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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-15518
ALLIED BANKSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1599653
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
P.O. BOX 1020 30824
149 MAIN STREET (ZIP CODE)
THOMSON, GEORGIA
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
(706) 595-9500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
TITLE OF EACH CLASS
Common stock, $1 Par Value
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ___
As of January 31, 1996, 12,611,622 common shares were outstanding, and the
aggregate market value of the common shares of Allied Bankshares, Inc. held by
non affiliates was approximately $83.6 million.
Portions of the following documents have been incorporated by reference into
the designated part of this 10-K.
Registrant's Proxy Statement
dated March 13, 1996 Part III, Items 10, 11, 12 and 13.
Registrant's Annual Report to Part I, Items 1 and 2;
Stockholders for the year ended Part II, Items 5, 6, 7 and Part IV,
December 31, 1995 Item 14.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Thomson, Georgia on
March 11, 1996.
ALLIED BANKSHARES, INC.
By: /s/ BOONE A. KNOX
-----------------------------------
Boone A. Knox
(CHAIRMAN OF THE BOARD
OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER)
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, this report has been signed by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- ----------------------------------- ------------------
<S> <C> <C>
/s/ BOONE A. KNOX Chairman of the Board March 11, 1996
- -------------------------------- of Directors and
Boone A. Knox Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
/s/ BEN O. HOWELL, JR. Secretary-Treasurer and March 11, 1996
- -------------------------------- Chief Financial Officer
Ben O. Howell, Jr.
(PRINCIPAL ACCOUNTING AND FINANCIAL
OFFICER)
/s/ BOONE A. KNOX Director March 11, 1996
- --------------------------------
Boone A. Knox
/s/ ROBERT E. KNOX, JR. Director March 11, 1996
- --------------------------------
Robert E. Knox, Jr.
/s/ JOHN W. LEE Director March 11, 1996
- --------------------------------
John W. Lee
/s/ BROOKS PENNINGTON Director March 11, 1996
- --------------------------------
Brooks Pennington
/s/ BROOKS PENNINGTON, III Director March 11, 1996
- --------------------------------
Brooks Pennington, III
/s/ JAMES H. RIGSBY, JR. Director March 11, 1996
- --------------------------------
James H. Rigsby, Jr.
/s/ JAMES E. WILSON, JR. Director March 11, 1996
- --------------------------------
James E. Wilson, Jr.
/s/ JACK B. SMITH Director March 11, 1996
- --------------------------------
Jack B. Smith
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibits marked with an asterisk are filed herewith. The remainder of the
exhibits have heretofore been filed with the commission and are incorporated by
reference.
<TABLE>
<CAPTION>
LOCATION IS
SEQUENTIAL
EXHIBIT NUMBER
NUMBER DESCRIPTION SYSTEM
- ------------ ----------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation Incorporated by reference to Exhibit
3.1 of Form S-18, filed February 19,
1987
3.2* By-Laws, amended and restated as of February 23, 1995 Page
13.1* 1995 Annual Report to Shareholders Page
21 * List of Subsidiaries Page of exhibit 13.1
</TABLE>
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EXHIBIT 3.2
BY-LAWS
OF
ALLIED BANKSHARES, INC.
