (A) BLF's or any of its Subsidiaries' ownership or
operation of any of their respective current properties, (B) BLF's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(C)
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BLF or any of its Subsidiaries' holding of a Security Interest in a Loan
Property, to the Knowledge of BLF, there was no release of Hazardous Material
or oil in, on, under or affecting any such property, Participation Facility or
Loan Property, except where such release does not or would not result, either
individually or in the aggregate, in a material adverse effect on the condition
of BLF and its Subsidiaries on a consolidated basis.
(vi) The following definitions apply for purposes
of this Section 5(t): (A) "Loan Property" means any real property in which BLF
holds a Security Interest and, where required by the context, said term means
the owner or operator of such property; (B) "Participation Facility" means any
facility in which BLF participates in the management and where required by the
context, said term means the owner or operator of such property; and (C)
"Hazardous Material" means any pollutant, contaminant, or hazardous substance
under the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. ss.9601 et seq. or any similar state law.
(u) Labor Matters. Except as set forth in the BLF
Disclosure Schedule, neither BLF nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
Subsidiaries the subject of any material proceeding asserting that it or any
Subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment nor
is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to its knowledge, threatened, any of which would have a
material adverse effect on the Condition of BLF and its Subsidiaries on a
consolidated basis.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6. Covenants. Except as otherwise set forth in the Disclosure
Schedules, the Parties agree as follows with respect to the period from and
after the execution of this Agreement until the earlier of the consummation of
the transactions contemplated by this Agreement or termination of this
Agreement:
(a) Current Information. During the period from the date of
this Agreement to the Effective Time, each Party shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other. Within twenty (20) days after the end of each calendar month
beginning after the date of this Agreement, each of CNB and BLF shall deliver
to the other copies of their respective unaudited consolidated balance sheets
and consolidated statements of income, and any other financial or statistical
information submitted by management to the Board of Directors of CNB, BLF,
Clewiston National Bank or Big Lake National Bank (other than information
provided to a Board of Directors specifically in connection with its
consideration of the Merger, this Agreement, and the transactions contemplated
hereby) for or in the preceding fiscal month. All such financial statements
shall be prepared in accordance with the books and records of such Party, shall
be complete and accurate in all material respects, shall present fairly the
consolidated financial position and the consolidated results of operations of
that Party as of and for the periods indicated, and shall be prepared in
accordance with GAAP, subject to normal recurring year-end adjustments and the
absence of certain footnote information in the unaudited statements.
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(b) Regulatory Matters and Approvals.
(i) Bank Regulatory Matters. BLF and CNB
shall cause to be promptly prepared and filed with the FRB, FDIC, and the OCC
applications for their approval of the Merger and with any other Regulatory
Authority having jurisdiction any other applications for approvals or Consents
which may be necessary for the consummation of the Merger. The Parties shall
provide copies of all such applications and notices to the others for review
prior to submission or filing with the appropriate Regulatory Authorities. Each
Party agrees to promptly review and provide any comments on such applications
and notices to the others. Each Party shall use its best efforts to take or
cause to be taken all actions necessary for such applications and notices to be
approved and shall provide the others with copies of all correspondence and
notices to or from such agencies concerning such applications and notices. No
Consent obtained which is necessary to consummate the transactions contemplated
by this Agreement shall be conditioned or restricted in a manner which in the
reasonable judgment of a Party would (A) unduly impair or restrict the
operations, or would have a material adverse effect on the Condition, of the
Combined Corporation, or (B) render consummation of the Merger unduly
burdensome; provided, that such Party has used its reasonable efforts (it being
understood that such reasonable efforts shall not include the threatening or
commencement of any litigation) to cause such conditions or restrictions to be
removed or modified as appropriate.
(ii) Definitive Proxy Materials. CNB and BLF
shall prepare a proxy statement which shall consist of the CNB definitive proxy
materials relating to the Special CNB Meeting (the "Proxy Statement"). The
Parties shall file the Proxy Statement with such Regulatory Agencies as may be
required by law in order for such materials to be furnished to the shareholders
of CNB. The Proxy Statement shall contain the affirmative recommendation of the
Board of Directors of CNB in favor of the adoption of this Agreement and the
approval of the Merger. CNB and BLF shall provide to the other whatever
information and assistance in connection with the preparation of the Proxy
Statement that such Party may reasonably request. CNB shall not be liable for
any untrue statement of a material fact or omission to state a material fact in
the Proxy Statement and Registration Statement made in reliance upon, or in
conformity with, information furnished to CNB by BLF, or Big Lake National Bank
for use therein. BLF shall not be liable for any untrue statement of a material
fact or omission to state a material fact in the Proxy Statement and
Registration Statement made in reliance upon, or in conformity with,
information furnished to BLF by CNB or Clewiston National Bank for use therein.
(iii) Shareholder Approvals. CNB shall call a
special meeting of its shareholders (the "Special CNB Meeting") and mail to
them the Proxy Statement (as soon as reasonably practicable following a
determination by CNB and BLF that such special meeting should be called) in
order that CNB shareholders may consider and vote upon the adoption of this
Agreement and the approval of the Merger in accordance with the Florida
Business Corporation Act.
(iv) Registration Statement. BLF will prepare
and file with the SEC a Registration Statement under the Securities Act in
connection with the BLF Shares to be issued to CNB shareholders in the Merger.
CNB and BLF shall each promptly furnish all information concerning it and the
holders of its outstanding shares as the other may reasonably request from time
to time in connection with the preparation of the Registration Statement. The
Parties shall use their reasonable efforts to cause the Registration Statement
to become effective under the Securities
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Act as soon as reasonably practicable after the filing thereof and to take any
action required to be taken under applicable state, Blue Sky or securities laws
in connection with the issuance of the BLF Shares upon consummation of the
Merger.
(v) Other Governmental Matters. Each of the
Parties shall take any additional action (and cause each of its Subsidiaries to
take any additional action) that may be necessary, proper, or advisable in
connection with any other notice to, filings with, and authorizations,
consents, and approvals of governments and governmental agencies that it may be
required to give, make or obtain.
(c) Tax Opinion. On or before the date the Proxy
Statement is mailed to CNB shareholders, CNB and BLF shall each use all
reasonable efforts to obtain a written opinion from Stevens, Thomas, Schemer &
Sparks, P.A., to the effect that the exchange of CNB Shares, to the extent
exchanged for BLF Shares as contemplated herein, shall not give rise to gain or
loss to the holders of such CNB Shares, or gain or loss to BLF with respect to
such exchange, and accordingly, the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
(the "Tax Opinion"). The Tax Opinion shall be reasonably satisfactory to each of
CNB and BLF in form and substance.
(d) Conduct of Business Prior to the Effective Time of
the Merger. During the period from the date of this Agreement to the Effective
Time of the Merger or the termination of this Agreement, except as set forth in
the CNB or BLF Disclosure Schedules and except as expressly contemplated or
permitted by this Agreement, each of CNB, Clewiston National Bank, BLF, and Big
Lake National Bank shall, and shall cause each of their respective Subsidiaries
to (i) conduct its business in, and only in, the usual, regular and ordinary
course consistent with past practices, (ii) use its reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees, and (iii) take no action which would materially adversely affect
or delay the ability of any Party to obtain any necessary approvals of any
Regulatory Authority or other governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements
under this Agreement.
(e) Forbearance. During the period from the date of this
Agreement to the Effective Time of the Merger or the termination of this
Agreement, except as set forth in the CNB or BLF Disclosure Schedules or in
Section 6(s), or except as expressly contemplated or permitted by this
Agreement, no Party shall or shall permit its Subsidiary to, without the prior
written consent of the other Parties:
(i) Other than in the Ordinary Course of
Business, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness; it being understood
and agreed that incurrence of indebtedness in the Ordinary Course of Business
shall include, without limitation, the creation of deposit liabilities,
purchases of federal funds, sales of certificates of deposit and entering into
repurchase agreements), assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity, or make any loan or advance other than in the
Ordinary Course of Business;
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(ii) Adjust, split, combine or reclassify any
capital stock; make, declare or pay and dividend or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or, grant any stock
appreciation rights or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock (except for dividends paid by
any of the Subsidiaries of a Party to such Party);
(iii) Sell, transfer, mortgage, encumber or other
wise dispose of any of its material properties or assets (including capital
stock of Subsidiaries) to any individual, corporation or other entity other
than a Subsidiary, or cancel, release or assign any material indebtedness to
any such person or any claims held by any such person, except (A) in the
Ordinary Course of Business, or (B) as set forth in a Disclosure Schedule
pursuant to contracts or agreements in force at the date of this Agreement;
(iv) Except for transactions in the ordinary
Course of Business, make any material investment in, either by purchase of
stock or securities, contributions to capital, property transfers, or purchase
of property or assets, any other individual, corporation or other entity other
than a Subsidiary of such Party;
(v) Except for transactions in the Ordinary
Course of Business, enter into or terminate any material contract or agreement,
or make any change in any of its material leases or contracts, other than
renewals of contracts and leases without material adverse changes of terms;
(vi) Increase in any material manner the
compensation or fringe benefits of any of its employees or pay any bonus or
pension or retirement allowance not required by any existing plan or agreement
to any such employees, or become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or agreement or
employment agreement with or for the benefit of any employee, other than in the
Ordinary Course of Business; with the understanding that entering into any new
employment contracts, or renewing or amending any existing employment
contracts, shall be deemed outside the Ordinary Course of Business;
(vii) Amend its Articles of Incorporation,
Articles of Association, or its bylaws;
(viii) Enter into any new material line of
business;
(ix) Change its or its Subsidiaries' lending,
investment, liability management and other material banking policies in any
respect which is material, including without limitation, policies and
procedures relating to calculating and funding the Allowance;
(x) Incur or commit to any capital expenditure
or any obligations or liabilities in connection therewith other than capital
expenditures and obligations or liabilities incurred or committed to in the
Ordinary Course of Business (except, as to BLF, the construction of an
operations center, two drive-in lanes for the BLF main office, the renovation
of the interior of the BLF main office, and the installation of safe-deposit
boxes in the Lake Placid banking office);
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(xi) Change its methods of accounting in effect
at December 31, 1996, except as required by Statement of Financial Accounting
Standards No. 121, 123 and 125 or its fiscal year; or
(xii) Agree to, or make any commitment to, take
any of the actions prohibited by this Section 6(e).
(f) Issuance of Securities. Except as set forth in a
Disclosure Schedule or as contemplated by this Agreement, no Party shall or
shall permit any of its Subsidiaries to issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any voting debt or any securities convertible into or exercisable for
or any rights, warrants or options to acquire, any such shares or voting debt,
or enter into any agreement with respect to any of the foregoing, other than (i)
the issuance of CNB Shares or BLF Shares, as the case may be, pursuant to
outstanding CNB Options or BLF Options, in each case as in effect on the date of
this Agreement and in each case in accordance with their present terms; and (ii)
issuances by a wholly-owned Subsidiary of its capital stock to its parent.
(g) No Acquisitions. Other than acquisitions which may be
mutually agreed to by the Parties, no Party shall, or shall permit any of its
Subsidiaries to, acquire or agree to acquire, by merging or consolidation with
or by purchasing a substantial equity interest in, or by purchasing a
substantial portion of the assets, or assuming a substantial portion of the
liabilities of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets in each case which are
material, individually or in the aggregate, to such Party and its Subsidiaries
taken as a whole; provided, however, that the foregoing shall not prohibit (i)
internal reorganizations, consolidations or dissolutions involving only existing
Subsidiaries, (ii) foreclosure and other acquisitions related to previously
contracted debt, in each case in the Ordinary Course of Business, (iii)
acquisitions of control by Clewiston National Bank, or Big Lake National Bank in
its fiduciary capacity, (iv) investments made by small business investment
corporations, acquisitions of financial assets and merchant banking activities,
in each case in the Ordinary Course of Business, or (v) the creation of new
Subsidiaries organized to conduct or continue activities otherwise permitted by
this Agreement.
(h) Other Actions. No Party shall or shall permit any of
its Subsidiaries to take any action that, or fail to take any action the failure
of which, results in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of the
conditions set forth in this Agreement not being satisfied or in a violation of
any provision of this Agreement which would adversely affect the ability of any
of them to obtain any of the Regulatory Approvals, except in every case as may
be required by applicable law.
(i) Government Filings. Each Party shall file all
reports, applications and other documents required to be filed with the
appropriate bank regulators between the date hereof and the Effective Time of
the Merger and shall make available to the other Party copies of all such
reports promptly after the same are filed.
(j) Tax-Free Reorganization Treatment. No Party shall
take or cause to be taken any action, whether before or after the Effective Time
of the Merger, which would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code.
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(k) Full Access. Each Party shall (and shall cause each
of its Subsidiaries to) permit representatives of the others to have full access
at all reasonable times, and in a manner so as not to interfere with the normal
business operations of such Party and its Subsidiaries to all premises,
properties, books, records, contracts, tax records, and documents of or
pertaining to each of such Party and its Subsidiaries. Each Party agrees to
furnish any other Party and its advisers with such financial operating data and
other information with respect to its business, properties and employees as such
Party shall, from time to time, reasonably request. No investigation by a Party
shall affect the representations and warranties of any other Party to this
Agreement, and each such representation and warranty shall survive any such
investigation. Each of the others shall treat and hold as such any Confidential
Information (as defined below) it receives from any of such Party and its
Subsidiaries in the course of the reviews contemplated by this Section 6(k),
shall not use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever,
agrees to return to such Party all tangible embodiments (and all copies) thereof
which are in its possession; provided, however, that this sentence shall not
apply to any information obtained by a Party (i) which, at the time of
disclosure, is available publicly, (ii) which, after disclosure, becomes
available publicly through no fault of such Party, or (iii) which such Party
knew or to which such Party had access prior to disclosure. For purposes of this
Agreement, the term "Confidential Information" means any information concerning
the businesses, operations, financial conditions and affairs of CNB, BLF, and
their respective Subsidiaries. In addition, no Party shall be required to
provide access to or disclose information which would violate or prejudice the
rights of any customer or other person, jeopardize a Party's attorney-client
privilege, or would contravene any law, rule, regulation, order or decree.
(l) Notice of Material Adverse Developments. Each Party
shall give prompt written notice to the other Parties of any material adverse
effect on its Condition, or any material adverse development affecting the
assets, liabilities, business, financial condition, operations, results of
operations, or future prospects of such Party and its Subsidiaries taken as a
whole, including without limitation (i) any material change in its business or
operations, (ii) any material complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any Regulatory
Authority, (iii) the institution or the threat of material litigation involving
such Party, or (iv) any event or condition that might be reasonably expected to
cause any of such Party's representations and warranties set forth herein not to
be true and correct in all material respects as of the Closing Date. Each Party
shall also give prompt written notice to the other Parties of any other material
adverse development affecting the ability of such Party to consummate the
transactions contemplated by this Agreement. Any such notices shall be
accompanied by copies of any and all pertinent documents, correspondence and
similar papers relevant to a complete understanding of such material adverse
development, which shall be promptly updated as necessary. BLF and Big Lake
National Bank shall have 20 business days after CNB gives any written notice
pursuant to this Section 6(l) within which to exercise any right BLF may have to
terminate this Agreement pursuant to Section 8(a)(iv) below by reason of the
material adverse development, and CNB and Clewiston National Bank likewise shall
have 20 business days after BLF gives any written notice pursuant to this
Section 6(l) within which to exercise any right CNB and Clewiston National Bank
may have to terminate this Agreement pursuant to Section 8(a)(iii) below by
reason of the material adverse development. Unless one of the Parties terminates
this Agreement within the aforementioned period, the written notice of a
material development shall be deemed to have amended the Disclosure Schedule, to
have qualified the representations and warranties contained herein, and to have
cured any misrepresentation or breach of warranty that otherwise might have
existed hereunder by reason of the material adverse development.
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(m) Exclusivity. Except as specifically permitted or
contemplated by this Agreement, the Parties shall not (and shall not cause or
permit any of their Subsidiaries to) solicit, initiate, encourage, entertain,
consider, or participate in the negotiation, discussion or submission of any
proposal or offer from any person (other than a Party) relating to any (i)
liquidation, dissolution, or recapitalization, (ii) merger or consolidation,
(iii) acquisition or purchase of 25% or more of securities or assets, or (iv)
similar transaction or business combination involving any of the Parties and/or
its Subsidiaries, or their respective assets (the foregoing transactions
referred to in subclauses (i) through (iv), inclusive, are referred to in this
Agreement as an "Acquisition Proposal"); provided, however, that each Party and
its Subsidiaries shall be entitled to entertain, consider, and participate in
negotiations and discussions regarding, and furnish any information with respect
to, any effort or attempt by any person to do or seek to do any of the foregoing
to the extent that the Board of Directors of such Party determines in good faith
that the failure to so consider or participate in such negotiations or
discussions would be inconsistent with the fiduciary obligations of the
directors of such Party to the shareholders of such Party. The Party shall give
all of the other Parties prompt notice of any such negotiations and discussions.
Each Party shall notify others immediately if any person (other than a Party)
makes any proposal, offer, inquiry, or contact with respect to any Acquisition
Proposal.
(n) Filings with the State Offices. Upon the terms and
subject to the conditions of this Agreement, the Parties shall execute and file
any and all documents in connection with the Merger and the Bank Merger for
filing with any Federal and state offices.
(o) Press Releases. Each Party shall consult with each
other as to the form and substance of any press release or other public
disclosure materially related to this Agreement, the Merger, or any other
transaction contemplated hereby; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or regulation.
(p) Agreements of Affiliates. CNB shall deliver to BLF a
letter identifying all persons whom CNB believes to be, at the time the Merger
is submitted to a vote of the CNB shareholders, "affiliates" of CNB for purposes
of Rule 145 under the Securities Act. CNB shall use its best efforts to cause
each person who is identified as an "affiliate" in the letter referred to above
to deliver to BLF prior to the Effective Time of the Merger a written agreement
providing that each such person shall agree not to sell, transfer or otherwise
dispose of the BLF Shares to be received by such person in the Merger, except in
compliance with the applicable provisions of the Securities Act. Prior to the
Effective Time of the Merger, CNB shall amend and supplement such letter and use
its reasonable best efforts to cause each additional person who is identified as
an "affiliate" to execute a written agreement as set forth in this Section 6(p).
(q) Miscellaneous Agreements and Consents. Subject to the
terms and conditions of this Agreement, each of the Parties hereto agrees to use
its respective best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as reasonably
practicable, including, without limitation, using their respective reasonable
best efforts to lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the Parties to consummate the
transactions contemplated hereby. Each Party shall, and shall cause each of
their respective Subsidiaries to, use their reasonable best efforts to obtain
all approvals and Consents of all third parties and Regulatory Authorities
necessary or, in the reasonable opinion of any Party, desirable for the
consummation of
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the transactions contemplated by this Agreement. No Consent obtained which is
necessary to consummate the transactions contemplated by this Agreement shall
be conditioned or restricted in a manner which in the reasonable judgment of a
Party would (A) unduly impair or restrict the operations, or would have a
material adverse effect on the Condition, of the Combined Corporation,
Clewiston National Bank or Big Lake National Bank, or (B) render consummation
of the Merger unduly burdensome; provided, that such Party has used its
reasonable efforts (it being understood that such reasonable efforts shall not
include the threatening or commencement of any litigation) to cause such
conditions or restrictions to be removed or modified as appropriate.
(r) Indemnification.
(i) After the Effective Time of the Merger, BLF
shall, and shall cause the Combined Corporation to, indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of CNB
and Clewiston National Bank (each, an "Indemnified Party") after the Effective
Time of the Merger against all losses, expenses, claims, damages or liabilities
arising out of actions or omissions occurring on or prior to the Effective Time
of the Merger (including, without limitation, the transactions contemplated by
this Agreement), subject to the Florida Business Corporation Act.
(ii) If the Combined Corporation or any of its
successors or assigns (A) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (B) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then and in each such case, the Combined Corporation shall cause
proper provision to be made so that the successors and assigns of the Combined
Corporation shall assume the obligations set forth in this Section 6(r).
(s) Fairness Opinions. On or before 10 days prior to the
date of the Proxy Statement (i) CNB shall use all reasonable efforts to obtain
an opinion from a firm selected by it that the terms of the Merger are fair to
CNB shareholders from a financial point of view (the "CNB Fairness Opinions"),
and (ii) BLF shall use all reasonable efforts to obtain an opinion from a firm
selected by it that the terms of the Merger are fair to BLF shareholders from a
financial point of view (the "BLF Fairness Opinions").
(t) Employee Benefit Plans. CNB and BLF shall use their
best efforts to coordinate the conversion of each CNB Benefit Plan into similar
plans of the Combined Corporation, to the extent similar plans are maintained by
the Combined Corporation, and to make available for eligibility for CNB and
Clewiston National Bank employees all benefit plans and policies maintained by
the Combined Corporation following the Effective Time of the Merger with such
employees receiving credit for past service with a Party prior to the Effective
Time of the Merger for purposes of eligibility for participation, vesting, and
years of service, under such benefit plans and policies.
(u) CNB Directors Deferred Plan. Prior to the Effective
Time of the Merger, CNB shall cause the deferred compensation agreements between
Clewiston National Bank and its directors to be terminated in exchange for
payment by Clewiston National Bank to such directors of the amount reserved for
such payment in the audited consolidated balance sheet of CNB as of December 31,
1996.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF CNB AND BLF
Section 7. Conditions to Obligation to Close.
(a) Conditions to Obligation of BLF and Big Lake National
Bank. The obligations of BLF and Big Lake National Bank to consummate the
transactions to be performed by each in connection with the Closing are subject
to satisfaction of the following conditions:
(i) This Agreement and the Merger shall have
received the requisite approval of the shareholders of CNB, and the number of
Dissenting Shares shall not exceed 5% of the number of CNB Shares issued and
outstanding immediately prior to the Effective Time of the Merger;
(ii) The Parties shall have procured all
approvals, authorizations and Consents specified in Section 6(b) above and the
Disclosure Schedules, including but not limited to all necessary consents,
authorizations and approvals of Regulatory Authorities which, with respect to
those from the Regulatory Authorities, shall not contain provisions which (A)
unduly impair or restrict the operations, or would have a material adverse
effect on the Condition, of the Combined Corporation, Clewiston National Bank
or Big Lake National Bank or (B) render consummation of the Merger unduly
burdensome, as determined in the reasonable discretion of BLF;
(iii) The representations and warranties set
forth in Article IV above shall be true and correct in all material respects
at and as of the Closing Date;
(iv) Each of CNB and Clewiston National Bank
shall have performed and complied with all its covenants required to be
complied with hereunder in all material respects through the Closing;
(v) No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge could
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (C) affect adversely the right of the
Combined Corporation after the Effective Time of the Merger to own, operate, or
control substantially all of the assets and operations of CNB and BLF and their
respective Subsidiaries (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(vi) The shareholders' equity of CNB on the
last day of the calendar month immediately preceding the Closing Date, as
determined in accordance with GAAP and before any adjustments required pursuant
to Statement of Financial Accounting Standards No. 115 ("FAS 115") and expenses
incurred in connection with the Merger, shall not be less than the
shareholders' equity of CNB set forth in the CNB Financial Statements at April
30, 1997;
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(vii) The Allowance of CNB on the last day of
the calendar month immediately preceding the Closing Date shall not be less
than 1.13% of CNB's gross loans net of unearned income (and before such
Allowance) on such date;
(viii) CNB shall have delivered to BLF a
certificate (without qualification as to knowledge or materiality or otherwise)
to the effect that each of the conditions specified above in Section 7(a)(i)
through (vii) is satisfied in all respects;
(ix) All actions to be taken by CNB and
Clewiston National Bank in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to BLF;
(x) BLF shall have received the Tax Opinion in
a form reasonably satisfactory to BLF;
(xi) Counsel to CNB shall have furnished to BLF
their written opinion, dated as of the Closing Date, in form and substance
reasonably satisfactory to BLF, to the effect that:
(a) CNB has been incorporated as a
corporation under the laws of Florida and its status is active. Clewiston
National Bank has been incorporated as a national banking association under the
laws of the United States and its status is active.
(b) Each of CNB and Clewiston National
Bank has the corporate power to conduct its business and to execute and deliver
the Agreement and to perform its obligations under the Agreement.
(c) Each of CNB and Clewiston National
Bank has authorized the execution, delivery, and performance of the Agreement
by all necessary corporate action.
(d) The execution and delivery of the
Agreement by CNB and Clewiston National Bank, the performance by CNB and
Clewiston National Bank of their respective obligations under the Agreement,
and the exercise by CNB and Clewiston National Bank of their respective rights
created by the Agreement do not: (A) violate the Articles of Incorporation, the
Articles of Association, or Bylaws of CNB or Clewiston National Bank; (B) to
the knowledge of such counsel, constitute a breach of or default under any
agreement or instrument to which CNB or Clewiston National Bank is a party or
by which it or its assets are bound, or result in the creation of a mortgage,
Security Interest, or other encumbrance upon any of the assets of CNB or
Clewiston National Bank; (C) to the knowledge of such counsel, violate a
judgment, decree, or order of any court or administrative tribunal, which
judgment, decree, or order is binding upon CNB or Clewiston National Bank, or
any assets of CNB or Clewiston National Bank; or (D) to the knowledge of such
counsel, violate any Federal or Florida law, rule, or regulation.
(e) The Agreement is a valid and
binding obligation of each of CNB and Clewiston National Bank enforceable
against each of them under the law of Florida and the Federal law of the United
States. (In rendering such opinion concerning the validity, binding effect, and
enforceability of the Agreement, such counsel may indicate that such opinion
means that (A) the Agreement constitutes an effective contract under applicable
law, (B) the Agreement is not
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invalid in its entirety because of a specific statutory prohibition or public
policy or is subject in its entirety to a contractual defense, and (C) subject
to the last sentence of this paragraph, some remedy is available if CNB or
Clewiston National Bank, as the case may be, is in material default under the
Agreement. Such counsel may also indicate that such opinion does not mean that
(A) any particular remedy is available upon a material default, or (B) every
provision of the Agreement will be upheld or enforced in any or each
circumstance by a court. Such counsel may also indicate that the validity,
binding effect, and enforceability of the Agreement may be limited or otherwise
affected by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other similar statutes, rules, regulations, or other laws
affecting the enforcement of creditors' rights and remedies generally and (B)
the unavailability of, or limitation on the availability of, a particular right
or remedy (whether in a proceeding in equity or at law) because of an equitable
principle or a requirement as to commercial reasonableness, conscionability, or
good faith.)
(f) CNB's authorized capitalization
consists of 10,000,000 CNB Shares, of which 416,279 CNB Shares are issued and
outstanding. Clewiston National Bank's authorized capitalization consists of
62,500 Clewiston National Bank Shares, of which 62,500 Clewiston National Bank
Shares are issued and outstanding, all of which are owned by CNB. All of the
outstanding shares of CNB and Clewiston National Bank are fully paid and
nonassessable. There are no agreements or other documents pursuant to which CNB
or Clewiston National Bank may be required to authorize or issue additional
securities. None of the holders of CNB Shares or Clewiston National Bank Shares
have any preemptive rights to subscribe for any additional CNB Shares or
Clewiston National Bank Shares or other shares of capital stock of CNB or
Clewiston National Bank; and
(xii) BLF shall have received the BLF Fairness
Opinions.
BLF and Big Lake National Bank may waive any condition specified in
this Section 7(a) if each executes a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of CNB and Clewiston
National Bank. The obligations of CNB and Clewiston National Bank to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) This Agreement and the Merger shall have
received the requisite approval of the shareholders of CNB, and the number of
Dissenting Shares shall not exceed 5% of the number of CNB Shares issued and
outstanding immediately prior to the Effective Time of the Merger;
(ii) The Parties shall have procured all of the
third party approvals, authorizations and consents specified in Section 6(b)
above, and the Disclosure Schedules, including but not limited to all necessary
consents, authorizations and approvals of Regulatory Authorities which, with
respect to those from the Regulatory Authorities, shall not contain provisions
which (A) unduly impair or restrict the operations, or would have a material
adverse effect on the Condition, of the Combined Corporation, Clewiston
National Bank or Big Lake National Bank or (B) render consummation of the
Merger unduly burdensome, in each case as determined in the reasonable
discretion of CNB.
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(iii) The representations and warranties set forth
in Article V above shall be true and correct in all material respects at and as
of the Closing Date;
(iv) Each of BLF and Big Lake National Bank
shall have performed and complied with all its covenants required to be
complied with hereunder in all material respects through the Closing;
xxxxxx
(v) No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge could
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (C) affect adversely the right of the
Combined Corporation after the Effective Time of the Merger, to own, operate,
or control substantially all of the assets and operations of CNB and BLF and
their respective Subsidiaries (and no such judgment, order, decree,
stipulation, injunction or charge shall be in effect);
(vi) The shareholders' equity of BLF on the last
day of the calendar month preceding the Closing Date, as determined in
accordance with GAAP and before any adjustments required pursuant to FAS 115 and
expenses incurred in connection with the Merger, shall not be less than the
shareholders' equity of BLF set forth in the BLF Financial Statements at April
30, 1997;
(vii) The Allowance of Big Lake National Bank on
the last day of the calendar month preceding the Closing Date shall not be less
than 1.20% of Big Lake National Bank's gross loans net of unearned income (and
before such Allowance) on such date;
(viii) BLF shall have delivered to CNB a
certificate (without qualification as to knowledge or materiality or otherwise)
to the effect that each of the conditions specified in Section 7(b)(i) through
(vii) is satisfied in all respects;
(ix) All actions to be taken by BLF and Big Lake
National Bank in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby shall be reasonably satisfactory
in form and substance to CNB;
(x) CNB shall have received the Tax Opinion in a
form reasonably satisfactory to CNB;
(xi) Counsel to BLF shall have furnished to CNB
their written opinion, dated as of the Closing Date, in form and substance
reasonably satisfactory to CNB, to the effect that:
(a) BLF has been incorporated as a
corporation under the laws of Florida and its status is active. Big Lake
National Bank has been incorporated as a state banking corporation under the
laws of Florida and its status is active.
(b) Each of BLF and Big Lake National
Bank has the corporate power to conduct its business and to execute and deliver
the Agreement and to perform its obligations under the Agreement.
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(c) Each of BLF and Big Lake National
Bank has authorized the execution, delivery, and performance of the Agreement by
all necessary corporate action.
(d) The execution and delivery of the
Agreement by BLF and Big Lake National Bank, the performance by BLF and Big Lake
National Bank of their respective obligations under the Agreement, and the
exercise by BLF and Big Lake National Bank of their respective rights created by
the Agreement do not: (A) violate the Articles of Incorporation or Bylaws of BLF
or Big Lake National Bank; (B) to the knowledge of such counsel, constitute a
breach of or default under any agreement or instrument to which BLF or Big Lake
National Bank is a party or by which it or its assets are bound, or result in
the creation of a mortgage, Security Interest, or other encumbrance upon any of
the assets of BLF or Big Lake National Bank; (C) to the knowledge of such
counsel, violate a judgment, decree, or order of any court or administrative
tribunal, which judgment, decree, or order is binding upon BLF or Big Lake
National Bank, or any assets of BLF or Big Lake National Bank; or (D) to the
knowledge of such counsel, violate any Federal or Florida law, rule, or
regulation.
(e) The Agreement is a valid and
binding obligation of each of BLF and Big Lake National Bank enforceable against
each of them under the law of Florida and the Federal law of the United States.
(In rendering such opinion concerning the validity, binding effect, and
enforceability of the Agreement, such counsel may indicate that such opinion
means that (A) the Agreement constitutes an effective contract under applicable
law, (B) the Agreement is not invalid in its entirety because of a specific
statutory prohibition or public policy or is subject in its entirety to a
contractual defense, and (C) subject to the last sentence of this paragraph,
some remedy is available if BLF or Big Lake National Bank, as the case may be,
is in material default under the Agreement. Such counsel may also indicate that
such opinion does not mean that (A) any particular remedy is available upon a
material default, or (B) every provision of the Agreement will be upheld or
enforced in any or each circumstance by a court. Such counsel may also indicate
that the validity, binding effect, and enforceability of the Agreement may be
limited or otherwise affected by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other similar statutes, rules,
regulations, or other laws affecting the enforcement of creditors' rights and
remedies generally and (B) the unavailability of, or limitation on the
availability of, a particular right or remedy (whether in a proceeding in equity
or at law) because of an equitable principle or a requirement as to commercial
reasonableness, conscionability, or good faith.)
(f) The authorized capital stock of BLF
consists of (i) 1,000,000 BLF Shares, of which 313,435 BLF Shares are issued and
outstanding (and 4,724 BLF Shares are held by BLF in treasury), and (ii) 500,000
shares of preferred stock, par value $1.00 per share, none of which are issued
or outstanding. Big Lake National Bank's authorized capitalization consists of
100,000 Big Lake National Bank Shares, all of which are issued and outstanding.
BLF owns all Big Lake National Bank Shares. All of the outstanding shares of BLF
and Big Lake National Bank are fully paid and nonassessable. There are no
agreements or other documents pursuant to which BLF or Big Lake National Bank
may be required to authorize or issue additional securities (except as to BLF,
the issuance of 18,213 BLF Shares pursuant to the BLF Options). None of the
holders of BLF Shares or Big Lake National Bank Shares have any preemptive
rights to subscribe for any additional BLF Shares or Big Lake National Bank
Shares or other shares of capital stock of BLF or Big Lake National Bank; and
(xii) CNB shall have received the CNB Fairness
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CNB and Clewiston National Bank may waive any condition specified in
this Section 7(b) if each executes a writing so stating at or prior to the
Closing.
ARTICLE VIII
TERMINATION
Section 8. Termination.
(a) Termination of Agreement. Any of the Parties may
terminate this Agreement with the prior authorization of its Board of Directors
(whether before or after approval of CNB shareholders) as provided below:
(i) The Parties may terminate this Agreement by
mutual written consent at any time prior to the Effective Time of the Merger;
(ii) BLF and Big Lake National Bank may terminate
this Agreement by giving written notice to CNB and Clewiston National Bank at
any time prior to the Effective Time of the Merger in the event CNB or Clewiston
National Bank is in breach, and CNB and Clewiston National Bank may terminate
this Agreement by giving written notice to BLF and Big Lake National Bank at any
time prior to the Effective Time of the Merger in the event BLF or Big Lake
National Bank is in breach, of any representation, warranty, or covenant
contained in this Agreement in any material respect. Each Party shall have the
right to cure any such breach, if such breach is capable of being cured, within
15 days after receipt of written notice of such breach or within any such longer
period mutually agreed to in writing by the Parties hereto ("Cure Period");
provided, however, that in no event shall the Cure Period extend beyond March
31, 1998;
(iii) If a material adverse development shall have
occurred affecting the Condition of BLF and its Subsidiaries on a consolidated
basis, CNB and Clewiston National Bank may terminate this Agreement by giving
written notice to BLF and Big Lake National Bank;
(iv) If a material adverse development shall have
occurred affecting the Condition of CNB and its Subsidiaries on a consolidated
basis, BLF and Big Lake National Bank may terminate this Agreement by giving
written notice to CNB and Clewiston National Bank;
(v) CNB and BLF each may terminate this
Agreement by giving written notice to the other Party at any time after (i) the
CNB Special Meeting in the event this Agreement or the Merger fails to receive
the requisite CNB shareholder approval or (ii) the denial, and any final appeal
or rehearing thereof (or if any denial by such authority is not appealed within
the time limit for appeal), of any approval from a Regulatory Authority
necessary to permit the Parties to consummate the Merger and the transactions
contemplated by this Agreement or if any Consent shall be conditioned or
restricted in the manner provided in the last sentence of Section 6(b)(i);
(vi) Any Party may terminate this Agreement by
giving written notice to the other Parties at any time after March 31, 1998 if
the Effective Time of the Merger has not yet then occurred and such termination
was approved by a two-thirds vote of such Party's full Board of Directors; and
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(vii) This Agreement also is subject to
termination pursuant to Section 8(c).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 8(a) above, all obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 6(k) above, the termination
fee provisions contained in Section 8(c) below, and the expense provisions in
9(1) below shall survive any such termination.
(c) Acquisition Proposal Termination and Fee. During the
term of this Agreement, if (i) an Acquisition Proposal is submitted to and
approved by the shareholders of any Party at any time prior to the Effective
Time of the Merger; or (ii) as to CNB, an Acquisition Proposal is received by
CNB or is made directly to CNB shareholders of a Party at any time prior to the
holding of the meeting of CNB shareholders to be called pursuant to Section
6(b)(iii), and CNB's Board of Directors fails to recommend, or withdraws its
recommendation, that CNB's shareholders approve this Agreement or the Merger, or
CNB's Board of Directors fails to solicit proxies of CNB's shareholders to
approve this Agreement or the Merger, and this Agreement or the Merger is
subsequently rejected by CNB's shareholders at such meeting, then, as to
subclause (i) if the Party is BLF or Big Lake National Bank, BLF shall pay to
CNB, and, as to subclause (i) if such Party is CNB or Clewiston National Bank,
or if subclause (ii) is applicable, CNB shall pay to BLF, a termination fee in
an amount equal to 10% of the shareholders' equity of the Party required to make
such payment as of the end of the month preceding such payment, as liquidated
damages, and not as a penalty, and, upon the payment in full thereof, this
Agreement shall be terminated and no Party shall have any further liability
under this Agreement or the Merger (except as set forth in Section 8(b)). The
obligations of the Parties under this Section 8(c) shall survive the termination
of this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9. Miscellaneous.
(a) Survival. None of the representations, warranties,
and covenants of the Parties (other than the provisions in Article III above
concerning issuance of BLF Shares and the provisions in Section 6(r) above
concerning insurance and indemnification) shall survive the Effective Time of
the Merger.
(b) No Third Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns; provided, however, that (i)
the provisions in Article III above concerning issuance of BLF Shares are
intended for the benefit of CNB Shareholders and (ii) the provisions in Section
6(r) above concerning insurance and indemnification are intended for the benefit
of the individuals specified and their respective legal representatives.
(c) Entire Agreement. This Agreement (including the
documents referred to herein and therein) constitutes the entire agreement among
the Parties and supersedes any prior
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understandings, agreements, or representations by or among the Parties, written
or oral, that may have related in any way to the subject matter hereof.
(d) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties.
(e) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communication) and shall be (as elected by the
person giving such notice) hand delivered by messenger or courier service,
delivered by facsimile transmission, or mailed (airmail if international) by
registered or certified mail (postage prepaid), return receipt requested,
addressed to:
If to BLF or Big Lake National Bank: Edwin E. Walpole, III
Chairman, President and
Chief Executive Officer
Big Lake Financial Corporation
1409 South Parrott Avenue
Okeechobee, FL 34974
Telecopy Number: (941) 467-6816
with a copy to: John P. Greeley, Esquire
Smith, Mackinnon, Greeley, Bowdoin
& Edwards, P.A.
255 S. Orange Avenue
Suite 800
Orlando, FL 32802
Telecopy Number: (407) 843-2448
If to CNB or Clewiston National Bank: Curtis S. Fry
Chairman of the Board
Clewiston National Bank
950 West Ventura Avenue
Clewiston, Florida 33440
Telecopy Number: (941) 983-2828
with a copy to: Garey F. Butler
Humphrey & Knott
1625 Hendry Street
Fort Myers, Florida 33901
Telecopy: (941) 334-1446
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or to such other address as any Party may designate by notice complying with
the terms of this Section. Each such notice shall be deemed delivered (a) on
the date delivered if by personal delivery; (b) on the date telecommunicated if
by telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
(h) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida
without regard to principles of conflict of laws.
(i) Amendments and Waivers. To the extent permitted by
law, the Parties may amend any provision of this Agreement at any time prior to
the Effective Time of the Merger by a subsequent writing signed by each of the
Parties upon the approval of their respective Boards of Directors; provided,
however, that after approval of this Agreement by a Party's shareholders, there
shall be made no amendment in the Conversion Ratio in a manner that adversely
affects the economic value of the Merger to such shareholders without their
further approval. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intention or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the remaining terms and provision
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
termination of invalidity or unenforceability shall have the power to reduce the
scope, duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provisions with a
term or provisions that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) Expenses. Each Party shall bear its own expenses in
connection with the negotiation and execution of this Agreement and the
implementation and effectiveness of the Merger; provided, however, that each of
BLF and CNB shall pay one-half (1/2) of all (i) filing fees related to all
applications and supplements thereto filed by CNB, BLF, Clewiston National Bank,
and Big Lake National Bank with federal and state banking authorities for prior
approval of the Merger, (ii) fees and expenses of Stevens, Thomas, Schemer &
Sparks, P.A. relating to the issuance of the Tax Opinion, (iii) fees and
expenses of Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A. relating to the
preparation of applications to the Regulatory Authorities for their approval of
the Merger and the preparation of the Proxy Statement and Registration
Statement, and (iv) the costs of printing and mailing the Proxy Statement.
Notwithstanding the foregoing, if any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any provision of this
Agreement, the successful or
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prevailing Party or Parties shall be entitled to recover reasonable attorneys'
fees, sales and use taxes, court costs and all expenses even if not taxable as
court costs (including, without limitation, all such fees, taxes, costs and
expenses incident to arbitration, appellate, bankruptcy and post-judgment
proceedings), incurred in that action or proceeding, in addition to any other
relief to which such Party or Parties may be entitled. Attorneys' fees shall
include, without limitation, paralegal fees, investigative fees, administrative
costs, sales and use taxes and all other charges billed by the attorney to the
prevailing Party.
(l) Construction. The language used in this Agreement
shall be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Party. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires.
(m) Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) Jurisdiction and Venue. The Parties acknowledge that
a substantial portion of negotiations and anticipated performance and execution
of this Agreement occurred or shall occur in Okeechobee and Hendry Counties,
Florida, and that, therefore, without limiting the jurisdiction or venue of any
other federal or state courts, each of the Parties irrevocably and
unconditionally (a) agrees that any suit, action or legal proceeding arising out
of or relating to this Agreement may be brought in a state or federal court of
record in Okeechobee or Hendry Counties, Florida; (b) consents to the
jurisdiction of each such Court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such Party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state.
(o) Remedies Cumulative. Except as otherwise expressly
provided herein, no remedy herein conferred upon any Party is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. No single
or partial exercise by any Party of any right, power or remedy hereunder shall
preclude any other or further exercise thereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first below written.
BIG LAKE FINANCIAL CORPORATION CNB FINANCIAL CORPORATION
By: /s/ Edwin E. Walpole, III By: /s/ Curtis S. Fry
- ------------------------------------- -----------------------------------
Edwin E. Walpole, III, Chairman, Curtis S. Fry, Chairman of the Board
President and Chief Executive Officer
BIG LAKE NATIONAL BANK CLEWISTON NATIONAL BANK
By: /s/ Joe G. Mullins By: /s/ Curtis S. Fry
- ------------------------------------- -----------------------------------
Joe G. Mullins, President and Curtis S. Fry, Chairman of the Board
Chief Executive Officer
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APPENDIX B
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. -- The following definitions
apply to ss.ss. 607.1302 and 607.1320;
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair Value" with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to ss. 607.1104, the day prior to the date on which a copy of
the plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT. --
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If the shareholder is entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with its parent
under ss. 607.1104, and the shareholders would have been entitled to vote
on action taken, except for the applicability of ss. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation, other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange
pursuant to ss. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in ss. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation is a
party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder is
entitled to vote on the amendment and if such amendment would adversely affect
such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of his
shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of
shares;
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3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification would
alter or abolish his voting rights or alter his percentage of equity in the
corporation, or effecting a reduction or cancellation of accrued dividends
or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking fund
for the redemption or purchase of any of his shares, or making any of his
shares subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference to any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph (1)
(e) has the right to dissent only as to those of his shares which are adversely
affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS. -- (1) (a) If a
proposed corporate action creating dissenters' rights under ss. 607.1302 is
submitted to a vote at a shareholders' meeting, the meeting notice shall state
that shareholders are or may be entitled to assert dissenters' rights and be
accompanied by a copy of ss.ss. 607.1301, 607.1302, and 607.1320. A shareholder
who wishes to asserts dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of
intent to demand payment.