Amended and Restated
as of February 23, 1995
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BY-LAWS
TABLE OF CONTENTS
ARTICLE ONE - OFFICERS
Section 1.1 Registered Office
Section 1.2 Other Offices
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings
Section 2.2 Annual Meetings
Section 2.3 Substitute Annual Meetings
Section 2.4 Special Meetings
Section 2.5 Notice of Meetings
Section 2.6 Quorum
Section 2.7 Voting of Shares
Section 2.8 Proxies
Section 2.9 Presiding Officer
Section 2.10 Adjournments
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers
Section 3.2 Requirements
Section 3.3 Number, Election, Class and
Term of Office
Section 3.4 Oath of Directors
Section 3.5 Removal
Section 3.6 Vacancies
Section 3.7 Compensation
Section 3.8 Committees of the Board of
Directors
Section 3.9 Honorary and Advisory
Directors
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings
Section 4.2 Special Meetings
Section 4.3 Place of Meetings
Section 4.4 Notice of Meetings
Section 4.5 Quorum
Section 4.6 Vote Required for Action
Section 4.7 Action by Directors Without
A Meeting
ARTICLE FIVE - NOTICE AND WAIVER
Section 5.1 Procedure
Section 5.2 Waiver
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ARTICLE SIX - OFFICERS
Section 6.1 Number
Section 6.2 Election and Term
Section 6.3 Compensation
Section 6.4 Removal
Section 6.5 Chairman of the Board
Section 6.6 President
Section 6.7 Secretary
ARTICLE SEVEN - DIVIDENDS
Section 7.1 Time and Conditions of
Declaration
Section 7.2 Share Dividends - Treasury
Shares
Section 7.3 Share Dividends - Unissued
Shares
Section 7.4 Share Splits
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of
Shares
Section 8.2 Share Certificates
Section 8.3 Rights of Corporation With
Respect to Registered Owners
Section 8.4 Transfer of Shares
Section 8.5 Duty of Corporation to Register
Transfer
Section 8.6 Lost, Stolen, or Destroyed
Certificates
Section 8.7 Fixing of Record Date
Section 8.8 Record Date if None Fixed
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Indemnification
Section 9.2 Payment of Expense in Advance
Section 9.3 Insurance
Section 9.4 Rights Not Exclusive
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and
Records
Section 10.2 Fiscal Year
Section 10.3 Seal
Section 10.4 Annual Statements
Section 10.5 Contracts, Checks, Drafts
Reports, Etc.
Section 10.6 Legal Restrictions
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Section 10.7 Conflict
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend By-Laws
Section 11.2 Conditions
Section 11.3 Inspection
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ARTICLE ONE
OFFICES
Section 1.1 REGISTERED OFFICE. The corporation shall maintain its
registered office in the City of Thomson, McDuffie County, Georgia. In the
event the main office is relocated then the registered office shall follow the
main office and shall be designated by the Board of Directors.
Section 1.2 OTHER OFFICES. In addition to the registered office, the
corporation also may have offices at such other place or places as the Board of
Directors may from time to time select, or as the business of the corporation
may require or make desirable.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
Section 2.1 PLACE OF MEETINGS. Meetings of the shareholders of the
corporation may be held at any place as set forth in the notice thereof or if no
place is so specified, then at the registered office of the corporation.
Section 2.2 ANNUAL MEETINGS. The annual meeting of shareholders of the
corporation shall be held on the second Tuesday in April or as soon thereafter
as reasonably practical on a date fixed by the Board of Directors for the
purpose of electing directors and transacting any and all business that may
properly come before the meeting.
Section 2.3 SUBSTITUTE ANNUAL MEETINGS. If the annual meeting is not
held on the day designated in Section 2.2, any business, including the election
of directors, which might properly have been acted upon at the meeting may be
transacted at any subsequent shareholders' meeting held pursuant to these by-
laws or held pursuant to a court order requiring a substitute annual meeting.
Section 2.4 SPECIAL MEETINGS. Special meetings of shareholders or a
special meeting in lieu of the annual meeting of shareholders shall be called by
the corporation upon the written request of the holders of twenty-five percent
or more of all the shares of capital stock of the corporation entitled to vote
in an election of directors. Special meetings of the shareholders or a special
meeting in lieu of the annual meeting of shareholders may be called at any time
by the President, Chairman of the Board, or a majority of the Board of
Directors.
Section 2.5 NOTICE OF MEETINGS. Unless waived as contemplated in Section
5.2, or by attendance at the meeting, either in person or by proxy, for any
purpose other than to object at the beginning of the meeting to the transaction
of business at the meeting, a written or printed notice of each shareholders'
meeting setting the place, day and hour of the meeting shall be delivered not
less than ten days, nor more than fifty days, before the date thereof, either
personally, by mail, or by telegram, charges prepaid, by or at the direction of
the Chairman, President, Secretary, or the officer or persons calling the
meeting, to each shareholder of records entitled to vote at such meeting. In
the case of an annual or substitute annual meeting, the notice of the meeting
need
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not state the purpose or purposes of the meeting unless the purpose or purposes
constitute a matter which the Georgia Business Corporation Code requires to be
stated in the notice of the meeting. In the case of a special meeting, the
notice of the meeting shall state the general nature of the business to be
transacted.