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(b) If proposed corporate action creating dissenters' rights under ss.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss.ss. 607.1301, 607,1302, and 607.1320 to each
shareholder simultaneously with any request for his written consent or, if such
request is not made, within 10 days after the date the corporation received
written consents without a meeting from the requisite number of shareholders
necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to Paragraph
(1) (a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the Corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand as
provided in this section to pay an amount the corporation estimates to be the
fair value for such shares. If the corporate action has not been consummated
before the expiration of the 90-day period after the shareholders' authorization
date, the offer may be made conditional upon the consummation of such action.
Such notice and offer shall be accompanied by:
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(a) A balance sheet of the Corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation of the
12-month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such 12-month period, for the
portion thereof during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within the
period of 30 days thereafter, then the corporation, within 30 days after
receipt of written demand from any dissenting shareholder given within 60 days
after the date on which such corporate action was effected, shall, or at its
election at any time within such period of 60 days may, file an action in any
court of competent jurisdiction in the county in this state where the
registered office of the corporation is located requesting that the fair value
of such shares be determined. The court shall also determine whether each
dissenting shareholder, as to whom the corporation requests the court to make
such determination, is entitled to receive payment of his shares. If the
Corporation fails to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the Corporation. All dissenting
shareholders (whether or not residents of this state), other than shareholders
who have agreed with the corporation as to the value of their shares, shall be
made parties to the proceeding as an action against their shares. The
corporation shall serve a copy of the initial pleading in such proceeding upon
each dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons and complaint and upon each
nonresident dissenting shareholder either by registered or certified mail and
publication or in such other manner as is permitted by law. The jurisdiction of
the court is plenary and exclusive. All shareholders who are proper parties to
the proceeding are entitled to judgment against the corporation for the amount
of the fair value of their shares. The court may, if it so elects, appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers shall have such power and authority
as is specified in the order of their appointment or an amendment thereof. The
Corporation shall pay each dissenting shareholder the amount found to be due
him within 10 days afer final determination of the proceedings. Upon payment of
the judgment, the dissenting shareholder shall cease to have any interest in
such shares.
(8) The judgment may at the discretion of the court, include a fair
rate of interest, to be determined by the court, include a fair rate of
interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be
determined by the court and shall be assessed against the corporation, but all
or any part of such costs and expenses may be apportioned and assessed as the
court deems equitable against any or all of the dissenting shareholders who are
parties to the proceeding, to whom the Corporation has made an offer to pay for
the shares, if the court finds that the action of such shareholders in failing
to accept such offer was arbitrary, vexatious, or not in good faith. Such
expenses shall include reasonable compensation for, and reasonable expenses of,
the appraisers, but shall exclude the fees and expenses of counsel for, and
experts employed by, any party. If the fair value of the shares, as determined,
materially exceeds the amount which the Corporation offered to pay therefor or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court determines to be
reasonable compensation to any attorney or expert employed by the shareholder
in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the
agreed value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such
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corporation as authorized but unissued shares of the corporation, except that,
in the case of a merger, they may be held and disposed of as the plan of merger
otherwise provides. The shares of the surviving corporation into which the
shares of such dissenting shareholders would have been converted had they
assented to the merger shall have the status of authorized but unissued shares
of the surviving corporation.
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APPENDIX C
__________, 1997
Board of Directors
Clewiston National Bank
CNB Financial Corporation
950 West Ventura Avenue
Clewiston, Florida 3440
Dear Board of Directors:
You have requested our opinion as to the fairness from a financial point
of view to the holders of shares of common stock of CNB Financial Corporation
("CNB") of the proposed consideration in a merger between CNB, Clewiston
National Bank (the "Bank"), Big Lake Financial Corporation ("BLFC") and Big
Lake National Bank ("BLNB"). This preliminary opinion is based upon the
information provided including the proposed Amended and Restated Agreement and
Plan of Reorganization considered by the Board of CNB on June 19, 1997.
William R. Hough & Co. ("Hough") is an investment banking firm that, as
part of our specialization in financial institutions, is regularly engaged in
the financial valuations and analyses of business enterprises and securities in
connection with mergers and acquisitions, public offerings, divestiture and
other corporate purposes. Senior members of Hough have extensive experience in
such matters. We believe that we have no conflicts of interest and can render
an independent opinion.
We have reviewed the proposed terms of the offer and discussed the offer
with management and the Board of Directors. We have reviewed the report
prepared by Mercer Capital, and financial reports of CNB, the Bank, BLFC, and
BLNB. Additionally, we have relied upon the information provided by CNB
regarding recent developments and subsequent events. We have considered this as
a merger of equals and compared this transaction to other transactions based
upon this assumption.
We have compared the Bank's financial condition and operating results in
similar financial institutions operating in Florida. We have also compared the
financial condition and operating results of CNB, the Bank, BLFC, and BLNB.
In arriving at our opinion, we have relied upon the accuracy and
completeness of the information provided to us by the various parties mentioned
above, upon public information, and upon representations and warranties in the
Agreement, and have not conducted an independent investigation to verify any
such information or performed any independent appraisal of CNB, the Bank, BLFC,
or BLNB.
Based upon the foregoing and on our general knowledge of, and experience
in the valuation of business and securities, we are of the opinion that, as of
_________, 1997, the proposed merger is fair to the shareholders of CNB from a
financial point of view.
Respectfully submitted,
William R. Hough & Co.
Ronald W. Goff
First Vice President
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850, Florida Statutes, grants a corporation the power to
indemnify its directors, officers, employees, and agents for various expenses
incurred resulting from various actions taken by its directors, officers,
employees, or agents on behalf of the corporation. In general, if an individual
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the action
was unlawful, then the corporation has the power to indemnify said individual
who was or is a party to any proceeding (including, in the absence of an
adjudication of liability (unless the court otherwise determines), any
proceeding by or in the right of the corporation) against liability expenses,
including counsel fees, incurred in connection with such proceeding, including
any appeal thereof (and, as to actions by or in the right of the corporation,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding, including any appeal thereof). To the extent
that a director, officer, employee, or agent has been successful on the merits
or otherwise in defense of any proceeding, he shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith. The
term "proceeding" includes any threatened, pending, or completed action, suit,
or other type of proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Any indemnification in connection with the foregoing, unless pursuant to a
determination by a court, shall be made by the corporation upon a determination
that indemnification is proper in the circumstances because the individual has
met the applicable standard of conduct. The determination shall be made (i) by
the board of directors by a majority vote of a quorum consisting of directors
who are not parties to such proceeding; (ii) by majority vote of a committee
duly designated by the board of directors consisting solely of two or more
directors not at the time parties to the proceeding; (iii) by independent legal
counsel selected by the board of directors or such committee; or (iv) by the
shareholders by a majority vote of a quorum consisting of shareholders who are
not parties to such proceeding. Evaluation of the reasonableness of expenses
and authorization of indemnification shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination of permissibility is made by independent legal counsel, then the
directors or the committee shall evaluate the reasonableness of expenses and
may authorize indemnification. Expenses incurred by an officer or director in
defending a civil or criminal proceeding may be paid by the corporation in
advance of the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
he is ultimately found not to be entitled to indemnification by the
corporation. Expenses incurred by other employees and agents may be paid in
advance upon such terms or conditions that the board of directors deems
appropriate.
Section 607.0850 also provides that the indemnification and advancement of
expenses provided pursuant to that Section are not exclusive, and a corporation
may make any other or further indemnification or advancement of expenses of any
of its directors, officers, employees, or agents, under any bylaw, agreement,
vote of shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. However, indemnification or advancement of expenses may
not be made if a judgment or other final adjudication established that the
individual's actions, or omissions to act, were material to the cause of action
so adjudicated and constitute (i) a violation of the criminal law (unless the
individual had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful); (ii) a transaction from
which the individual derived an improper personal benefit; (iii) in the case of
a director, a circumstance under which the liability provisions of Section
607.0834 are applicable;
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or (iv) willful misconduct or a conscious disregard for the best interests of
the corporation in a proceeding by or in the right of the corporation to
procure a judgment in its favor in a proceeding by or in the right of a
shareholder. Indemnification and advancement of expenses shall continue as,
unless otherwise provided when authorized or ratified, to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such person, unless
otherwise provided when authorized or ratified.
Section 607.0850 further provides that unless the corporation's articles
of incorporation provide otherwise, then notwithstanding the failure of a
corporation to provide indemnification, and despite any contrary determination
of the board or of the shareholders in the specific case, a director, officer,
employee, or agent of the corporation who is or was a party to a proceeding may
apply for indemnification or advancement of expenses, or both, to the court
conducting the proceeding, to the circuit court, or to another court of
competent jurisdiction. On receipt of an application, the court, after giving
any notice that it considers necessary, may order indemnification and
advancement of expenses, including expenses incurred in seeking court-ordered
indemnification or advancement of expenses, if it determines that (i) the
individual is entitled to mandatory indemnification under Section 607.0850 (in
which case the court shall also order the corporation to pay the director
reasonable expenses incurred in obtaining court-ordered indemnification or
advancement of expenses); (ii) the individual is entitled to indemnification or
advancement of expenses, or both, by virtue of the exercise by the corporation
of its power under Section 607.0850; or (iii) the individual is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether the person met
the standard of conduct set forth in Section 607.0850. Further, a corporation
is granted the power to purchase and maintain indemnification insurance.
Article VI of the Bylaws of the Company provides for indemnification of
the Company's officers and directors and advancement of expenses. The text of
the indemnification provision contained in the such Bylaws is set forth in
Exhibit 3.2 to this Registration Statement. Among other things, indemnification
is granted to each person who is or was a director, officer or employee of the
Company and each person who is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation to the full
extent authorized by law. Article VI of the Company's Bylaws also sets forth
certain conditions in connection with any advancement of expenses and provision
by the Company of any other indemnification rights and remedies. The Company
also is authorized to purchase insurance on behalf of any person against
liability asserted whether or not the Company would have the power to indemnify
such person under the Bylaws.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits
<TABLE>
<S> <C> <C>
2.1 - Amended and Restated Agreement and Plan of
Reorganization between Big Lake Financial
Corporation, CNB Financial Corporation Big Lake
National Bank and Clewiston National Bank
(attached as Appendix A to the Prospectus)
3.1 - Restated Articles of Incorporation of Big Lake
Financial Corporation.
3.2 - Bylaws of Big Lake Financial Corporation.
4.1 - Specimen Stock Certificate of Big Lake Financial
Corporation.
5 - Legal Opinion of Smith, Mackinnon, Greeley,
Bowdoin & Edwards, P.A. with respect to the
validity of the Common Stock being offered hereby
</TABLE>
II-2
<PAGE> 229
<TABLE>
<S> <C> <C>
8 - Tax Opinion of Stevens, Thomas, Schemer & Sparks,
P.A.
10.1 - Big Lake Financial Corporation 1987 Stock Option
Plan and amendment thereto
10.2 - Lease dated December 11, 1989 between AAA
Warehouse, Inc. and Clewiston National Bank and
Amendment thereto dated November 28, 1995.
10.3 - Lease dated April 1, 1981 between Earl R. Gamer
and Clewiston National Bank and Modification and
Lease Extension Agreement thereto dated April 1,
1996
21 - Subsidiary of Big Lake Financial Corporation
23.1 - Consent of Stevens, Thomas, Schemer & Sparks, P.A.
23.2 - Consent of Humphrey & Knott, P.A.
23.3 - Consent of William R. Hough & Co.
23.4 - Consent of Mercer Capital
23.5 - Consent of Smith, Mackinnon, Greeley, Bowdoin &
Edwards, P.A. (included in Exhibit 5)
24 - Power of Attorney
27.1 - Financial Data Schedule
27.2 - Financial Data Schedule
99.1 - Proxy of CNB Financial Corporation
</TABLE>
(B) FINANCIAL STATEMENTS
(1) Financial Statements are included in the Prospectus; see
"Index to Financial Statements" in the Prospectus.
Schedules are omitted for the reason that they are not required or are
not applicable, or the required information is shown in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of the Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
II-3
<PAGE> 230
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant will (1) file, during any period in which it
offers or sells securities, a post-effective amendment to this Registration
Statement to (i) include any prospectus required by Section 10(a)(3) of the
Securities Act; (ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement; and (iii) include any additional or changed
information on the plan of distribution; (2) for determining liability under
the Securities Act, treat each post-effective amendment as a new Registration
Statement of the securities offered, and the offering of securities at that
time to be the initial bona fide offering; and (3) file a post-effective
amendment to remove from registration any of the securities that remain unsold
at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described in Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Registration Statement, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 231
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Okeechobee, State of Florida, on the 30th day of June, 1997.
BIG LAKE FINANCIAL CORPORATION
/s/ Edwin E. Walpole, III
---------------------------------
Edwin E. Walpole, III
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Edwin E. Walpole, III Chairman of the Board, President June 30, 1997
- --------------------------------- and Chief Executive Officer and
Edwin E. Walpole, III Director
/s/ Anita DeWitt Treasurer June 30, 1997
- --------------------------------- (Principal Financial Officer
Anita DeWitt and Principal Accounting
Officer)
/s/ Joe G. Mullins Executive Vice President and Chief June 30, 1997
- --------------------------------- Administrative Officer and Director
Joe G. Mullins
/s/ John W. Abney, Sr. Director June 30, 1997
- ---------------------------------
John W. Abney, Sr.
/s/ Mary Beth Cooper Director June 30, 1997
- ---------------------------------
Mary Beth Cooper
/s/ H. Gilbert Culbreth, Jr. Director June 30, 1997
- ---------------------------------
H. Gilbert Culbreth, Jr.
/s/ Henry C. Kelly Director June 30, 1997
- ---------------------------------
Henry C. Kelly
/s/ Bobby H. Tucker Director June 30, 1997
- ---------------------------------
Bobby H. Tucker
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
BIG LAKE FINANCIAL CORPORATION
Big Lake Financial Corporation, whose original Articles of Incorporation
were filed by the Florida Department of State on August 8, 1985 under the name
of Big Lake Financial Corporation, does hereby amend and restate its Articles of
Incorporation by filing the following Restated Articles of Incorporation,
pursuant to Section 607.1007, of the Florida Business Corporation Act (the
"Act").
ARTICLE I
Name
The name of the Corporation is Big Lake Financial Corporation
ARTICLE II
Duration
The Corporation shall exist perpetually, commencing August 8, 1985.
ARTICLE III
Purpose
The general purpose of the Corporation shall be the transaction of
any and all lawful business for which corporations may be incorporated under
the Act. The Corporation shall have all of the powers enumerated in the Act and
all such other powers as are not specifically prohibited to corporations for
profit under the laws of the State of Florida.
ARTICLE IV
Capital Stock
A. Number and Class of Shares Authorized; Par Value.
The Corporation is authorized to issue the following shares of
capital stock:
(1) Common Stock. The aggregate number of shares of common stock
(referred to in these Restated Articles of Incorporation as "Common Stock")
which the Corporation shall have authority to issue is 1,000,000 with a par
value of $0.01 per share.
<PAGE> 2
(2) Preferred Stock. The aggregate number of shares of preferred stock
(referred to in these Restated Articles of Incorporation as "Preferred Stock")
which the Corporation shall have authority to issue is 500,000 with a par value
of $.01 per share.
B. Description of Preferred Stock.
The terms, preferences, limitations and relative rights of the Preferred
Stock are as follows:
(1) Dividends on the outstanding shares of Preferred Stock shall be
declared and paid or set apart for payment before any dividends shall be
declared and paid or set apart for payment on the outstanding shares of Common
Stock with respect to the same quarterly period. Dividends on any shares of
Preferred Stock shall be cumulative only if and to the extent determined by
resolution of the Board of Directors, as provided below. In the event of any
liquidation, dissolution, or winding up of the affairs of the Corporation,
whether voluntary or involuntary, the outstanding shares of Preferred Stock
shall have preference and priority over the outstanding shares of Common Stock
for payment of the amount, if any, to which shares of each outstanding series of
Preferred Stock may be entitled in accordance with the terms and rights thereof
and each holder of Preferred Stock shall be entitled to be paid in full such
amount, or have a sum sufficient for the payment in full set aside, before any
such payments shall be made to the holders of Common stock.
(2) The Board of Directors is expressly authorized at any time and
from time to time to provide for the issuance of shares of Preferred Stock in
one or more series, with such voting powers, full or limited (including, by way
of illustration and not limitation, in excess of one vote per share), or without
voting powers, and with such designations, preferences and relative
participating, option or other rights, qualifications, limitations or
restrictions, as shall be fixed and determined in the resolution or resolutions
providing for the issuance thereof adopted by the Board of Directors, and as are
not stated and expressed in these Restated Articles of Incorporation or any
amendment hereto, including (but without limiting the generality of the
foregoing) the following:
(a) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors
in creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by resolution of
the Board of Directors; and
(b) The rate and manner of payment of dividends payable on shares
of such series, including the dividend rate, date of declaration and
payment, whether dividends shall be cumulative, and the conditions
upon which and the date from which such dividends shall be cumulative;
and
(c) Whether shares of such series shall be redeemed, the time or
times when, and the price or prices at which, shares of such series
shall be redeemable, the redemption price, the terms and conditions of
redemption, and the sinking fund provisions, if any, for the purchase
or redemption of such shares; and
(d) The amount payable on shares of such series and the rights of
holders of such shares in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation; and
(e) The rights, if any, of the holders of shares of such series
to convert such shares into, or exchange such shares for, shares of
Common Stock, other securities, or shares of any other class or series
of Preferred Stock and the terms and conditions of such conversion or
exchange; and
(f) The voting rights, if any, and whether full or limited, of
the shares of such series, which may include no voting rights, one
vote per share, or such higher number of votes per share as may be
designated by the Board of Directors; and
(g) The preemptive or preferential rights, if any, of the holders
of shares of such series to subscribe for, purchase, receive, or
otherwise acquire any part of any new or additional issue of stock of
any class, whether now or
2
<PAGE> 3
hereafter authorized, or of any bonds, debentures, notes, or other
securities of the Corporation, whether or not convertible into shares
of stock with the Corporation.
(3) Except in respect of the relative rights and preferences that
may be provided by the Board of Directors as hereinbefore provided,
all shares of Preferred Stock shall be identical, and each share of a
series shall be identical in all respects with the other shares of the
same series. When payment of the consideration for which shares of
Preferred Stock are to be issued shall have been received by the
Corporation, such shares shall be deemed to be fully paid and
nonassessable.
C. Common Stock Voting Rights.
Each record holder of Common Stock shall be entitled to one vote
for each share held. Holders of Common Stock shall have no cumulative voting
rights in any election of directors of the Corporation.
D. Preemptive Rights.
Holders of Common Stock shall not have as a matter of right
any preemptive or preferential right to subscribe for, purchase, receive, or
otherwise acquire any part of any new or additional issue of stock of any
class, whether now or hereafter authorized, or of any bonds, debentures, notes,
or other securities of the Corporation, whether or not convertible into shares
of stock of the Corporation.
ARTICLE V
Registered Office and Agent; Principal Place of Business
The street address of the registered office of the Corporation shall be
1409 South Parrott Avenue, Okeechobee, Florida 34974, and the registered agent
of the Corporation at such address shall be Joe G. Mullins. The principal place
of business and the mailing address of the Corporation shall be 1409 South
Parrott Avenue, Okeechobee, Florida 34974. The Corporation may change its
registered agent, the location of its registered office, its principal place of
business, or its mailing address, or any of the foregoing, from time to time
without amendment of these Restated Articles of Incorporation.
ARTICLE VI
No Action by Shareholders Without a Meeting
Pursuant to Section 607.0704 of the Act, action required or permitted
by the Act to be taken by shareholders of the Corporation may be taken only at
an annual or special meeting of shareholders, and may not be taken by written
consent or any other action.
ARTICLE VII
Directors
The number of Directors of this Corporation shall be the number from time
to time fixed by the shareholders or by the Directors, in accordance with the
provisions of the bylaws of the Corporation, but at no time shall the number of
Directors be less than one. Directors may be removed by shareholders only for
cause. The Board of Directors of this Corporation shall be divided into three
classes as equal in number as may be feasible, with the term of office of one
class expiring each year. At each annual meeting of shareholders, successors to
the Directors whose terms shall then expire shall be elected to hold office for
terms expiring at the third succeeding annual meeting. In case of any vacancies,
by reason of an increase in the number of directors or otherwise, each
additional director may be elected by the Board of Directors to hold office
until the end of the term he is elected to fill and until his successors shall
have been elected and qualified in the class to which such director is assigned
and for the term or remainder of the term of such class. Directors
3
<PAGE> 4
shall continue in office until others are chosen and qualified in their stead.
When the number of directors is changed, any newly created directorships or any
decrease in directorships shall be so assigned among the classes by a majority
of the directors then in office, though less than a quorum, as to make all
classes as equal in number as may be feasible. No decrease in the number of
directors shall shorten the term of incumbent director.
ARTICLE VIII
Bylaws
The power to adopt, alter, amend or repeal bylaws shall be vested in
the Board of Directors.
ARTICLE IX
Amendment of Restated Articles of Incorporation
These Restated Articles of Incorporation may be amended in the manner
from time to time provided by law and any right conferred upon the shareholders
by any provision of these Restated Articles of Incorporation is hereby made
subject to this reservation.
CERTIFICATE
The foregoing Restated Articles of Incorporation were duly adopted by the
Board of Directors of the Corporation in accordance with the Act on March 20,
1997 and by the holders of the shares of Common Stock, being the sole shares
entitled to vote thereon, in accordance with the Act, on March 20, 1997, and
the number of votes cast for the foregoing Restated Articles of Incorporation
was sufficient for approval by such holders of Common Stock.
IN WITNESS WHEREOF, the undersigned Chairman of the Board, President
and Chief Executive Officer of this Corporation has executed these Restated
Articles of Incorporation on the 8th day of April, 1997.
BIG LAKE FINANCIAL CORPORATION
By: /s/ Edwin E. Walpole, III
-----------------------------------
Edwin E. Walpole III
Chairman of the Board, President and
Chief Executive Officer
STATE OF FLORIDA )
COUNTY OF OKEECHOBEE )
The foregoing instrument was acknowledged before me this 8th day of
April , 1997, by Edwin E. Walpole III, Chairman of the Board, President and
Chief Executive Officer, of Big Lake Financial Corporation, a Florida
corporation, on behalf of the corporation. He is personally known to me and did
not take an oath.
/s/ Eileen P. Casian
--------------------------------
( Eileen P. Casian )
-----------------------------
Print Name Below Signature
Notary Public, State of Florida
My Commission Expires:
4
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
BIG LAKE FINANCIAL CORPORATION
ARTICLE I
Stock
1. Certificate of Stock. Certificates of stock shall be issued in
numerical order from the stock certificate book, and be signed by the President
or a Vice President and the Secretary or an Assistant Secretary, and sealed
with the seal of the Corporation. The seal may be facsimile, engraved or
printed. If such certificate is signed by (a) a transfer agent other than the
Corporation itself, or by (b) a registrar, or (c) an employee of the
Corporation, the signature of any of those officers named herein may be
facsimile. In case any officer who signed, or whose facsimile signature has
been used on, any certificate shall cease to be such officer for any reason
before the certificate has been delivered by the Corporation, such certificate
may nevertheless be adopted by the Corporation and delivered as though the
person who signed it or whose facsimile signature has been used thereon had not
ceased to be such officer. Subscription warrants, scrip for fractional shares,
and similar certificates may be issued from time to time and be signed by a
President, a Vice President, the Secretary or an assistant Secretary and, where
otherwise required, sealed with the seal of the Corporation. The signature of
the signing officer, and the seal may be a facsimile, engraved or printed.
2. Transfer of Stock. Transfers of stock shall be made only on the
books of the corporation, in person or by attorney, upon surrender of the
certificate evidencing the stock sought to be transferred, properly endorsed or
assigned; the certificate so surrendered shall be cancelled as and when a new
certificate or certificates are issued.
3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore, issued by the Corporation alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnify
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
4. Closing of Transfer Books; Record Date. The Board of Directors
shall have power to close the stock transfer books of the Corporation for a
period not exceeding sixty (60) days preceding the date of any meeting of
stockholders or the date for the payment of any dividend or the date for the
allotment of any rights or the date when any change or conversion or exchange
of stock shall go into effect, or for a period not exceeding sixty (60) days in
connection with obtaining the consent of stockholders for any purpose;
provided, that, in lieu of closing the stock transfer books, as aforesaid, the
Board of Directors is authorized to fix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of stockholders or the date for
payment of any dividend or the date for the allotment of any rights or the date
when any change or conversion or exchange of stock shall go into effect or a
date in connection with obtaining any such consent, as a record date for the
determination of the of the stockholders entitled to notice of, and to vote at,
any such meeting and any adjournment thereof or to receive payment of any such
dividend or any such change, conversion or exchange of stock or to give any
such consent; and, in such case, such stockholders, and only such stockholders,
as shall be stockholders of record on the date so fixed shall be entitled to
notice of, vote at, such meeting and any adjournment thereof or to receive
payment of any such dividend or any such allotment of rights or to exercise
rights in respect of any such change, conversion or exchange of stock or to
give any such consent; and, in such case, such stockholders, and only
-1-
<PAGE> 2
such stockholders, as shall be stockholders of record on the date so fixed
shall be entitled to notice of, and vote at, such meeting and any adjournment
thereof or to receive payment of such dividend or to receive such allotment of
rights or to exercise such rights or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date, fixed as aforesaid.
ARTICLE II
Stockholders
1. Annual Meeting. The annual meeting of the stockholders of this
Corporation shall be held at 4:00 p.m. local time on the third Thursday in March
of each year, commencing with March, 1986. Each annual meeting shall be held at
the principal office of the Corporation unless some other place in or out of the
State of Florida is designated by the Board of Directors.
2. Special Meeting. Special meetings of the stockholders may be
called or held at any time by the Board of Directors, and shall be called at any
time upon written request of stockholders holding not less than one-tenth (1/10)
of all outstanding shares entitled to vote at the meeting.
3. Notice of Stockholders' Meetings. Notice of stockholders'
meetings of the Corporation shall be in writing and signed by the President or a
Vice President or the Secretary or an Assistant Secretary of the Corporation.
Each such notice shall state the purposes or purposes for which the meeting is
called and time when and the place where it is to be held. A copy of such notice
shall be served upon or mailed to each stockholder of record entitled to vote at
such meeting and shall be mailed not less than ten (10) nor more than sixty (60)
days before the date set for such meeting. If mailed, it shall be directed to
the stockholder at his address as it appears upon the stock transfer books of
the Corporation. Notice duly served upon or mailed to a stockholder in
accordance with the provisions of this Bylaw shall be deemed sufficient, and in
the event of the transfer of stock after such service and prior to the holding
of the meeting, it shall not be necessary to serve notice of the meeting upon
the transferee. Any meeting of stockholders may be held either within or without
the State of Florida. Any stockholder may waive notice of any meeting either
before or after the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of business. Neither the business to be transacted at, nor the
purpose of any regular or special meeting of the stockholders need be specified
in any written waiver of notice.
4. Quorum. A quorum at any meeting of the stockholders shall consist
of a majority of the stock of the corporation represented in person or by proxy,
and a majority of such quorum shall decide any question that may come before the
meeting. In the absence of a quorum, a majority of the shares present in person
or by proxy and entitled to vote may adjourn any meeting from time to time until
a quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called unless otherwise provided by statute, and no notice
of an adjourned meeting need be given.
5. Judges. At every meeting oft he stockholders, the vote shall be
conducted by two (2) or more judges of election appointed fro that purpose by
the Board of Directors; and all questions respecting the qualification of
voters, the validity of the proxies and the acceptance and rejection of votes
shall be decided by such judges. If fewer than two (2) judges appointed by the
Board of Directors to act at any meeting shall be present and willing to act at
such meeting the stockholders present at the meeting in person or by proxy may,
by a per capita vote, appoint one (1) or more judges so to act.
ARTICLE III
Directors
1. Powers. The business, property and affairs of the Corporation
shall be managed under the direction of a Board of Directors, all of whom shall
be of federal voting age, and all powers of the Corporation, the exercise of
which
-2-
<PAGE> 3
are not reserved to the Board of Directors by law or the Articles of
Incorporation or these Bylaws, shall be exercised under the authority and
supervision of such Board of Directors.
2. Number and Term of Directors. The Board of Directors shall
consist of not less than six (6) nor more than thirty-five (35) persons, the
exact number within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full Board of Directors or
by resolution of the stockholders at any meeting thereof; provided, however,
that a majority of the full Board of Directors may not increase the number of
directors to a number which exceeds by more than six (6) the number of directors
elected by the stockholders, but in no event shall the number of directors
exceed thirty-five (35).
The directors shall be classified with respect to the time for
which they shall severally hold office by dividing them into three (3) classes,
each consisting of as near one-third (1/3) of the whole number of directors as
practicable and each director of the Corporation shall hold office until his
successor is elected and qualified or until his death, or resignation or removal
in accordance with the Bylaws. At each annual meeting of stockholders the
successors to the class of directors whose terms expire that year shall be
elected to hold office for the term of three (3) years, sot hat the term of
office of one (1) class of directors shall expire in each year. Vacancies in the
Board of Directors shall be filled until the next annual meeting of stockholders
by the directors remaining in office and the term of office of any director
appointed by the Board of Directors shall expire at the next annual meeting of
stockholders. At the next annual meeting of stockholders following any increase
or decrease in the number of directors, or the death, resignation, or removal of
any directors, the increase or decrease of directors shall be so apportioned by
the Board of Directors among the classes as to make all classes as nearly equal
in number as practicable and any director appointed by the Board of Directors or
his successor shall be elected by the stockholders to serve for the remainder of
the unexpired term of directors in the class to which he has been allocated.
3. Election of Directors. At the annual meeting of stockholders,
directors shall be elected by a majority of the votes cast at such election. At
the election of directors, each stockholder shall have the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected. There shall be no cumulative voting. Nominations for election to the
Board of Directors may be made by the Board of Directors, or by any stockholder
of any outstanding class of capital stock of the Corporation Entitled to vote
for the election of directors. Nominations shall specify the class of directors
to which each person is nominated, and nominations, other than those made by the
existing Board of Directors, shall be made in writing and shall be delivered or
mailed to the President of the Corporation not less than fourteen (14) days nor
more than fifty (500 days prior to any meeting of stockholders called for the
election of directors; provided, however, that if less than twenty-one (21) days
notice of the meeting is given to stockholders such nomination shall be mailed
or delivered to the President of the Corporation not later than the close of
business on the seventh (7th) day following the date on which the notice of
meeting was mailed. Such nomination and notification shall contain the following
information to the extent known to the notifying stockholder:
(a) The names and addresses of the proposed nominee or nominees;
(b) The principal occupation of each proposed nominee;
(c) The total number of shares that to the knowledge of the
notifying or nominating stockholders will be voted for each
of the proposed nominees;
(d) The name and residence address of each notifying or
nominating stockholder;
(e) The number of shares owned by the notifying or nominating
stockholder; or
(f) The consent of the proposed nominee to serve, if elected.
Nominations not made in accordance herewith may, in his discretion be
disregarded by the chairman of the meeting, and upon his instructions, the
judges of election shall disregard all votes cast for each such nomination.
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4. Place of Meeting. Meetings of the Board of Directors or of any
committee thereof may be held either within or without the State of Florida.
Members of the Board of Directors shall be deemed present at a meeting of such
Board, if a conference telephone, or similar communications equipment by means
of which all persons participating in the meeting can hear each other, is used.
5. Organization Meetings. Organization meetings of the Board of
Directors shall be held as soon as practicable each year after the annual
election of directors for the purpose of organization, election of officers and
the transaction of other business. No notice of such meeting shall be required.
Such organization meetings may, however, be held at any other time or place
which shall be specified in a notice given, as hereinafter provided for special
meetings of the Board, or in a consent and waiver of notice thereof signed by
all of the directors.
6. Stated Meetings. The Board of Directors may from time to time, by
resolution, appoint the time and place for holding stated meetings of the Board,
if by it deemed advisable; and such stated meetings shall thereupon be held at
the time and place so appointed, without the giving of notice with regard
thereto. In case the day appointed for a stated meeting shall fall upon a
Saturday, Sunday, or legal holiday in the State of Florida, such meeting shall
be held on the next succeeding day not Saturday, Sunday, or legal holiday in
Florida, at the regularly appointed hour. Except as otherwise provided in the
Bylaws, any and all business may be transacted at any stated meeting.
7. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman, the President, or by any two (2)
of the directors. Notice to a director of any such meeting may be given in
writing, by mailing the same to the residence or place of business of the
director as shown on the books of the Corporation not later than twenty-four
(24) hours before the day on which the meeting is to be held, or may be given by
sending the same to him at such place by telegraph, telex, facsimile, or
electronic mail, or by delivering the same to him personally or leaving the same
for him at his place of business or by giving the same to him personally or by
telephone, not later than the day before such day of meeting. Notice of any
meeting of the Board need not, however, be given to any director, if waived by
him in writing (including telegram, telex, facsimile, or electronic mail) or if
he shall be present at the meeting; and any meeting of the Board of Directors
shall be a legal meeting without any notice thereof having been given, if all
the members shall be present thereat. Except as otherwise provided in the Bylaws
or as may be indicated in thenotice thereof, any and all business may be
transacted at any special meeting.
8. Quorum and Manner of Acting. A majority of the directors in
office at the time of any meeting of the Board of Directors, but not less than
two (2) directors, shall constitute a quorum for the transaction of business;
and, except as otherwise required by statute or by the Articles of Incorporation
or any amendment thereto, or by the Bylaws, the act of a majority of the
directors present at any such meeting at which a quorum is present shall be the
act of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn any meeting, from time to time, until a quorum is
present. No notice of any adjourned meeting need be given.
9. Directors' Compensation. The Board of Directors shall have
authority to determine from time to time the amount of compensation which shall
be paid to its members for attendance at meetings of, or services on, the Board
or of any committee of the Board. The Board of Directors shall also have power,
in its discretion, to provide for and to pay to directors rendering services to
the Corporation not ordinarily rendered by directors, as such, special
compensation appropriate to the value of such services, as determined by the
Board from time to time. The Board of Directors shall also have power to
reimburse directors for reasonable expenses of attendance at directors'
meetings.
10. Resignations. Any director of the Corporation may resign at any
time either by oral tender of resignation at any meeting of the Board or by
giving written notice thereof to the Chairman, the President, or the Secretary.
Such resignation shall take effect at the time specified therefor; and, unless
otherwise specified with respect thereto, the acceptance of such resignation
shall not be necessary to make it effective.
11. Removal of Directors. Any director of the Corporation may be
removed from office as a director, but only for cause, by the affirmative vote
at a meeting called as provided in the Bylaws for that purpose, of at least 66
2/3% in interest of the holders of voting stock of the Corporation issued and
outstanding including a majority in interest of the
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holders of issued and outstanding voting stock of the Corporation held by
persons other than any person who is an "Interested Shareholder" as defined in
Paragraph (3) of Section D of Article VIII of the Articles of Incorporation.
ARTICLE IV
Officers, Employees and Agents
1. Officers, Term of Office, Vacancies, Removal. The Board of Directors
shall appoint, from among its members, a Chairman and a President, such
appointment to be made, if practicable, at the Organization Meeting of the Board
of Directors in each year, and such officers shall hold office, subject to
removable by the Board, until the Organization Meeting of the Board of Directors
in the next subsequent year and until their respective successors are chosen.
The Board of Directors shall also appoint, from time to time, a Secretary and a
Treasurer; and the Board of Directors or the Executive Committee may, from time
to time, appoint a Chairman Pro Tempore and one (1) or more Vice Chairmen,
Executive Vice Presidents, Senior Vice Presidents, and Vice Presidents; and the
Board of Directors, the Executive Committee, the Chief Executive Officer, the
Chief Administrative Officer, and any other officer of the Corporation thereunto
authorized by the Board of Directors may, from time to time, appoint one (1) or
more Assistant Vice Presidents, one (1) or more Assistant Secretaries, one (1)
or more Assistant Treasurers, and such other officers and agents as may appear
to be necessary or advisable in the conduct of the affairs of the Corporation
and, unless any such appointment is specified when made to be for a shorter
term, the term of each such officer so appointed shall expire at the time of the
next following Organization Meeting of the Board of Directors, subject to
earlier removal, except that any such officer or agent may be appointed to hold
office during the pleasure of the Board, Committee, or the officer making the
appointment. The Board of Directors may appoint a successor to fill a vacancy in
any office for the remainder of the term; and, subject to the foregoing, in the
case of a vacancy in any office the prior appointment to which was not made by
the Board, the Executive Committee or the officer which made the prior
appointment may appoint a successor for the remainder of the term. Any officers
and agents may be removed by the Executive Committee and, if the appointment was
by a duly authorized appointing officer, he may be removed by the Executive
committee and, if the appointment was by a duly authorized appointing officer,
he may be removed by such appointing officer or by any duly authorized
appointing officer senior to the officer who made the appointment.
2. Chairman. Subject to the supervision and direction of, and any
limitations imposed by, the Board of Directors, the Chairman shall have general
executive powers as well as the specific duties and powers conferred by these
Bylaws or by the Board of Directors including, without limiting the foregoing,
during such periods of time as the Chairman is designated by the Board of
Directors as the Chief Executive Officer or as the Chief Administrative Officer,
or both, the duties, responsibilities and powers specified in these Bylaws with
respect to such designation or designations. The Chairman shall preside, when
present, at all meetings of the stockholders, the Board of Directors and, if a
Chairman of the Executive Committee has not been appointed by the Board, the
Executive Committee, unless for purposes of any such meeting, he shall delegate
all or some of those duties to the Chairman Pro Tempore, the President, or a
Vice Chairman.
3. President. The President shall have all duties and powers required by
law to be exercised by a president of a corporation as such, and, subject to the
supervision and direction of, and any limitations imposed by, the Board of
Directors, he shall have general executive powers as well as the specific duties
and powers conferred by these Bylaws or by the Board of Directors including,
without limiting the foregoing, during such periods of time as the President is
designated by the Board of Directors as the Chief Executive Officer or as the
Chief Administrative Officer, or both, the duties, responsibilities and powers
specified in these Bylaws with respect to such designation or designations. In
the absence of the Chairman and the Chairman Pro Tempore, the President shall
preside at all meetings of the stockholders, the Board of Directors and, if a
Chairman of the Executive Committee has not been appointed by the Board, the
Executive Committee.
4. Chief Executive Officer. The Chief Executive Officer shall, by virtue
of such designation by the Board of Directors, be the most senior officer of the
Corporation, and all other officers and agents of the Corporation shall be
subject to his direction. He shall be accountable to the Board of Directors for
the fulfillment of his duties and responsibilities and, in the performance and
exercise of all his duties, responsibilities and powers, he shall be subject to
the supervision and
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direction of, and any limitations imposed by, the Board of Directors. The Chief
Executive Officer shall be responsible for interpretation and required
implementation of the policies of the Corporation as determined and specified
from time to time by the Board of Directors and he shall be responsible for the
general management and direction of the business and affairs of the
Corporation. For the purpose of fulfilling his duties and responsibilities, the
Chief Executive Officer shall have, subject to these Bylaws and the Board of
Directors, plenary authorities and powers, including general executive powers,
the authority to delegate and assign duties, responsibilities and authorities,
and, in the name of the Corporation and on its behalf, to negotiate and make
any agreements, waivers or commitments which do not require the express
approval of the Board of Directors; provided, however, that if at any time the
Chief Executive Officer is not also the President of the Corporation, he shall
not have or exercise any of the powers which are expressly required by law to
be exercised by a president of a Corporation as such.
5. Chief Administrative Officer. The Chief Administrative Officer, by
virtue of such designation by the Board of Directors, shall be the second most
senior officer of the Corporation, and all officers and agents of the
Corporation, except the Chief Executive Officer, shall be subject to his
direction. He shall be accountable to the Board of Directors and the Chief
Executive Officer for the fulfillment of his duties and responsibilities and, in
the performance and exercise of all his duties, responsibilities and powers, he
shall be subject to the supervision and direction of, and any limitations
imposed by, the Board of Directors, and he shall also be subject to the
supervision and direction of the Chief Executive Officer. The Chief
Administrative Officer shall have direct supervision of the business, properties
and affairs of the Corporation, including the direct supervision of the
implementation and execution of such of the policies of the Corporation as are
not, from time to time otherwise assigned or delegated by the Board of Directors
or the Chief Executive Officer. For the purpose of fulfilling his duties and
responsibilities, the Chief Administrative Officer shall have, subject to the
Bylaws and to the Board of Directors and the Chief Executive Officer, full and
complete authorities and powers, including general executive powers, the
authority to delegate and assign duties, responsibilities and authorities, and,
in the name of the Corporation and on its behalf, the authority to negotiate and
make any agreements, waivers or commitments which do not require the express
approval of the Board of Directors; provided, however, that if at any time the
Chief Administrative Officer is not also the President of the Corporation, he
shall not have or exercise any of the powers which are expressly required by law
to be exercised by a president of a corporation as such.
6. Vice Chairman. Subject to the supervision and direction of, and any
limitations imposed by, the Board of Directors, the Vice Chairman shall have
general executive powers as well as specific duties and powers conferred by
these Bylaws or by the Board of Directors including, without limiting the
foregoing, the power to delegate and assign duties, responsibilities and
authorities, and, in the name of the Corporation, and on its behalf, to
negotiate and make any agreements, waivers or commitments which do not require
the express approval of the Board of Directors. The Vice Chairman shall assist
in the general management and direction of the business and in the supervision,
implementation and execution of policies of the Corporation.
7. Chairman Pro Tempore. The Chairman Pro Tempore shall have the specific
duties and powers conferred by these Bylaws or by the Board of Directors, and,
in the absence of the Chairman or at his request, shall preside at all meetings
of the stockholders, the Board of Directors and, if a Chairman of the Executive
Committee has not been appointed by the Board, the Executive Committee. In the
absence or at the request of a Chairman of the Executive Committee appointed by
the Board, the Chairman Pro Tempore shall preside at meetings of the Executive
Committee.
8. Vice Presidents. Each Executive Vice President, Senior Vice President
or Vice President shall have general executive powers as well as the specific
powers conferred by these Bylaws. he shall also have such further powers and
duties as may from time to time be conferred upon, or assigned to, him by the
Board of Directors, the Chairman, Chief Executive Officer, Vice Chairman,
President or Chief Administrative Officer.