Section 2.6 QUORUM. At all meetings of the shareholders, the presence in
person or by proxy of the holders of more than one-half of the shares
outstanding and entitled to vote shall constitute a quorum. If a quorum is
present, a majority of the shares represented at the meeting and entitled to
vote on the subject matter shall determine any matter coming before the meeting
unless a different vote is required by the Georgia Business Corporation Code, by
the articles of incorporation of the corporation or by these by-laws. The
shareholders at a meeting at which a quorum is once present may continue to
transact business at the meeting or at any adjournment thereof, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. If a meeting
cannot be organized for lack of a quorum, those shareholders present may adjourn
the meeting to such time and place as they may determine. In the case of a
meeting for the election of directors which is twice adjourned for lack of a
quorum, those present at the second of such adjourned meetings shall constitute
a quorum for the election of directors without regard to the other quorum
requirements of the articles of incorporation of the corporation or by these by-
laws.
Section 2.7 VOTING OF SHARES. Each outstanding share having voting
rights shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. Voting on all matters shall be by voice vote or by
show of hands unless any qualified voter, prior to the voting on any matter,
demands vote by ballot, in which case each ballot shall state the name of the
shareholder voting and the number of shares voted by him, and if such ballot be
cast by proxy, it shall also state the name of such proxy.
Section 2.8 PROXIES. A shareholder entitled to vote pursuant to Section
2.7 may vote in person or by proxy executed in writing by the shareholder or by
his attorney in fact. A proxy shall not be valid after eleven months from the
date of its execution, unless a longer period is expressly stated therein. If
the validity of any proxy is questioned it must be submitted to the secretary of
the shareholders meeting for examination or to a proxy officer or committee
appointed by the person presiding at the meeting. The secretary of the meeting
or, if appointed, the proxy officer or committee, shall determine the validity
or invalidity of any proxy submitted and references by the secretary in the
minutes of the meeting to the regularity of a proxy shall be received as prima
facie evidence of the facts stated for the purpose of establishing the presence
of a quorum at such meeting and all other purposes.
Section 2.9 PRESIDING OFFICER. The Chairman of the Board of Directors
or, in the absence of a Chairman of the Board of Directors, the President, shall
serve as chairman of every shareholders meeting unless some other person is
elected to serve as chairman by a majority vote of the shares represented at the
meeting. The Chairman shall appoint such persons as he deems required to assist
with the meeting.
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Section 2.10 ADJOURNMENTS. Any meeting of the shareholders, whether or
not a quorum is present, may be adjourned by the holders of a majority of the
voting shares represented at the meeting to reconvene at a specific time and
place. Except as otherwise provided by Section 2.6, it shall not be necessary
to give any notice of the reconvened meeting or of the business to be
transacted, if the time and place of the reconvened meeting are announced at the
meeting which was adjourned. At any such reconvened meeting, any business may
be transacted which could have been transacted at the meeting which was
adjourned.
ARTICLE THREE
THE BOARD OF DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by the Board of Directors. In addition to the powers and
authority expressly conferred upon it by these by-laws, the Board of Directors
may exercise all such powers of the corporation, except for any action as may be
required by law, by any legal agreement among shareholders, by the articles of
incorporation, or by these by-laws to be taken or done by the shareholders.
Section 3.2 REQUIREMENTS. Each director of the corporation shall be a
natural person eighteen years of age or older and shall be a United States
citizen, but need not be a resident of Georgia.