9. Secretary. The Secretary shall attend to the giving of notice of all
meetings of stockholders and of the Board of Directors required by these Bylaws
to be given, and shall keep true records of all proceedings thereat. He shall
have charge of the corporate seal and shall keep and account for all books,
documents, papers and records of the Corporation, except those for which some
other officer or agent is properly accountable, and shall generally perform all
the duties usually appertaining to the office of secretary of a corporation. He
shall also have such further powers and duties as may from time to time be
conferred upon, or assigned to him by the Board of Directors, the Chairman, the
Chief
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Executive Officer, Vice Chairman, President, or Chief Administrative Officer.
In the absence of the Secretary, an Assistant Secretary or Secretary Pro
Tempore shall perform his duties.
10. Treasurer. The Treasurer shall have the care and custody of all
moneys, funds, and securities of the Corporation. He shall disburse the funds of
the Corporation in the manner ordered by the Board of Directors and shall keep
full and accurate accounts of receipts and disbursements of the Corporation, He
shall, whenever required to do so, render an account of all his transactions as
Treasurer to the Board of Directors. He shall perform such other duties as shall
be assigned to him by the Board of Directors, the Chairman, Chief Executive
Officer, Vice Chairman, President, or Chief Administrative Officer. In the
absence of the Treasurer, his duties shall be performed by an Assistant
Treasurer, Assistant Comptroller, or by another officer designated by the Board
of Directors, the Chairman, or the President.
11. Additional Officers; Duties and Powers. In addition to the foregoing
especially enumerated duties and powers the several officers and agents of the
Corporation, whether or not specifically referred to in these Bylaws, shall
perform such duties and exercise such powers, in addition to those for which
provision is made in these Bylaws, as the Board of Directors or Executive
Committee may from time to time determine or as may be assigned to them by any
competent superior officer.
ARTICLE V
Committees of the Board
1. Executive Committee; Constitution, Powers, Vacancies. The Board of
Directors may, by affirmative vote of a majority of the whole Board, appoint an
Executive Committee, to consist of the Chairman and the President, ex officio,
and one (1) or more other directors; and, in like manner, the Board may
designate one (1) or more directors as alternate members of the Executive
committee who may act int he place and stead of any absent member; and the Board
may appoint a chairman of said Committee. The Executive Committee shall have and
may exercise, when the Board is not in session, all the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
including the power to authorize the seal of the Corporation to be affixed to
all papers which may require it, and also including the power, from time to
time, to appoint one (1) or more attorneys-in-fact to act for and in
representation of the Corporation, either generally or specially, judicially or
extrajudicially, and to delegate to any such attorney or attorneys-in-fact all
or any of the powers which, in the judgment of the Executive Committee, may be
necessary, convenient or suitable for exercise in any country or jurisdiction in
the transaction of the business of the Corporation or the defense or enforcement
of its rights, even though such powers be herein provided or directed to be
exercised by a designated officer of the Corporation; provided, however, that
the foregoing shall not be construed as authorizing action by the Executive
Committee with respect to any action which by these Bylaws is required to be
taken by vote of a specified proportion of the whole Board of Directors, or any
other action required by the Bylaws or by the Articles of Incorporation or any
amendment thereto, or by statute, to be taken by the Board of Directors, or the
stockholders, as such. As far as practicable, members of the Executive Committee
and their alternates (if any) shall be appointed at the Organization Meeting of
the Board, in each year, and, unless sooner discharged by the Board of
Directors, shall hold office until the Organization Meeting of the Board in the
next subsequent year and until their respective successors are appointed.
2. Executive Committee; Meetings. Stated meetings of the Executive
Committee, of which no notice shall be necessary, shall be held at such times
and at such places as shall be fixed, from time to time, by resolution adopted
by the Executive Committee. Special meetings of the Executive Committee may be
called by the Chairman or the President, or by the Chairman of the Executive
Committee (if he be a person other than the Chairman or the President) or by any
other two (2) members of the Executive Committee, at any time. Notice of any
special meeting of the Executive Committee may be given in the manner provided
in the Bylaws for giving notice of a special meeting of the Board of Directors,
but notice of any such meeting need not be given to any member of the Executive
Committee if waived by him before or after the meeting, in writing (including
telegram, telex, facsimile, or electronic mail) or if he shall be present at the
meeting; and any meeting of the Executive Committee shall be a legal meeting,
without any notice thereof having been given, if all the members shall be
present thereat. A majority of the Executive Committee shall constitute a quorum
for the transaction of business; and the act of a majority of those present at
any meeting at which a quorum is present shall be the act of the Executive
Committee. Members of the Executive Committee shall be deemed present at a
meeting of such committee, if
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a conference telephone, or similar communications equipment by means of which
all persons participating in the meeting can hear each other, is used.
3. Executive Committee; Records. The Executive Committee shall keep a
record of its acts and proceedings and shall report the same, from time to time,
to the Board of Directors. The Secretary of the Corporation, or in his absence,
an Assistant Secretary, shall act as secretary to the Executive Committee; or
the Committee may, in its discretion, appoint its own secretary.
4. Standing Committee. The Board of Directors may by affirmative vote of
a majority of the whole Board, appoint such standing or special Committees as
the Board shall determine. Each such committee shall consist of not less than
three (3) members, each of whom, as far as practicable, shall be appointed at
the Organization Meeting of the Board, and, unless sooner discharged by the
Board of Directors, shall hold office until the Organization Meeting of the
Board int he next subsequent year and until their respective successors are
appointed. The Board may delegate to each such committee such powers of the
Board of Directors in the management of the business and affairs of the
Corporation as the Board may deem expedient, subject to the provisions of these
Bylaws, the Articles of Incorporation, and applicable statutes, with power to
sub-delegate such powers, if the Board deems advisable. Stated meetings of each
such committee of which no notice shall be necessary, shall be held at such
times and at such places as shall be fixed, from time to time by such
committees. Special meetings of each such committee may be called by the
Chairman or the President, or by the Chairman of such committee, or by any two
(2) members of each such committee, at any time. Notice of special meetings may
be given in the manner provided int he Bylaws for giving notice of a special
meeting of the Board of Directors, but notice of any such meeting need not be
given to any member if waived by him before or after the meeting in writing
(including telegram, telex, facsimile, or electronic mail) or if he shall be
present; and any meeting of each such committee shall be legal meetings, without
any notice thereof having been given if all the members shall be present
thereat. A majority of each such committee shall constitute a quorum for the
transaction of business; and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of each such committee.
Members of each such committee shall be deemed present at a meeting of each
committee, if a conference telephone, or similar communications equipment by
means of which all persons participating in the meeting can hear each other, is
used.
ARTICLE VI
Indemnification of Officers,
Directors, Employees and Agents
1. Permitted Indemnification; Matters Other Than Those by, or in the
Right of, this Corporation. This Corporation shall have power to indemnify any
person who was or is a party, or is threatened to be made a part, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, this Corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of this Corporation, or is or was serving at the
request of this Corporation as a director, officer, employee, or agent of
another Corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys' fees), judgments, fines, and amount paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding, including any appeal thereof, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interest of this Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of this Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. Permitted Indemnification; Matters by, or in the Right of, this
Corporation. This Corporation shall have power to indemnify any person who was
or is a party, or is threatened to be made a party, to any threatened, pending,
or completed action or suit by or in the right of this Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of this Corporation or is or was serving at the
request of this Corporation as a director, officer, employee, or agent of
another Corporation, partnership, joint venture, trust, or other enterprise
against
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expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, including any
appeal thereof, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of this Corporation,
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to this Corporation
unless, and only to the extent that, the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
3. Mandatory Indemnification Against Expenses. To the extent that a
director, officer, employee, or agent of this Corporation has been successful on
the merits or otherwise in defense of any action, suit, or proceeding referred
to in Section 1 or Section 2 of this Article, or in defense of any claim, issue,
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
4. Determination of Right to Indemnification. Any indemnification under
Section 1 or Section 2 of this Article, unless pursuant to a determination by a
court or pursuant to one (1) or more of the methods or procedures provided for
in Section 6 of this Article, shall be made by this Corporation only if and to
the extent authorized int he specific case, and upon a determination that
indemnification of the director, officer, employee, or agent is appropriate in
the circumstances and that he has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article. Such determination and
authorization shall be made: (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit, or
proceeding or; (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion; or (c) if the Board of Directors has omitted to make such
determination or authorization, or both, because such quorum cannot be obtained
or for any other reason, then by the stockholders by a majority vote of a quorum
consisting of stockholders who were not parties to such action, suit, or
proceeding.
5. Advancing Expenses. Expenses (including attorneys' fees), or some part
thereof, incurred in defending a civil or criminal action, suit, or proceeding
may be paid by this Corporation in advance of the final disposition of such
action, suit, or proceeding upon a preliminary determination, following one of
the procedures set forth in Section 4 of this Article, that at that time there
is reasonable cause to believe that the director, officer, employee, or agent
met the applicable standard of conduct set forth in Section 1 or Section 2 of
this Article and that indemnification may be appropriate in the circumstances,
and upon receipt of any undertaking by or on behalf of the director, officer,
employee, or agent to repay such amount unless it shall ultimately be determined
that he has met said applicable standard of conduct and that it is appropriate
that he be indemnified by this Corporation as authorized in this Article.
6. Other or Further Indemnification. This Corporation shall have the
power to make any other or further indemnification of any person, except an
indemnification against gross negligence or willful misconduct, under any Bylaw
(including, without limitation, any other or further Section or provision of
this Article), statute, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. The provisions of this
Section are cumulative and in addition to, and shall not be deemed as a
limitation upon, any other Section of this Article or any other Bylaw of this
Corporation.
7. Retroactive and Prospective Application. Indemnification as provided
or permitted in this Article: (a) includes, but is not limited to, cases and
circumstances in which a person may be deemed to be a fiduciary or acting in a
fiduciary capacity, (b) shall be applicable to acts or omissions which occurred
prior to the adoption of this Article, and (c) shall continues as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person. The
repeal or amendment of this Article or of any Section or provisions thereof
which would have the effect of limiting, qualifying or restricting any of the
powers or rights of indemnification provided or permitted in this Article shall
not, solely by reason of such repeal or amendment, eliminate, restrict or
otherwise affect the right and power of this Corporation to indemnify any
person, or affect any right of indemnification of such person, with respect to
any acts or omissions which occurred prior to such repeal or amendment.
8. Liability Insurance. This Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employees, or agent of this Corporation or is or was serving at the request of
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this Corporation as a director, officer, employee, or agent of another
Corporation, partnership, joint venture, trust, or other enterprise against any
proceeding, expenses (including attorneys' fees) or liability asserted against
him or incurred by him in any such capacity or arising out of his status as
such, whether or not this Corporation would have the power to indemnify him
against such proceeding, expenses or liability under the provisions of this
Article.
9. Definition of Requested Service. During the time that any Corporation
is a subsidiary Corporation of this Corporation, any person who was, is, or
becomes a director of such subsidiary Corporation shall be deemed, for the
purposes of this Article, to have been, or to be, serving in such capacity at
the request of this Corporation. A subsidiary corporation, for said purposes, is
one which, under the definition of "control" in the Bank Holding Company act of
1956, as amended, is controlled by this Corporation.
10. Additional Conditions and Limitations of Indemnity; Subrogation.
(a) Notice of Claim of Proceeding. Without limiting the discretion of
the Board of Directors or the stockholders of this Corporation in determining
whether, in any specific case, indemnification of a specific individual is
appropriate, the Board of Directors or the stockholders shall have the right to
consider whether such person has given prompt written notice to this Corporation
of any claim or proceeding made, initiated or threatened against such person.
(b) Rights Reserved to Impose Conditions to Indemnification. This
Corporation shall have the right to impose, as conditions to any indemnification
provided or permitted in this Article, such reasonable requirements and
conditions as to the Board of Directors or stockholders may appear appropriate
in each specific case and circumstances, including, but not limited to, any one
(1) or more of the following: (i) that any counsel representing the person to be
indemnified in connection with the defense or settlement of any claim or
proceeding shall be counsel mutually agreeable to the person to be indemnified
and to this Corporation; (ii) that this Corporation shall have the right, at its
option, to assume and control the defense or settlement of any claim or
proceeding made, initiated or threatened against the person to be indemnified;
and (iii) that this Corporation shall be subrogated, to the extent of any
payments made by way of indemnification, to all of the indemnified person's
right of recovery, and that the person to be indemnified shall execute all
writings and do everything necessary to assure such rights of subrogation to
this Corporation.
11. Limitation of Indemnity Payments. There shall be deducted from the
amount which, except for the provisions of this Section, otherwise would be
payable by this Corporation (including, but not limited to, the incurring of
costs or expenses by this Corporation) pursuant to any indemnification provided
ro permitted in this Article, any amount or amounts to which the person to be
indemnified is entitled by way of indemnity or payment under any policy or
policies of insurance, and any amount or amounts to which the person to be
indemnified is entitled by way of indemnification provided by another
Corporation, partnership, joint venture, trust, or other enterprise.
ARTICLE VII
Emergency Transfer of Responsibility
1. Emergency Defined. In the event of a national emergency threatening
national security or a major disaster declared by the President of the United
States or the person performing his functions which directly and severely
affects the operations of the Corporation, the officers and employees of this
Corporation will continue to conduct the affairs of the Corporation under such
guidance from the directors as may be available except as to matters which by
law or regulation require specific approval of the Board of Directors and
subject to conformance with any applicable laws, regulations, and governmental
directives during the emergency.
2. Officers Pro Tempore. The Board of Directors shall have the power, in
the absence or disability of any officer, or upon the refusal of any officer to
act as a result of said national emergency directly and severely affecting the
operations of the Corporation, to delegate and prescribe such officer's powers
and duties to any other officer, or to any director.
-10-
<PAGE> 11
In the event of a national emergency or a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of this Corporation by its directors and officers as contemplated by
the Bylaws, any two (2) or more available members or alternate members, of the
then incumbent Executive committee shall constitute a quorum of such Committee
for the full conduct and management of the Corporation in accordance with the
provisions of Articles III, IV, and V of the Bylaws. If two (2) members or
alternate members, of the Executive Committee cannot be expeditiously located,
then three (3) available directors shall constitute the Executive committee for
the full conduct and management of the affairs and business of the Corporation
until the then remaining Board can be convened. These provisions shall be
subject to implementation by resolutions of the Board of Directors passed from
time to time, and any provisions of the Bylaws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or the
provisions of any such implementary resolutions shall be suspended until it
shall be determined by any such interim Executive Committee acting under this
Section that it shall be to the advantage of this Corporation to resume the
conduct and management of its affairs and business under all of the other
provisions of these Bylaws.
3. If, in the event of a national emergency or disaster which directly
and severely affects the operations of the Corporation, the Chief Executive
officer cannot be located expeditiously or is unable to assume or to continue
normal duties, then the authority and duties of the office shall be
automatically assumed, without Board of Directors action, in order of title, and
subject only to willingness and ability to serve, by the Chief Administrative
Officer, Chairman, President, Vice Chairman, Executive Vice President, Senior
Vice President, Vice President, Secretary, or their successors in office at the
time of the emergency or disaster. Where two (2) or more officers hold
equivalent titles and are willing and able to serve, seniority in title controls
initial appointment. If, in the same manner the Secretary or Treasurer cannot be
located or is unable to assume or continue normal duties, the responsibilities
attached thereto, shall, in like manner as described immediately above, be
assumed by any Executive Vice President, Senior Vice President, or Vice
President. Any officer assuming authority and positions hereunder shall continue
to serve until the earlier of his resignation or the elected officer or more
senior officer shall become available to perform the duties of the position of
Chief Executive Officer, Secretary, or Treasurer.
4. Certificate of Authority. Anyone dealing with this Corporation may
accept a certification by any three (3) officers that a specified individual is
acting as Chief Executive Officer, President, Secretary, Treasurer, or
Comptroller in accordance with these Bylaws; and that anyone accepting such
certification may continue to consider it in force until notified in writing of
a change, said notice of change to carry the signature of three (3) officers of
the Corporation.
5. Alternative Locations. In the event of a national emergency or
disaster which destroys, demolishes, or renders the Corporation's offices or
facilities unserviceable, or which causes, or, in the judgment of the Board of
Directors or the Executive Committee, probably will cause, the occupancy or use
thereof to be a clear and imminent hazard to personal safety, the Corporation
shall temporarily lease or acquire such facilities to carry on its business as
may be designated by the Board of Directors. Any temporarily relocated place of
business of this Corporation shall be returned to its legally authorized
location as soon as practicable and such temporary place of business shall then
be discontinued.
ARTICLE VIII
Miscellaneous
1. Fiscal Year. The fiscal year of the Corporation shall be the calendar
year.
2. Corporate Seal. The Secretary or any Assistant Secretary, or other
officer thereunto designated by the Secretary, shall have authority to affix the
corporate seal to any document requiring such seal and to attest the same.
3. Execution of Instruments. All bills, notes, checks, and other
instruments for the payment of money, all agreements, indentures, mortgages,
deeds, conveyances, transfer, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Corporation by the
-11-
<PAGE> 12
Chairman, Chief Executive Officer, the President, any Vice Chairman, Chief
Administrative Officer, Executive Vice President, Senior Vice President or Vice
President, the Secretary or the Treasurer. Any such instrument may also be
signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Corporation in such manner and by such other officers, employees or agents
of the Corporation as the Board of Directors or Executive Committee may from
time to time direct.
4. Dividends. Dividends shall be declared only at such times and in such
amounts as the Board of Directors shall direct.
ARTICLE IX
Amendments
These Bylaws or any provisions thereof may be amended, altered, or
repealed, in any particular, and new Bylaws or provisions, not inconsistent with
any provision of law, may be adopted by the stockholders of the Corporation at
any meeting of the stockholders or by the Board of Directors, at any meeting
thereof, by the affirmative vote of a majority of the whole number of directors,
provided, however, that notice of the proposed amendment shall have been mailed
or delivered to each such director not less than ten (10) days prior to such
meeting, and provided further that the power of the directors to make and alter
Bylaws shall be subject to such restrictions upon the exercise of such power as
may be expressly imposed by the stockholders in any Bylaws adopted by them from
time to time.
-12-
<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA SHARES
[BIG LAKE LOGO] _______________
BIG LAKE FINANCIAL CORPORATION
AUTHORIZED CAPITAL STOCK
1,000,000 SHARES OF COMMON STOCK OF $.01 PAR VALUE PER SHARE
500,000 SHARES OF PREFERRED STOCK OF $1.00 PAR VALUE PER SHARE
This Certifies That ____________________________________________________ is
the owner of _________________________________________________ shares of the
Commons Capital Stock of
BIG LAKE FINANCIAL CORPORATION
transferable only on the books of the Corporation by the holder hereof in
person, or by duly authorized attorney, upon surrender of this certificate
properly endorsed.
The respective rights, preferences, privileges, voting rights, powers,
restrictions, limitations, and qualifications of each class of stock issued by
the Corporation, are set forth in the Articles of Incorporation of the
Corporation and the amendments thereto, which are on file at the main office of
the Corporation and are hereby expressly incorporated herein by reference.
IN WITNESS WHEREOF, the said Corporation has caused this certificate to be
signed by its duly authorized officers and its seal to be hereunto affixed,
this ____________________________________________________________________
day of _________________________________ A.D., 19________________________
- ----------------------------------------- ---------------------------------
Secretary President
<PAGE> 2
NOTICE. THE SIGNATURE OF THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
FOR VALUE RECEIVED,___________________hereby sell, assign and transfer unto
Please insert social security or other
identification number of assignee
[ ]
__________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
_____________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated______________________19_____________
In presence of ____________________________
________________________________ ____________________________
<PAGE> 1
EXHIBIT 5
June 30, 1997
Big Lake Financial Corporation
1409 South Parrott Avenue
Okeechobee, FL 34974
Gentlemen:
This opinion is issued in connection with the filing by Big Lake Financial
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), of a Registration Statement
on Form S-4, as amended (the "Registration Statement"), with respect to the
offer and sale of shares of common stock, par value $.01 per share, of the
Company (the "Shares") pursuant to an Amended and Restated Agreement and Plan of
Reorganization, between the Company, CNB Financial Corporation, Big Lake
National Bank and Clewiston National Bank (the "Agreement").
We have examined the originals, or certified, conformed or reproduction
copies, of such records, agreements, instruments and documents as we have deemed
relevant or necessary as the basis for the opinion hereinafter expressed. In all
such examinations, we have assumed the genuineness of all signatures on original
or certified copies and the conformity to original or certified copies of all
copies submitted to us as conformed or reproduction copies. As to various
questions of fact relevant to such opinion, we have relied upon, and assumed the
accuracy of, certificates and oral or written statements and other information
of or from public officials, officers or representatives of the Company, and
others.
Based upon the foregoing and subject to the limitations set forth herein,
we are of the opinion that the Shares, when issued, delivered and paid for in
accordance with the Registration Statement, the Agreement, and the Restated
Articles of Incorporation of the Company, will be legally issued, fully paid and
nonassessable Shares of common stock of the Company.
The opinion expressed herein is limited to the laws of the State of
Florida.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the
<PAGE> 2
Big Lake Financial Corporation
June 30, 1997
Page 2
- --------------------------
Registration Statement. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act.
Very truly yours,
SMITH, MACKINNON, HARRIS, GREELEY,
BOWDOIN & EDWARDS, P.A.
/s/ John P. Greeley
----------------------------------
By: John P. Greeley
JPG:erw
<PAGE> 1
EXHIBIT 8
June 23, 1997
Board of Directors
c/o Mr. Edwin E. Walpole, III
Chairman, President, and Chief Executive Officer
Big Lake Financial Corporation
1409 South Parrott Avenue
Okeechobee, Florida 33474
Board of Directors
c/o Mr. Curtis S. Fry
Chairman of the Board
CNB Financial Corporation
950 West Ventura Avenue
Clewiston, Florida 33440
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the proposed merger of CNB Financial Corporation ("Target")
with and into Big Lake Financial Corporation ("Acquiring"). Unless otherwise
specifically indicated, all section references are to the Internal Revenue Code
of 1986, as amended (the "Code"), and all regulations and section references
are to Treasury regulations promulgated under the Code.
FACTS
Acquiring, a corporation organized in Florida, is the parent corporation of Big
Lake National Bank ("A-Sub"), also a Florida corporation, through which
Acquiring engages in the business of banking. Acquiring does not directly
engage in the business of banking but instead does so indirectly as the holding
company for A-Sub.
Target is a Florida corporation that owns all of the outstanding stock of
Clewiston National Bank ("T-Sub"), which is also a Florida corporation. Target
engages in no substantial business activities other than the activities related
to its ownership of T-Sub. T-Sub is engaged primarily in the business of
banking in locations other than those in which Acquiring and its subsidiary are
so engaged.
<PAGE> 2
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 2
The terms of the proposed merger (the "Merger") are contained in the Amended
and Restated Agreement and Plan of Reorganization dated as of February 19,
1997, and amended and restated June 19, 1997, between Target and Acquiring (the
"Agreement"). Terms not otherwise defined in this letter shall have the
meanings assigned to them in the Agreement.
You have directed us to assume in preparing this opinion that (1) the Merger
will be consummated in accordance with the terms, conditions and other
provisions of the Agreement, and (2) all of the factual information,
descriptions, representations and assumptions set forth in this letter, in the
Agreement, in the letters to us from Acquiring dated June 20, 1997, and from
Target dated June 20, 1997 (the "Letters"), and in the Proxy
Statement/Prospectus, and mailed to Target shareholders in connection with
the special meeting of shareholders to approve the Merger, are accurate and
complete and will be accurate and complete at the time the Merger becomes
effective (the "Effective Time"). We have not independently verified any
factual matters relating to the Merger with or apart from our preparation of
this opinion and, accordingly, our opinion does not take into account any
matters not set forth herein that might have been disclosed by independent
verification.
The Agreements provide that Target will be merged with and into Acquiring in
accordance with the applicable provisions of the Florida Business Corporation
Act (the "Florida Act"). The Merger must be approved as required by law by the
Target shareholders at a special meeting. Any stockholder of Target entitled
to vote on approval of the Merger has the right to receive the fair value of
his or her shares of Target Common Stock upon compliance with Sections
607.1302, 1, 607.1302, and 607.1320 of the Florida Act (the "Florida Dissent
Provisions").
At the Effective Time, all assets and liabilities of Target will be transferred
by operation of law to Acquiring, the separate corporate existence of Target
will cease, and, except as provided below, each share of Target Common Stock
then outstanding will be converted into .40 share of the Acquiring Common
Stock. Shares of Target Common Stock owned beneficially at the Effective Time
by Target, a Target subsidiary, Acquiring or an Acquiring subsidiary will be
canceled as a result of the Merger. Note, however, this does not apply to
Target Common Stock owned in a fiduciary capacity or in connection with a debt
previously contracted. Acquiring will be the surviving entity following the
Merger.
No fractional shares of Acquiring Common Stock will be issued in the Merger.
Notwithstanding any other provision of the Agreement, if a holder of Target
Common Stock converted pursuant to the Merger is otherwise entitled to receive
a fraction of a Acquiring Common Stock (after taking into account all
certificates delivered by such holder), then, in lieu thereof, such fraction
shall be rounded up to the next whole share if such fraction is .500 or greater
and such fraction shall be rounded down to the next whole share if such
fraction is .499 or less (hereinafter referred to as "Rounding"). No cash will
be exchanged for shares of Target Common Stock or shares of Acquiring Common
Stock pursuant to the Merger.
<PAGE> 3
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 3
As soon as practicable after the Merger, T-Sub will be merged with and into
A-Sub in accordance with the applicable provisions of the Florida Act (the "Sub
Merger"). On the effective date of the Sub Merger, all assets and liabilities
of T-Sub will be transferred by operation of law to A-Sub, and the separate
corporate existence of T-Sub will cease.
We have also relied with your permission on the following additional
representations and/or assumptions:
1. The Merger will be a statutory merger in accordance with the
applicable provisions of the Florida Act.
2. The fair market value of the Acquiring Common Stock and other
consideration received by each Target shareholder will be approximately equal to
the fair market value of the Target Common Stock surrendered in the exchange.
3. There is no plan or intention by the shareholders of Target to
sell, exchange or otherwise dispose of a number of shares of Acquiring Common
Stock received in the Merger that would reduce the Target shareholders'
ownership of the Acquiring Common Stock to a number of shares having an
aggregate value, as of the Effective Time, of less than 50 percent of the value
of all of the formerly outstanding Target Common Stock as of the same date. For
purposes of this paragraph, shares of Target Common Stock, surrendered by
dissenters, will be treated as outstanding Target Common Stock at the Effective
Time. Moreover, shares of Target Common Stock and shares of Acquiring Common
Stock held by Target shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the Merger are taken into account for purposes of the
calculations described in this paragraph.
4. Acquiring has no plan or intention to reacquire any of the
Acquiring Common Stock to be issued in the Merger.
5. Acquiring has no plan or intention to sell or otherwise dispose of
any of the assets of Target acquired in the Merger (or to cause or permit the
sale or other disposition of any assets of T-Sub), except for the transactions
contemplated by the Sub Merger, dispositions made in the ordinary course of
business or transfers described in section 368(a)(2)(C).
6. The liabilities of Target assumed by Acquiring and the liabilities
to which the transferred assets of Target are subject were incurred by Target in
the ordinary course of its business.
7. Following the Merger, Acquiring will continue the historic
business of Target and will use a significant portion of Target's historic
business assets in a business.
<PAGE> 4
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 4
8. Except as provided in the next sentence, Acquiring, Target and the
shareholders of Target will pay their respective expenses, if any, incurred in
connection with the Merger. Acquiring will pay or assume only those expenses of
Target that are solely and directly related to the Merger in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
9. There is no intercorporate indebtedness existing between Acquiring
and Target that was issued, acquired or will be settled at a discount.
10. No two parties to the Merger are investment companies as defined
in section 368(a)(2)(F)(iii) and (iv).
11. Target is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(A).
12. The fair market value of the assets of Target transferred to
Acquiring will equal or exceed the sum of the liabilities assumed by Acquiring
plus the amount of liabilities, if any, to which the transferred assets are
subject.
13. No dividends or distributions will be made with respect to any
Target stock prior to the Merger. After the Merger, no dividends or
distributions will be made to the former Target shareholders by Acquiring, other
than regular or normal dividend distributions made with regard to all shares of
Acquiring Common Stock.
14. None of the compensation received by any shareholder-employee of
Target will be separate consideration for, or allocable to, any of their shares
of Target Common Stock. The compensation paid to any shareholder-employees of
Target will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
None of the Acquiring Common Stock received by any shareholder-employee of
Target will be in exchange for, or in consideration of, services rendered to
Acquiring, Target or any other entity by such shareholder-employee.
15. The Rounding of fractional shares of Acquiring Common Stock (as
more fully described in the Agreement) is solely for the purpose of avoiding the
expense and inconvenience to Acquiring of issuing fractional shares and does not
represent separately bargained-for consideration. The fractional share interests
of each Target shareholder will be aggregated, and no Target shareholder will
receive consideration in the form of Rounding an amount equal to or greater than
the value of one full share of Acquiring Common Stock. The total consideration
paid in connection with Rounding will not exceed one percent of the total
consideration that will be issued in the Merger to the Target shareholders in
exchange for their shares of Target common stock.
<PAGE> 5
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 5
16. The Merger is being effected for bona fide business reasons as
described in the Proxy Statement/Prospectus.
17. Prior to the Sub Merger, T-Sub will not sell or otherwise dispose
of any of its assets except for dispositions made in the ordinary course of
business or transfers described in section 368(a)(2)(C).
18. A-Sub has no plan or intention to sell or otherwise dispose of any
of the assets of T-Sub to be acquired in the Sub Merger, except for dispositions
made in the ordinary course of business or transfers described in section
368(a)(2)(C).
19. Prior to the Sub Merger, T-Sub will continue its historic
businesses and will use a significant portion of its historic assets in those
businesses.
20. Following the Sub Merger, A-Sub will continue the historic
business of T-Sub and will use a significant portion of T-Sub's historic
business assets in a business.
21. The Sub Merger will be effected for bona fide business reasons.
OPINION
Assuming that the Merger and the Sub Merger are consummated in accordance with
the terms and conditions set forth in the Agreements and based on the facts set
forth in the Proxy Statement/Prospectus, the Letters, and this letter (including
all assumptions and representations), it is our opinion that for federal income
tax purposes:
1. Upon consummation, the Merger will qualify as a reorganization
within the meaning of section 368(a)(1)(A) and section 368(a)(2)(D) of the Code.
Target, T-Sub, Acquiring, and A-Sub will each be a party to the reorganization.
2. No gain or loss will be recognized by any shareholder of Target
upon the exchange of such shareholder's Target Common Stock for Acquiring Common
Stock issued pursuant to the Merger.
3. No gain or loss will be recognized by any shareholder of Acquiring
as a result of the Merger.
4. The basis of the Acquiring Common Stock received by the
shareholders of Target will be the same as the basis of the Target Common Stock
surrendered therefor.
<PAGE> 6
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 6
5. To the extent that any Target shareholder owns less than 1.25
shares of Target Common Stock immediately prior to the Effective Time, a loss,
if any, may be recognized by such Target shareholder in an amount equal to the
tax basis in said shares as determined in accordance with applicable provisions
of the Code.
6. A shareholder of Target who dissents to the proposed Merger and
receives solely cash for such shareholder's stock will be treated as having
received such cash as a distribution in redemption of such shareholder's stock
subject to the provisions and limitations of section 302 of the Code.
7. Provided that shares of Target Common Stock were capital assets in
the hands of a holder of Target Common Stock immediately prior to the Merger,
the holding period of the Acquiring Common Stock received by a holder of Target
Common Stock in the Merger will include the holding period of the Target Common
Stock surrendered in the exchange therefor.
Our opinion is limited to the foregoing federal income tax consequences of the
Merger, which are the only matters as to which you have requested our opinion,
and you must judge whether the matters addressed herein are sufficient for your
purposes. We do not address any other federal income tax consequences of the
Merger or other matters of federal law and have not considered matters
(including state or local tax consequences) arising under the laws of any
jurisdiction other than matters of federal law arising under the laws of the
United States.
Our opinion is based on the understanding that the relevant facts are, and will
be at the Effective Time, as set forth in this letter. If this understanding is
incorrect or incomplete in any respect, our opinion could be affected. Our
opinion is also based on the Code, Treasury Regulations, case law, and Internal
Revenue Service rulings as they now exist. These authorities are all subject to
change and such change may be made with retroactive effect. We can give no
assurance that after any such change, our opinion would not be different.
We undertake no responsibility to update or supplement our opinion. Only
Acquiring and Target may rely on this opinion, and only with respect to the
proposed Merger described herein.
Very truly yours,
STEVENS, THOMAS, SCHEMER & SPARKS, P.A.
Jacksonville, Florida
June 23, 1997
<PAGE> 7
Big Lake Financial Corporation/CNB Financial Corporation
June 23, 1997
Page 7
CC: John P. Greeley, Esquire
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Avenue
Suite 800
Orlando, Florida 32802
Garey F. Butler
Humphrey & Knott
1625 Hendry Street
Fort Myers, Florida 33901
<PAGE> 1
EXHIBIT 10.1
BIG LAKE FINANCIAL CORPORATION
DIRECTORS' STOCK OPTION PLAN
ARTICLE I
Definitions
As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Bank" shall mean Big Lake National Bank.
(b) "Board of Directors" shall mean the Board of Directors of
the Holding Company.
(c) "Director" shall mean any individual who serves on the Board
of Directors of the Holding Company.
(d) "Holding Company" shall mean Big Lake Financial Corporation.
(e) "Option" shall mean an option to purchase Stock granted
pursuant to the provisions of Article IV hereof.
(f) "Option Price" shall mean the purchase price of each share
of Stock subject to Option, as defined in Section 4.3 hereof.
(g) "Optionee" shall mean a Director to whom an Option has been
granted hereunder.
(h) "Plan" shall mean the Big Lake Financial Corporation
Directors' Stock Option Plan, the terms of which are set forth herein.
(i) "Stock" shall mean the common stock of the Holding Company,
$0.01 par value per share, or, in the event that the outstanding shares of Stock
are hereafter changed into or exchanged for shares of a different class of stock
or securities of the Holding Company or some other corporation, such other stock
or securities.
(j) "Stock Option Agreement" shall mean the agreement between
the Holding Company and the Optionee under which the Optionee may purchase
Stock.
-1-
<PAGE> 2
(k) "Year" shall mean any calendar year during the term of this
Agreement from January 1 to December 31, inclusive.
ARTICLE II
The Plan
2.1 Name. This plan shall be known as the "Big Lake Financial
Corporation Directors' Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of
the Holding Company and its shareholders by affording to the Directors of the
Holding Company an opportunity to increase their proprietary interest in the
Holding Company by the grant of Options to such Directors under the terms set
forth herein. By thus encouraging such Directors to become owners of Holding
Company shares, the Holding Company seeks to motivate, retain, and attract those
highly competent individuals upon whose judgment, initiative, leadership, and
continued efforts the success of the Holding Company and the Bank in large
measure depends.
2.3 Effective Date. The Plan shall become effective upon its approval
by the Board of Directors of the Holding Company.
2.4 Participants. Only the following Directors of the Holding Company
shall be eligible to participate in the Plan: John W. Abney, Sr., Edward R.
Carmody, Jr., Mary Beth Cooper, George H. Cooper, Jr., H. Gilbert Culbreth, Jr.,
Curtis S. Fry, Fred L. Humphries, Henry C. Kelly, Joe G. Mullins, and Edwin E.
Walpole, III.
ARTICLE III
Shares of Stock Subject to Plan
3.1 Limitations. Subject to adjustment pursuant to the provisions of
Section 3.1 hereof, the number of shares of Stock which may be issued and sold
hereunder shall not exceed 27,500 shares. Such shares may be either authorized
and unissued shares or shares issued and thereafter acquired by the Holding
Company.
3.2 Options Granted Under Plan. Shares of Stock with respect to which
an Option granted hereunder shall have been exercised shall not again be
available for Option hereunder. If Options granted hereunder shall terminate for
any reason without being wholly exercised, new Options may be granted, subject
to approval of the Board of Directors of the Holding Company, to Optionees
hereunder covering the number of shares to which such Option termination
relates.
-2-
<PAGE> 3
3.3 Antidilution. In the event that the outstanding shares of Stock
hereafter are changed into or exchanged for a different number or kind of shares
of stock or other securities of the Holding Company or of another corporation by
reason of merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up, or stock dividends:
(a) The aggregate number and kind of shares subject to Options
which may be granted hereunder shall be adjusted so that no dilution of the
Optionee's shares shall result;
(b) Rights under outstanding Options granted hereunder, both as
to the number of subject shares and the Option Price, shall be adjusted so that
no dilution of the Optionee's shares shall result; and
(c) Where dissolution or liquidation of the Holding Company or
any merger or combination in which the Holding Company is not a surviving
corporation is involved, each outstanding Option granted hereunder shall
terminate, but the Optionee shall have the right, immediately prior to such
dissolution, liquidation, merger or combination, to exercise his Option in whole
or in part, to the extent that it shall not have been exercised prior thereto.
ARTICLE IV
Options
4.1 Option Grant and Agreement. Each Option granted hereunder shall be
evidenced by a written Stock Option Agreement dated as of the effective date of
the Plan and executed by the Holding Company and the Optionee, which Agreement
shall set forth such terms and conditions as may be determined by the Holding
Company to be consistent with the Plan.
4.2 Number of Shares Per Stock Option Agreement. Subject to adjustment
pursuant to the provisions of Section 3.3 hereof, the number of shares of Stock
covered by each Option that shall be granted to each Director shall equal Two
Thousand Seven Hundred Fifty (2,750) shares.
4.3 Option Exercise.
(a) Each Stock Option Agreement shall expire June 30, 1993.
Subject to adjustment pursuant to the provisions of Section 3.3 hereof, the
purchase price of each share of Stock subject to Option shall be ten dollars
($10.00) per share (the "Option Price").
(b) Options may be exercised in whole or in part with respect
to whole shares only, within the period permitted for the exercise thereof, and
shall be exercised by written notice of intent to exercise the Option with
respect to a specific number of shares, delivery of such written notice to the
Holding Company at its principal office in the State of Florida, and payment in
full to the Holding Company at said office of the amount of the Option Price for
the number of
-3-
<PAGE> 4
shares of Stock with respect to which the Option is then being exercised. In
addition to and at the time of payment of the Option Price, Optionees shall pay
to the Holding Company in cash the full amount of all federal and state
withholding or other employment taxes applicable to the taxable income of such
Optionee resulting from such exercise, if any.
4.4 Option Rights are Cumulative. Any shares, which an Optionee would
have been entitled to purchase but did not so purchase in any Year, shall be
available for purchase by the Optionee in subsequent years during the term of
this Agreement.
4.5 Nontransferability of Option. No Option shall be transferred by an
Optionee, otherwise than by will or the laws of descent and distribution,
without first obtaining the written consent of the Board of Directors. In the
event an Option is transferred in accordance with this Section 4.5, the Optionee
shall provide to the Holding Company all information regarding the terms and
conditions of such transfer as may be requested by the Holding Company.
4.6 Effect of Death or Other Termination of Tenure as a Director of
the Holding Company.
(a) If an Optionee's tenure as a Director of the Holding
Company shall be terminated for any reason other than the disability or death of
the Optionee, his Option shall remain exercisable until the earlier of (i) three
months after the date of such termination, or (ii) June 30, 1993.
(b) If an Optionee shall die or become permanently disabled
while serving as a Director of the Holding Company, the Optionee or personal
representative or administrator of the estate of the decedent or the person or
persons to whom an Option granted hereunder shall have been validly transferred
by the personal representative or administrator pursuant to will or the laws of
descent and distribution, as the case may be, shall have the right, during the
period ending on the earlier of (i) one year after the date of the Optionee's
death or disability, or (ii) June 30, 1993 to exercise the Optionee's Options to
the extent that same would have been exercisable had the Optionee's tenure as a
Director of the Holding Company not been terminated.
(c) No transfer of an Option by the Optionee by will or by the
laws of descent and distribution shall be effective to bind the Holding Company
unless the Holding Company shall have been furnished with written notice thereof
and an authenticated copy of the will and/or such other evidence as the Holding
Company may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of such
Option.
4.7 Rights as Shareholder. An Optionee or a transferee of an Option
shall have no rights as a shareholder with respect to any shares of Stock
subject to such Option prior to the purchase of such shares by exercise of such
Option as provided herein.
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<PAGE> 5
4.8 Investment Intent. Upon or prior to the exercise of all or any
portion of an Option, the Optionee shall furnish to the Holding Company in
writing such information or assurances as, in the Holding Company's opinion, may
be necessary to enable it to comply fully with the Securities Act of 1933, as
amended, and the rules and regulations thereunder and any other applicable
statutes, rules and regulations. Without limiting the foregoing, if a
registration statement is not in effect under the Securities Act of 1933, as
amended, with respect to the shares of Stock to be issued upon exercise of an
Option, the Holding Company shall have the right to require, as a condition to
the exercise of such Option, that the Optionee represent to the Holding Company
in writing that the shares to be received upon exercise of such Option will be
acquired by the Optionee for investment and not with a view to distribution and
that the Optionee agrees, in writing, that such shares will not be disposed of
except pursuant to an effective registration statement, unless the Holding
Company shall have received an opinion of counsel reasonably acceptable to it to
the effect that such disposition is exempt from the registration requirements of
the Securities Act of 1933, as amended. The Holding Company shall have the right
to endorse on certificates representing shares of Stock issued upon exercise of
an Option such legends referring to the foregoing representations and
restrictions or any other applicable restrictions on resale or disposition as
the Holding Company, in its discretion, shall deem appropriate.
ARTICLE V
Stock Certificates
The Holding Company shall not be required to issue or deliver any
certificate for shares of Stock purchased upon the exercise of any Option
granted hereunder, or of any portion thereof, prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed, if any;
(b) The completion of any registration or other qualification
of such shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory agency, which the Holding Company shall in its sole discretion
determine to be necessary or advisable;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency which the Holding Company shall in its sole
discretion determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Holding Company from time to time may establish
for reasons of administrative convenience.
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<PAGE> 6
ARTICLE VI
Termination, Amendment and Modification of Plan
The Board of Directors may at any time terminate, and may at any
time and from time to time and in any respect amend or modify, the Plan;
provided, however, that no such action of the Board of Directors may increase
the total number of shares of Stock subject to the Plan without approval of the
shareholders of the Holding Company except as contemplated in Section 3.3
hereof, and provided further that no termination, amendment or modification of
the Plan shall in any manner affect any Option theretofore granted under the
Plan without the consent of the Optionee of the Option.
ARTICLE VII
Miscellaneous
7.1 Service. Nothing in the Plan or in any Option granted hereunder or
in any Stock Option Agreement relating thereto shall confer upon any Director
the right to continue as a Director of the Holding Company or of any subsidiary
of the Holding Company, including, without limitation, the Bank.
7.2 Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in effect
for the Holding Company or for any subsidiary of the Holding Company, including,
without limitation, the Bank, nor shall the Plan preclude the Holding Company
from establishing any other forms of incentive or other compensation for
Directors of the Holding Company or of any subsidiary of the Holding Company,
including, without limitation, the Bank.
7.3 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Holding Company.
7.4 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
7.5 Applicable Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Florida.
7.6 Headings; No Part of Plan. Heading of Articles and Sections hereof
are inserted for convenience and reference; they constitute no part of the Plan.
7.7 Severability. If any provision of this Plan shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
-6-
<PAGE> 7
AMENDMENT
TO
BIG LAKE FINANCIAL CORPORATION
DIRECTORS' STOCK OPTION PLAN
Big Lake Financial Corporation has previously adopted a Directors'
Stock Option Plan (the "Plan"). The Plan provided that each Option granted to
a Director thereunder was exercisable for 2,750 shares. As a result of stock
dividends issued by the Holding Company in the interim and the antidilution
provisions of Section 3.3 of the Plan, each outstanding option is currently
exercisable for 3,035.49 shares, or an aggregate of 18,213 shares under the
Plan. As a result of amendments adopted by the Board of Directors of the
Holding Company in June, 1993 and June, 1996, the Options expire June 30, 1998.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to
memorialize Plan this 2nd day of June, 1997.
/s/ Joe G. Mullins
----------------------------------
Joe G. Mullins
Executive Vice President and Chief
Administrative Officer
-7-
<PAGE> 1
EXHIBIT 10.2
LEASE
THIS AGREEMENT is made and entered into this 11th day of December, 1989,
by and between AAA WAREHOUSE, INC., a Corporation existing under the laws of the
State of Florida, hereinafter referred to as "Lessor" and CLEWISTON NATIONAL
BANK, a corporation existing under the laws of the United State of America,
hereinafter referred to as "Lessee," in consideration of the premises and
covenants by each made and to be kept to the other, the adequacy of which is
hereby confirmed, as follows:
1. Leased Property:
A. The Lessor hereby leases to the Lessee the following
described real property to be constructed by the Lessor pursuant to the
specifications of Lessee: Office space located at 6th Street and S.R. 25 (U.S.
27), with dimensions of sixteen feet (16') by forty feet (40'), including drive
thru lane.
B. Lessor shall provide a one hundred eight feet (108') by
sixty feet (60') paved public parking lot and a paved driveway as specified by
Lessee.
C. Lessor shall provide space at no charge to be utilized by
Lessee for a freestanding sign at a location mutually agreed upon by both
parties.
2. Term of Lease:
The Lease shall commence on the 1st day of December, 1989, and
shall continue thereafter for three (3) years, and shall end on the 30th day of
November, 1992.
3. Rent:
The Lessee shall pay to the Lessor, as rent for the leased
property, the amount of $20,520.00, payable monthly at $570.00 per month, plus
applicable sales tax. All rent shall be paid when due, without demand, at the
office of AAA Warehouse, Inc., 6th Street, Post Office Box 430, Moore Haven,
Florida, 33471.
4. Utilities:
The Lessee shall be responsible for, and shall pay for in a timely
manner, all utilities provided to the leased premises.
-1-
<PAGE> 2
5. Use of the Leased Property:
The Lessee will use the leased property as a bank only, and shall
make no unlawful, improper or offensive use of said premises.
6. Interior:
Lessee shall be responsible for the installation and maintenance
of all interior furnishings including counters, wall coverings, and flooring.
Lessee's personal property can be removed at the termination of this lease,
provided that said removal does not damage Lessor's property.
7. Access by Lessor:
The Lessor, or its agents, may enter, inspect and make such
repairs to the leased property as the Lessor may reasonably desire, at all
reasonable times, but the right to make such repairs shall impose no greater
burden upon the Lessor than is provided for in this Lease.
8. No Waste, Nuisance, or Unlawful Use:
Lessee shall not commit, or allow to be committed, any waste on
the premises, create or allow any nuisance to exist on the premises, or use or
allow the premises to be used for any unlawful purpose.
9. Lessee's Assignment, Sublease, or License for Occupation by Other
Persons:
Lessee agrees not to assign or sublease the leased premises, any
part thereof, or any right or privilege connected therewith, or to allow any
other person, except Lessee's agents and employees, to occupy the premises or
any part thereof, without first obtaining Lessor's written consent. Lessor
expressly covenants that such consent shall not be unreasonably or arbitrarily
refused. One consent by the Lessor shall not be a consent to a subsequent
assignment, sublease, or occupation by other persons. Lessee's unauthorized
assignment, sublease, or license to occupy shall be void, and shall terminate
the lease at Lessor's option. Lessee's interest in this lease is not assignable
by operation of law, nor is any assignment of his interest herein, without
Lessor's written consent.
10. Insurance:
Lessee shall procure and maintain in force during the term of this
lease and any extension thereof, at his expense, public liability insurance in
companies and through brokers approved by Lessor, adequate to protect against
liability for damage claims through public use of or arising out of accidents
occurring in or around the leased premises, in a minimum amount of Five Hundred
Thousand Dollars ($500,000.00), for each person injured, One Million Dollars
($1,000,000.00) for any one accident. Such insurance policies shall provide
coverage for Lessor's
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<PAGE> 3
contingent liability on such claims or losses, and shall name Lessors as
co-insured. The policies shall be delivered to Lessor for keeping. Lessee
agrees to obtain a written obligation from the insurers to notify Lessor in
writing at least thirty (30) days prior to cancellation or refusal to renew any
such policies. Lessee agrees that if such insurance policies are not kept in
force during the entire terms of this lease and any extension thereof, Lessor
may procure the necessary insurance and pay the premium therefor, and that such
premium shall be repaid to Lessor as an additional rent installment for the
month following the date on which such premiums are paid.
11. Renewal of Lease:
This lease may be extended, modified or renewed at any time during
this lease with the consent of all parties. Any extension, modification or
renewal shall be in writing and signed by all parties. Lessee shall have the
option to take a renewal lease for three (3) renewal options at least three (3)
years each. The rent for each respective option period shall be the base sum as
reflected in Paragraph #3 above plus the respective increase in the cost of
living index calculated from December 1, 1989. If at the expiration of this
lease the Lessor does not wish to renew this lease, it shall give the Lessee at
least thirty (30) days written notice of its intention.
12. Mechanic's Liens:
Pursuant to Sections 713.10, Florida Statutes, the Lessee is
specifically prohibited from contracting for any services or materials, or
taking any other action which would cause any Mechanic's Lien to attach to the
leased property. Further, the Lessor shall not be liable for any materials or
services purchased by the Lessee.
A Memorandum to this Lease may be, at the Lessor's discretion,
recorded in the Public Records giving notice that the Lessee is prohibited from
taking any action to subject the leased property to any Mechanic's Liens.
13. Lessor's Remedies at Lessee's Breach:
If Lessee breaches this lease, Lessor shall have the following
remedies in addition to his other rights and remedies in such event:
a. REENTRY: Lessor may reenter the premises immediately, and
remove all Lessee's personnel and property therefrom. Lessor may store the
property in a public warehouse or at another place of his choosing at Lessee's
expense or to Lessee's account.
b. TERMINATION: After reentry, Lessor may terminate the lease
giving thirty (30) days' written notice of such termination to Lessee. Reentry
only, without notice of termination will not terminate the Lease.
-3-
<PAGE> 4
c. RELETTING PREMISES: After reentering, Lessor may relet the
premises or any part thereof, for any term, without terminating the lease at
such rent and on such terms as they may choose. Lessor may make alterations and
repairs to the premises.
(1) Liability of Lessee on Reletting. Lessee shall be
liable to Lessor in addition to its other liability for breach of the lease for
all expenses of the reletting, and of the alterations and repairs made, which
Lessor may incur. In addition Lessee shall be liable to Lessor for the
difference between the rent received by Lessor under the reletting and the rent
installments that are due for the same period under this lease.
(2) Application of Rent on Reletting. Lessor at its
option may apply the rent received from reletting the premises as follows:
(a) To reduce Lessee's indebtedness to Lessor
under the lease, not including indebtedness for rent;
(b) To expenses of the reletting and alterations
and repairs made;
(c) To rent due under this lease;
(d) To payment of future rent under this lease as
it becomes due.
If the new Lessee does not pay a rent installment promptly to
Lessor, and the rent installment has been credited in advance of payment to
Lessee's indebtedness other than rent, or if rentals from the new Lessee have
been otherwise applied by Lessor as provided for herein, and during any rent
installment period are less than the rent payable for the corresponding
installment period under this lease, Lessee agrees to pay Lessor the deficiency
separately for each rent installment deficiency period, and before the end of
that period.
Lessor may at any time after such reletting terminate the lese for
the breach because of which he reentered and relet.
Lessor may recover from Lessee on terminating the lease for
Lessee's breach all damages proximately resulting from the breach, including the
costs of recovering the premises, and the worth of the balance of this lease
over the reasonable rental value of the premises for the remainder of the lease
term, which sum shall be immediately due Lessor from Lessee.
14. Lessee to Pay Lessor's Attorneys' Fees:
Lessee agrees to pay Lessor's reasonable attorneys' fees for any
services rendered in enforcing the terms of this lease.
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<PAGE> 5
15. Effect of Lessor's Waiver:
Lessor's waiver of breach of one covenant or condition of this
lease is not waiver of breach of others, or of subsequent breach of the one
waived.
16. Lease Applicable to Successors:
This lease and the covenants and conditions hereof apply to and
are binding on the heirs, successors, legal representatives, and assigns of the
parties.
17. Time of the Essence:
Time is of the essence of this lease.
18. Notices:
Any notice required or permitted to be given under this Agreement
shall be deemed validly given when sent by certified mail, return receipt
requested, addressed as follows:
To Lessor: AAA WAREHOUSE, INC.
Post Office Box 430
Moore Haven, Florida 33471
To Lessee: CLEWISTON NATIONAL BANK
950 West Ventura Avenue
Clewiston, Florida 33440
19. Miscellaneous:
This Agreement contains the entire Agreement of the parties and
shall not be modified except in writing signed by both parties.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year above first written.
Witnesses as to Lessor:
(Corporate Seal) AAA WAREHOUSE, INC., Lessor
ATTEST: By:
----------------------------- ---------------------------
Secretary
- ------------------------------------
- ------------------------------------
As to Lessor
(Corporate Seal) CLEWISTON NATIONAL BANK, Lessee
ATTEST: By:
----------------------------- ----------------------------
Secretary
- ------------------------------------
- ------------------------------------
As to Lessee
STATE OF FLORIDA
COUNTY OF HENDRY
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared JOSEPH P. BRANCH and ARTHUR SWANSON, to me known to be the
President and Secretary respectively of AAA WAREHOUSE, INC., and that they
severally acknowledged executing the same in the presence of two subscribing
witnesses freely and voluntarily under authority duly vested in them by said
corporation and that the seal affixed thereto is the true corporate seal of said
corporation.
WITNESS my hand and official seal in the County and State last aforesaid
this 11th day of December, 1989.
My Commission Expires:
---------------------------
Notary Public
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<PAGE> 7
STATE OF FLORIDA
COUNTY OF HENDRY
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared EDWARE R. CARMODY, JR. and RHONDA DAVIS, to me known to be
the President and Vice President and Cashier respectively of CLEWISTON NATIONAL
BANK, and that they severally acknowledged executing the same in the presence of
two subscribing witnesses freely and voluntarily under authority duly vested in
them by said corporation and that the seal affixed thereto is the true corporate
seal of said corporation.
WITNESS my hand and official seal in the County and State last aforesaid
this 11th day of December, 1989.
My Commission Expires: -----------------------------------
Notary Public
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<PAGE> 8
AAA SELF-STORAGE
P. O. Box 430
Moore haven, FL 33471
and
CLEWISTON NATIONAL BANK
940 West Ventura Avenue
Clewiston, FL 33440
Date: November 28, 1995
ADDENDUM TO LEASE #__1006_____
THIS DOCUMENT SERVES AS NOTICE TO ADD BUILDING #2 TO THE LEASE AGREEMENT
# 1006 SIGNED ON DEC. 11, 1989. THE COST PER MONTH WILL BE AS FOLLOWING, $100.00
FOR THE TIME BEFORE ANY CONSTRUCTION. THEN AFTER THE STARTING OF WORK ON
BUILDING IT WILL BE $200.00 A MONTH UNTIL THE BANK STARTS SERVICE IN IT. AT THAT
TIME IT WILL GO TO $385.00 A MONTH. THE RENT AMOUNT STATED IS PLUS SALE TAX AND
THE STARTING OF THIS AGREEMENT WILL BE AUG. 1, 1994.
- ------------------------------
- ------------------------------ AAA SELF-STORAGE, INC.
WITNESS TO LESSOR By:
---------------------
CLEWISTON NATIONAL BANK
- -----------------------------
By:
- ----------------------------- ---------------------
Date:
-------------------
WITNESS TO LESSEE
<PAGE> 9
AAA MINI-WAREHOUSES
P. O. Box 430
Moore haven, FL 33471
and
CLEWISTON NATIONAL BANK
940 West Ventura Avenue
Clewiston, FL 33440
ADDENDUM TO LEASE #1006
This letter serves as notice to renew the second three years (December 1,
1992 to November 30, 1995) of the lease signed on December 11, 1989. Adding the
5% "cost of living" to the base rent of $570.00 making it $598.50 per month plus
sales tax. This would be a total of $21,546.00 for this rent period. There will
be a late charge of $10.00 if payment is received after the 5th of each month.
Seal
- -----------------------
- -----------------------
AAA Warehouses, Inc.
Witness to Lessor By:
--------------------
Seal
Clewiston National Bank
- ----------------------- By:
--------------------
- -----------------------
Witness to Lessee
Date: November 6, 1992
<PAGE> 10
AAA SELF-STORAGE
P. O. Box 430
Moore haven, FL 33471
and
CLEWISTON NATIONAL BANK
940 West Ventura Avenue
Clewiston, FL 33440
Date: November 28, 1995
ADDENDUM TO LEASE #__1006_____
THIS DOCUMENT SERVES AS NOTICE TO RENEW THE LEASE # 1006 SIGNED ON
DECEMBER 11, 1989 ADDING $216.50 TO THE COST PER MONTH RENT GOING FROM $983.50
TO $1200.00 PLUS SALES TAX ON DEC. 1, 1995. THIS WOULD TAKE CARE OF 1996 AND IN
1997 A .05% INCREASE OF $60.00 MAKING IT $1260.00 PER MONTH PLUS TAX, AND IN
1998 WITH $63.00 INCREASE MAKING IT $1323.00 A MONTH PLUS SALES TAX.
EACH RENT CHANGE WOULD BE ON DEC. 1, OF EACH YEAR.
- ---------------------------------
- ---------------------------------
AAA SELF-STORAGE, INC.
WITNESS TO LESSOR By:
------------------------
CLEWISTON NATIONAL BANK
- ---------------------------------
By:
- --------------------------------- ------------------------
Date:
----------------------
WITNESS TO LESSEE
<PAGE> 1
EXHIBIT 10.3
MODIFICATION AND LEASE EXTENSION AGREEMENT
This MODIFICATION AND LEASE EXTENSION AGREEMENT ("Agreement") made and
entered into this first day of April, 1996 by and between LAWRENCE R. GAMER,
individually, and KATHLEEN J. HOOPER, individually, hereinafter "Lessor" and
CLEWISTON NATIONAL BANK, a National Banking Association existing under the laws
of the United States of America, hereinafter "Lessee," with both Lessor and
Lessee sometimes being collectively referred to as the "Parties."
W I T N E S S E T H:
WHEREAS, EARL R. GAMER, predecessor in interest to LAWRENCE R. GAMER and
KATHLEEN J. HOOPER, entered a certain written Lease dated April 1, 1981 between
EARL R. GAMER and CLEWISTON NATIONAL BANK, a true copy of which is attached
hereto and incorporated herein by reference as EXHIBIT "A", hereinafter the
"Original Lease," for the Lease premises described therein and;
WHEREAS, the Parties are desirous of modifying the Original Lease and
have mutually agreed to modify the terms thereof in the manner hereafter stated
and upon the terms and conditions hereafter set forth.
NOW, THEREFORE, for value received and in consideration of the mutual
covenants herein contained and in consideration of the sum of Ten Dollars
($10.00) this day paid by each of the Parties to the other, the receipt and
sufficiency of which is acknowledged, the Parties mutually covenant and agree as
follows:
20. All matters hereinabove are true and correct.
21. Provided that the Lessee executes this instrument, all rental
obligations under the Original Lease shall be satisfied as of March 31, 1996 and
Lessee has no obligation for any unpaid rents accruing prior to March 31, 1996.
22. Effective April 1, 1996, the monthly rent payable by Lessor to
Lessee shall be ONE THOUSAND ONE HUNDRED AND NO/100 ($1,100.00) DOLLARS per
month, plus applicable sales and use tax as imposed by any governmental
authority. The current monthly rental installment of ONE THOUSAND ONE HUNDRED
SEVENTY-SEVEN ($1,177.00) DOLLARS, inclusive of applicable tax, shall be made
current upon the execution hereof with Lessee paying the balance of TWO HUNDRED
FOURTEEN AND NO/100 ($214.00) DOLLARS on account of the monthly rental
installment owed for April 1, 1996. The rent payable by Lessor to Lessee shall
be a fixed rent during the Lease term from April 1, 1996 up to and including
March 31, 20001 and there shall be no consumer price increase applicable or
payable. In addition, Lessee shall pay the real property and drainage taxes and
provide insurance as well as perform all other covenants and undertakings
contained in the Original Lease.
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<PAGE> 2
23. As additional consideration for the execution of this Agreement,
Lessee agrees that the obligations created hereby shall be expressly assumed by
any successor of Lessee, by merger or otherwise, to ensure that Lessor gets the
benefit of the five (5) year term herein granted to Lessee upon the terms and
conditions herein stipulated.
24. All rent payable and notices given under this Lease to Lessor
shall be at 308 Lucerne Avenue, Lake worth, Florida 33460.
25. Lessor and Lessee reaffirm all of the obligations set forth in the
Original Lease, except to the extent herein modified and agree to perform each
and all of the covenants, agreements and obligations in the Original Lease.
26. Except as specifically set forth and provided herein, each and
every one of the terms, conditions, covenants and stipulations of the Original
Lease shall remain in full force and effect.
27. This instrument may be executed in one or more counterparts, each
one of which shall be deemed an original. This instrument shall bind the Parties
and inure to the benefit of their heirs, personal representatives, and assigns.
IN WITNESS THEREOF, the Parties by these presents have executed this
Agreement by subscribing their names and affixing their seal the date and year
first above written.
TWO WITNESSES REQUIRED AS
TO EACH:
/s/ Lawrence R. Gamer
- -------------------------- ------------------------------------
Lawrence R. Gamer
- --------------------------
/s/ Kathleen J. Hooper
- -------------------------- ------------------------------------
Kathleen J. Hooper
- --------------------------
-2-
<PAGE> 3
CLEWISTON NATIONAL BANK
- --------------------------------
By: /s/ John H. Holmes
- -------------------------------- ---------------------------
President
STATE OF FLORIDA )
SS.:
COUNTY OF PALM BEACH )
BEFORE ME, the undersigned authority, personally appeared LAWRENCE R.
GAMER who is personally known to me or has produced Florida Driver's License No.
______________ as identification and who did (did not) take an oath and, after
being duly cautioned and sworn, deposes and says that the information contained
in the above MODIFICATION AND LEASE EXTENSION AGREEMENT is true and correct to
the best of his knowledge and belief.
Sworn to and subscribed before me this 25th day of April, 1996.
/s/ Elaine Smith
---------------------------
Notary Public
State of Florida
My commission expires:
My commission number:
-3-
<PAGE> 4
STATE OF OREGON )
SS.:
COUNTY OF CLACKAMAS )
BEFORE ME, the undersigned authority, personally appeared KATHLEEN J.
HOOPER who is personally known to me or has produced Oregon Driver's License No.
3500863 as identification and who did (did not) take an oath and, after being
duly cautioned and sworn, deposes and says that the information contained in the
above MODIFICATION AND LEASE EXTENSION AGREEMENT is true and correct to the best
of his knowledge and belief.
Sworn to and subscribed before me this 2nd day of May, 1996.
/s/ Julie M. Howland
---------------------------
Notary Public
State of Oregon
My commission expires:
My commission number:
STATE OF FLORIDA )
SS.:
COUNTY OF HENDRY )
BEFORE ME, the undersigned authority, personally appeared JOHN H. HOLMES,
President of CLEWISTON NATIONAL BANK who is personally known to me or has
produced Florida Driver's License No. ______________ as identification and who
did (did not) take an oath and, after being duly cautioned and sworn, deposes
and says that the information contained in the above MODIFICATION AND LEASE
EXTENSION AGREEMENT is true and correct to the best of his knowledge and belief.
Sworn to and subscribed before me this 12th day of June, 1996.
/s/ Nanette M. Schmiedeberg
---------------------------
Notary Public
State of Florida
My commission expires:
My commission number:
-4-
<PAGE> 5
LEASE
THIS LEASE AGREEMENT, made and entered into this 1st day of April, 1981,
by and between EARL R. GAMER, as party of the first part and hereinafter
referred to as the "Lessor," and CLEWISTON NATIONAL BANK, a national banking
association existing under the laws of the United States of America, as party of
the second part, and hereinafter referred to as the "Lessee." The Lessor and
Lessee, each in consideration of the agreements to be performed by the other,
hereby agree:
1. Property and Term: The Lessor hereby leases to the Lessee the real
property in Clewiston, Hendry County, Florida, described as:
Lots 21, 22, 23 and 24, Block 167, General Plan of Clewiston, Florida, as
revised September 7, 1937, according to plat thereof recorded in Plat
Book 2, pages 71-78, inclusive, Public Records of Hendry County, Florida.
for a term of fifteen (15) years beginning on April 1, 1981, and ending March
31, 1996.
2. Rent: The Lessee will pay to the Lessor the sum of $700.00 per
month in advance during the first five (5) years of this Lease. Commencing April
1, 1986, and for the next ensuing five (5) years, Lessee will pay Lessor as
monthly rent under this Lease the sum of $700.00 per month increased by the same
percentage which the Consumer Price Index has increased between 1980 and 1985,
both inclusive, or $100.00, whichever is less, plus the sum of $100.00; provided
the maximum monthly rental shall not exceed the sum of $900.00.
Commencing April 1, 1991, and for the next ensuing five (5) years,
Lessee will pay Lessor as monthly rent the sum of $700.00 per month, increased
by the same percentage which the Consumer Price Index has increased between the
years 1980 and 1990, both inclusive, or the sum of $200.00, whichever is less,
plus the sum of $200.00; provided the total monthly rental shall not exceed the
sum of $1,100.00.
In addition to the foregoing, Lessee will pay Lessor the Florida
state sales tax due on said rental, if applicable. As used in this Paragraph,
the Consumer Price Index shall mean the Consumer Prices for all items as
published by the U.S. Department of Commerce, Bureau of Economic Analysis (1967
= 100).
3. Use: The parties agree that at the commencement of this Lease the
property is unimproved. The Lessee shall have the right to construct a building
for a branch office of its bank, including drive-in teller facilities, all in
accordance with the plans and specifications attached hereto as Exhibit A and
by reference made part hereof. Lessee shall have the right to further expand
the office and drive-in facility during the lease term without the consent of
the Lessor. The parties agree that the branch office building and drive-in
facilities will become part of the real estate and will remain the property of
the Lessor at the end of the lease term or extension thereof. The parties agree
that all of the equipment, fixtures and advertising signs installed on the
leased
-1-
<PAGE> 6
premises will not become part of the real estate, but will remain the property
of the Lessee. The Lessor will have no responsibility for the maintenance or
repair of any improvements placed on the property by the Lessee. In event of
termination or expiration of this Lease, the Lessee will have a reasonable time
after such termination or expiration within which to remove its equipment,
fixtures and advertising signs. Lessee will make no unlawful, improper or
offensive use of the leased property.
4. Liens or Encumbrances: The parties agree that the interest of the
Lessor shall not be subject to liens for improvements made by the Lessee, and
such liens are hereby specifically prohibited. All persons dealing with the
Lessee in connection with the premises or furnishing labor, services or material
for improvements upon the premises shall be bound by the provision herein
contained. Should a Claim of Lien be filed in the Public Records against the
leased premises for improvements made by Lessee. Lessee shall cause same to be
removed from the Public Records within forty-five (45) days of the filing
thereof either by payment or transferring said Claim of lien to a bond.
5. Real Property and Drainage Taxes: During the term of this Lease,
the Lessee will pay all ad valorem real property taxes and drainage taxes levied
against the property whether such taxes be imposed against the land or the
improvements placed thereon and whether imposed against the Lessor's property or
Lessee's property. Said ad valorem real property taxes and drainage taxes for
the year 1981 and the ending year of the Lease will be prorated.
6. Assignment or Sub-Leasing: No assignment of this Lease or
sub-leasing of any part of the leased property, by the Lessee or any assignee or
sub-lessee, shall be valid without the written consent of the Lessor, but that
consent shall not reasonably be withheld. No assignment or subleasing shall
relieve the assignor or sub-lessor of any obligation under this Lease. Each
Assignee or sub-lessee shall, by assuming that status, become obligated to
perform every agreement of this Lease to be performed by the Lessee; except that
a sub-lessee shall be obligated to perform them only in so far as they relate to
that part of the property sub-leased and the rent required by the sublease, and
shall be obligated to pay directly to the Lessor only after default in payment
by the sub-lessor and written demand from the Lessor to pay rent directly to the
Lessor.
7. Insurance: The Lessee will carry public liability Insurance with
limits of liability of $100,000/$300,000/$25,000, insuring the Lessor and the
Lessee against liability by reason of injury to persons or damage to property
occurring on the premises, and the Lessee will furnish Lessor with a certificate
showing that such coverage is in effect. The Lessee will carry fire and extended
coverage insurance on the building and drive-in facility in a sum equal to the
full insurable value. Said fire and extended coverage policy shall show Lessor
as an additional insured to the extent of his interest in the building and
drive-in facilities.
8. Lessee's Covenants: The Lessee covenants and agrees to pay the
rental specified without demand to the Lessor at the address stated herein; to
comply with all applicable rules and regulations of any governmental or
municipal authority; to pay for all utilities and other services furnished to
the premises; not to permit any lien to arise or to be created against the
premises by
-2-
<PAGE> 7
reason of any act or thing done by the Lessee; to pay all ad valorem real
property taxes and drainage taxes levied against the property; to save the
Lessor harmless from any liability and damage by reason of injury to personal
property upon the premises; and to quit and surrender the premises at the end
of the term or any extension thereof.
9. Lessor's Covenants: The Lessor covenants and agrees that he is
lawfully seized of the premises and that the Lessee will have peaceful,
undisputed possession and quiet enjoyment of the premises during the term of
this lease or any extension thereof.
10. Addresses: All rent payable and notice given under this Lease to
the Lessor shall be paid and given at 112 Lake Avenue, Lake worth, Florida
33460, or at such other place as the Lessor shall specify in writing. All
notices given under this Lease to Lessee shall be given at 940 West Ventura
Avenue, Clewiston, Florida 33440. All notices given under this Lease to any
assignee or sub-lessee of the Lessee shall be given at the leased premises. Any
notice properly mailed by certified mail, postage and fee prepaid, shall be
deemed delivered when mailed, whether received or not.
11. Remedies for Breach of Agreement: If either the Lessor or the
Lessee shall fail to perform, or shall breach any agreement of this Lease, for
ten (10) days after a written notice specifying the performance required shall
have been given to the party failing to perform, the party so giving notice may
institute action in a court of competent jurisdiction to terminate this Lease or
to compel performance of the agreement, and the prevailing party in that
litigation shall be paid by the losing party all expense, including a reasonable
attorney's fee and court costs. In the event the performance required to remedy
the breach will by its nature take longer than ten (10) days, and the party
whose performance is required shall commence a bona fide effort to remedy the
breach within said ten (10) day period, then, in that event, there shall be no
breach hereunder so long as said bona fide effort is continued and completed as
expeditiously as possible.
12. Option to Renew: Lessee shall have the option to renew this Lease
for an additional five (5) year term by giving lessor at least sixty (60) days
written notice prior to the expiration of this Lease. The Lease shall be renewed
on the same terms and conditions as the initial fifteen (14) year term, but
there shall be no further option to renew. Commencing on April 1, 1996, and for
the next ensuing five (5) years, Lessee will pay Lessor as monthly rent the sum
of $1,000.00 per month, increased by the same percentage which the Consumer
Price Index has increased between the years 1980 and 1995, both inclusive, or
the sum of $300.00, whichever is less, plus the sum of $300.00; provided that
the total monthly rental shall not exceed the sum of $1,600.00. Lessee shall
also pay Lessor the Florida state sales tax on said rental, if applicable. The
same Consumer Price Index used in Paragraph 2 of this Lease shall be used in
this Paragraph.
13. Right of First Refusal: In the event the Lessor receives a bona
fide written offer to purchase the leased premises at any time during the
initial fifteen (15) year term, or the five (5) year extension thereof, then
Lessor shall offer to sell the leased property to the Lessee for the same price
and terms and conditions as said bona fide written offer. A copy of said written
offer shall be furnished to Lessee. Lessee shall have thirty (30) days within
which to exercise his first right of
-3-
<PAGE> 8
refusal, and if it is not so exercised in writing within said thirty (30) day
period said right shall expire and Lessor shall be free to sell said property
on said same terms and conditions; provided, if said property is not sold to
the person and firm who has made said bona fide offer on said same terms and
conditions, then this first right of refusal shall not expire but shall
continue in effect. Lessor shall have the right to sell the leased property to
his relatives, and the right of first refusal given Lessee hereunder shall to
apply to that sale and transfer.
14. Effectiveness; The effectiveness of this Lease is conditioned upon
Lessor furnishing the following documents in a form which are recordable in the
Public Records of Hendry County, to-wit:
(a) A written release of that certain Lease dated June 1, 1969,
between MOLLY MANDAU, as Lessor and Rock & Stones, Inc., a Florida corporation
as Lessee, which had a fifteen (14) year term; and
(b) A reassignment of the above described Lease from National
Biff-Burger System to Rocks & Stones, Inc.
15. Miscellaneous: This Lease is executed in triplicate, each to be
taken as an original. This Lease contains the entire agreement between the
parties and there are no prior or agreements contemporaneous oral agreements
between the parties pertaining to the subject matter of this Lease. There shall
be no canon of interpretation against the Lessee by virtue of its having
prepared this Lease. This Lease shall be binding upon the heirs, personal
representatives, successors and assigns of the respective parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.
Witnesses as to Gamer:
- ---------------------------- --------------------------------
- ----------------------------
-4-
<PAGE> 9
Witnesses as to Lessee: CLEWISTON NATIONAL BANK
- ------------------------------- By:
-----------------------------
- ------------------------------- Ival G. Combs
Executive Vice President
ATTEST:
- -------------------------------
James Kulczy, Cashier
STATE OF FLORIDA
COUNTY OF HENDRY
The foregoing instrument was acknowledged before me this 15th day of
April, 1981, by Earl R. Gamer.
----------------------------
Notary Public
State of Florida
My commission expires:
STATE OF FLORIDA
COUNTY OF HENDRY
The foregoing instrument was acknowledged before me this ____ day of
_______, 1981, by Ival G. Combs and James Kulczy, Executive Vice President and
Cashier, respectively of Clewiston National Bank, a national banking association
existing under the laws of the United States of America, on behalf of the
association.
--------------------------
Notary Public
State of Florida
My commission expires:
Instrument prepared by:
JACK J. RAFTER, JR., ATTORNEY
208 West Ventura Avenue
Clewiston, Florida 33440
-5-
<PAGE> 10
RELEASE
KNOW ALL MEN BY THESE PRESENTS, that Rocks & Stones, Inc., a Florida
corporation, for and n consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration paid by or on behalf of Molly Mandau, does
hereby release, remise and quit claim unto Molly Mandau all of its interest in
and to that certain unrecorded Lease dated June 1, 1969 wherein Molly Mandau was
Lessor and Rocks & Stones, Inc., a Florida Corporation was Lessee on that
certain Lease of a fifteen year (15) term covering the following described real
property in Hendry County, Florida, to wit:
Lots 21, 22, 23 and 24, Block 167, General Plan of Clewiston,
Florida, as revised September 7, 1937, according to the plat
thereof recorded in Plat Book 2, Pages 71-78, inclusive, Public
Records of Hendry County, Florida.
TO HAVE AND TO HOLD to Molly Mandau, her heirs, Personal Representative,
Successors and Assigns forever.
IN WITNESS WHEREOF Rocks & Stones, Inc., a Florida corporation, has
caused these presents to be executed by its proper officers and its corporate
seal to be affixed as of this 15th day of April, 1981.
Witnesses: ROCKS & STONES, INC., a Florida
corporation
By:
- ---------------------------- ---------------------------------------
Billy H. Bryant, President
- ----------------------------
Attest:
------------------------------------------
Susan C. Bryant
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 15th day of
April, 1981, by Billy H. Bryant, President and Susan C. Bryant, Secretary,
respectfully of Rocks & Stones, Inc., a Florida corporation, on behalf of the
corporation.
-----------------------------------
Notary Public
State of Florida at Large
<PAGE> 11
QUIT CLAIM DEED
THIS QUIT CLAIM DEED, executed this 2nd day of March, 1981, by MOLLIE
MANDAU, a single person, first party, to EARL R. GAMER, whose post office
address is ________________________, second party:
(Wherever used herein the terms "first party" and "second party" shall
include singular and plural, heirs, legal representatives, and assigns of
individuals, and the successors and assigns of corporations, wherever the
context so admits or requires.)
WITNESSETH, That the said first party, for and in consideration of the
sum of $10.00 in hand paid by the said second party, the receipt whereof is
hereby acknowledged, does hereby remise, release and quitclaim unto the said
second party forever, all the right, title, interest, claim and demand which the
said first party has in and to the following described lot, piece or parcel of
land, situate, lying and being in the County of Hendry, State of Florida,
to-wit:
A certain parcel of land with the dimensions of 120 feet by 125 feet,
located on Route 27 in the City of Clewiston, Florida, ALSO KNOWN as Lots
Twenty-One (21), Twenty-two (22), Twenty-three (23) and Twenty-Four (24),
Block One Hundred Sixty-Seven (167), of the GENERAL PLAN OF CLEWISTON,
Florida, as revised September 7, 1937, according to the Plan thereof
recorded in Plat Book 2, pages 71-78, inclusive, of the Public Records of
Hendry County, Florida.
TO HAVE AND TO HOLD the same together with all and singular the
appurtenances thereunto belonging or in anywise appertaining, and all the
estate, right, title, interest, lien, equity and claim whatsoever of the said
first party, either in law or equity, to the only proper use, benefit and behoof
of the said second party forever.
IN WITNESS WHEREOF, The said first party has signed and sealed these
presents the day and year first above written.
Signed, sealed and delivered in presence of:
- ------------------------ --------------------------
Mollie Mandau
- ------------------------
STATE OF FLORIDA
COUNTY OF
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
int he State aforesaid and int he County aforesaid to take acknowledgments,
personally appeared MOLLIE MANDAU to me known to be the person described in and
who executed the foregoing instrument and who acknowledged before me that she
executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 2nd day of March, 1981.
------------------------------
Notary Public
State of
This instrument prepared by:
Ronald E. Young
2601 Tenth Avenue North, Suite 314
Lake Worth, Florida 33461
<PAGE> 1
EXHIBIT 21
SUBSIDIARY OF BIG LAKE FINANCIAL CORPORATION
The sole subsidiary of Big Lake Financial Corporation is Big Lake
National Bank, a national banking association organized and existing under the
laws of the United States.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this registration statement of (i) our report
dated February 13, 1997, except as to the fourth paragraph in the report and
Note 16 to the financial statements which are as of April 4, 1997, relating to
the Consolidated Financial Statements of CNB Financial Corporation as of
December 31, 1996 and 1995, and for each of the years in the two-year period
then ended, (ii) to the use of our report dated January 24, 1997, relating to
the Consolidated Financial Statements of Big Lake Financial Corporation as of
December 31, 1996 and 1995, and for each of the years in the two-year period
then ended, and (iii) and to the use of our name under the captions of "The
Merger Federal Income Tax Considerations" and "Experts" in the Form S-4
Registration Statement of Big Lake Financial Corporation.
STEVENS, THOMAS, SCHEMER & SPARKS, P.A.
Jacksonville, Florida
June 30, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT
We hereby consent to the use of our name under the caption "Legal
Matters" in the Form S-4 Registration Statement of Big Lake Financial
Corporation.
Humphey & Knott, P.A.
Fort Myers, Florida
June 23, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT
CNB Financial Corporation
940 W. Ventura Avenue
Clewiston, Florida 33440
and
Big Lake Financial Corporation
1409 South Parrott Avenue
Okeechobee, Florida 34974
We hereby consent to the discussion relative to our opinion delivered to
the Board of Directors of CNB Financial Corporation, Clewiston, Florida, in
connection with its proposed merger with Big Lake Financial Corporation,
Okeechobee, Florida, in the Proxy Statement included in Big Lake Financial
Corporation's Registration Statement on Form S-4 under the heading "Opinion of
Financial Advisor," to the references to our firm in such Proxy Statement, and
to the inclusion of such opinion as an appendix to the Proxy Statement.
William R Hough & Co.
St. Petersburg, Florida
By: /s/ Ronald W. Goff
----------------------------
June 14, 1997
<PAGE> 1
EXHIBIT 23.4
JUNE 27, 1997
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the references to our firm in the Proxy Statement
included in Big Lake Financial Corporation's Registration Statement on Form
S-4.
Mercer Capital Management, Inc.
By: /s/ Jeff K. Davis, ASA, CFA
----------------------------
Vice President
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned officers and directors of Big Lake Financial
Corporation (the "Corporation") hereby appoints Edwin E. Walpole, III and Joe G.
Mullins, as his or her attorneys, and any of them, with power to act without the
other, as his or her attorney, to sign on his or her behalf and in any and all
capacities stated below, and to cause to be filed with the Securities and
Exchange Commission (the "Commission"), the Corporation's Registration Statement
on Form S-4 (the "Registration Statement") for the purpose of registering under
the Securities Act of 1933, as amended, shares of the Common Stock, Par Value
$.01 per share, of the Corporation in connection with the proposed merger of CNB
Financial Corporation with and into the Corporation, and any and all amendments,
including post-effective amendments, to the Registration Statement, hereby
granting to such attorneys, and to each of them individually, full power and
authority to do and perform in the name and on behalf of each of the
undersigned, and in any and all such capacities, every act and thing whatsoever
necessary to be done in and about the premises as fully as the undersigned could
or might do in person, hereby granting to each such attorney-in-fact full power
of substitution and revocation and hereby ratifying all that any such
attorney-in-fact or his or her substitute may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have signed these presents this
30th day of June, 1997.
SIGNATURE TITLE
--------- -----
/s/ Edwin E. Walpole, III Chairman of the Board, President
- -------------------------------- and Chief Executive Officer and
Edwin E. Walpole, III Director
/s/ Anita DeWitt Treasurer
- -------------------------------- (Principal Financial Officer
Anita DeWitt and Principal Accounting
Officer)
/s/ Joe G. Mullins Executive Vice President and Chief
- -------------------------------- Administrative Officer and Director
Joe G. Mullins
/s/ John W. Abney, Sr. Director
- --------------------------------
John W. Abney, Sr.
/s/ Mary Beth Cooper Director
- --------------------------------
Mary Beth Cooper
<PAGE> 2
/s/ H. Gilbert Culbreth, Jr. Director
- --------------------------------
H. Gilbert Culbreth, Jr.
/s/ Henry C. Kelly Director
- --------------------------------
Henry C. Kelly
/s/ Bobby H. Tucker Director
- --------------------------------
Bobby H. Tucker
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BIG LAKE
FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED AND PARENT COMPANY ONLY
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT FOR THE YEARS' ENDED
DECEMBER 31, 1996 AND 1995 ("AUDITED REPORT") AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH AUDITED REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,410
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 992
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,215
<INVESTMENTS-CARRYING> 801
<INVESTMENTS-MARKET> 823
<LOANS> 36,732
<ALLOWANCE> 470
<TOTAL-ASSETS> 59,518
<DEPOSITS> 54,245
<SHORT-TERM> 0
<LIABILITIES-OTHER> 419
<LONG-TERM> 0
0
0
<COMMON> 3
<OTHER-SE> 4,851
<TOTAL-LIABILITIES-AND-EQUITY> 59,518
<INTEREST-LOAN> 3,088
<INTEREST-INVEST> 1,042
<INTEREST-OTHER> 99
<INTEREST-TOTAL> 4,229
<INTEREST-DEPOSIT> 1,736
<INTEREST-EXPENSE> 1,736
<INTEREST-INCOME-NET> 2,493
<LOAN-LOSSES> 132
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,112
<INCOME-PRETAX> 838
<INCOME-PRE-EXTRAORDINARY> 838
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 551
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<YIELD-ACTUAL> 8.17
<LOANS-NON> 111
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 363
<CHARGE-OFFS> 46
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 470
<ALLOWANCE-DOMESTIC> 470
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,018
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,766
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,871
<INVESTMENTS-CARRYING> 801
<INVESTMENTS-MARKET> 817
<LOANS> 40,056
<ALLOWANCE> 492
<TOTAL-ASSETS> 62,810
<DEPOSITS> 57,376
<SHORT-TERM> 0
<LIABILITIES-OTHER> 480
<LONG-TERM> 0
0
0
<COMMON> 3
<OTHER-SE> 4,951
<TOTAL-LIABILITIES-AND-EQUITY> 62,810
<INTEREST-LOAN> 887
<INTEREST-INVEST> 236
<INTEREST-OTHER> 34
<INTEREST-TOTAL> 1,157
<INTEREST-DEPOSIT> 442
<INTEREST-EXPENSE> 442
<INTEREST-INCOME-NET> 715
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 612
<INCOME-PRETAX> 259
<INCOME-PRE-EXTRAORDINARY> 259
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<YIELD-ACTUAL> 8.15
<LOANS-NON> 238
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 470
<CHARGE-OFFS> 3
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 492
<ALLOWANCE-DOMESTIC> 492
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CNB FINANCIAL CORPORATION
Revocable Proxy Solicited by the Board of Directors
for the Special Meeting of Shareholders
To Be Held on __________, 1997
The undersigned hereby appoints the Board of Directors of CNB Financial
Corporation ("CNB"), with full power of substitution, proxy to vote all shares
of common stock of CNB that the undersigned may be entitled to vote at the
Special Meeting of Shareholders to be held at CNB's office located at 950 West
Ventura Avenue, Clewiston, Florida 33440 on __________, 1997, and at any
adjournment or postponement thereof (the "Special Meeting").
Said proxy will vote on the proposal set forth in the Notice of Special
Meeting and the Proxy Statement as specified on this card and is authorized to
vote in his discretion as to any other business that may come properly before
the Special Meeting. If no vote is specified, said proxy will vote in favor of
the following proposal:
1. FOR ____ OR AGAINST ____ OR ABSTAIN FROM VOTING ON ____ the proposal to
authorize, adopt and approve the Amended and Restated Agreement and Plan of
Reorganization between CNB Financial Corporation, Big Lake Financial
Corporation, Clewiston National Bank and Big Lake National Bank.
PLEASE MARK, SIGN BELOW, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
FURNISHED.
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
DATED , 1997
-------- -- ---------------------------------------
Signature
---------------------------------------
Signature (if held jointly)