Section 3.3 NUMBER, ELECTION, CLASS AND TERM OF OFFICE. The Board of
Directors of the corporation shall consist of not fewer than five nor more than
twenty-five persons, with the exact number within such minimum and maximum
number to be fixed and determined from time to time by resolution of the Board
of Directors or by resolution of the shareholders at any annual or special
meeting of the shareholders. Except as provided in Section 3.6, the directors
shall be elected by the affirmative vote of a majority of the shares represented
at the annual meeting of shareholders. Each director, except in the case of his
earlier death, resignation, retirement, disqualification or removal, shall serve
until the next succeeding annual meeting and thereafter until his successor
shall have been elected and qualified.
Section 3.4 OATH OF DIRECTORS. Before assuming office, each director
shall take an oath or affirmation that he shall diligently and honestly perform
his duties in the administration of the corporation and that he will not permit
a willful violation of laws by the corporation.
Section 3.5 REMOVAL. The entire Board of Directors or any individual
director may be removed from office with or without cause by the affirmative
vote of the holders of two-thirds of the shares entitled to vote at an election
of directors. In addition, the Board of Directors may remove a director from
office if such director is adjudicated as incompetent by a court, if he is
convicted of a felony, if he does not within sixty day of his election, accept
the office in writing or by attendance at a meeting of the Board of Directors
and fulfill any other requirements for holding the office of director or he
fails to attend regular meetings of the Board of Directors for three consecutive
meetings without having been excused by the Board of Directors.
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Section 3.6 VACANCIES. A vacancy occurring in the Board of Directors
through death, resignation, retirement, disqualification or removal may be
filled for the unexpired term and until the shareholders have elected a
successor by the affirmative vote of a majority of the directors remaining in
office though less than a quorum of the Board of Directors.
Section 3.7 COMPENSATION. Directors may receive such compensation for
their service as directors as may from time to time be fixed by vote of the
Board of Directors. A director may also serve the corporation in a capacity
other than that of director and receive compensation, as determined by the Board
of Directors, for services rendered in such other capacity.
Section 3.8 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors,
by resolution adopted by a majority of the full Board of Directors, may
designate from among its members an executive committee and one or more other
committees, each consisting of three or more directors. Each committee shall
have the authority of the Board of Directors in regard to the business of the
corporation to the extent set forth in the resolution establishing such
committee, subject to the limitations set forth in State and Federal laws and
regulations.
Section 3.9 HONORARY AND ADVISORY DIRECTORS. The Board of Directors of
the corporation may appoint any individual as an Honorary Director, Director
Emeritus, Advisory Director or member of any advisory board established by the
Board of Directors. Any individual so appointed by the Board of Directors shall
be compensated as provided by the Board of Directors but such individual may not
vote at any meeting of the Board of Directors or be counted in determining a
quorum as provided in Section 4.5 and shall not have responsibility or be
subject to any liability imposed upon a director or otherwise be deemed a
director.
ARTICLE FOUR
MEETING OF THE BOARD OF DIRECTORS
Section 4.1 REGULAR MEETINGS. An annual organizational meeting of the
Board of Directors shall be held on the day of or after the annual meeting of
the shareholders of the corporation. In the event the annual shareholders
meeting is not held as provided by Section 2.2, such organizational meeting
shall be held at a time as is herein provided for regular meetings. Regular
meetings of the Board of Directors shall be held quarterly during the calendar
year; provided that the Chairman may cancel not more than one of such regular
meeting during any year, and the date of a regular meeting for any quarter may
be changed to another date within one month of the original date if notice of
the change of date is given at least five days before the earlier of the
original or the rescheduled meeting date.
Section 4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, President, or
by any two directors in office at that time.
Section 4.3 PLACE OF MEETINGS. Directors may hold their meetings at any
place within or without the State of Georgia as the Board of Directors may from
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time to time establish for regular meetings, or as set forth in the notice of
special meetings, or in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
Section 4.4 NOTICE OF MEETINGS. No notice shall be required for any
regular scheduled meeting of the directors of the corporation. Unless waived as
contemplated in Section 5.2, the Chairman, President or Secretary of the
corporation, or any director thereof shall give notice to each director of each
special meeting stating the time, place and purposes of the meeting. Such
notice shall be given by mailing notice of the meeting at least five day before
the date of the meeting, or by telephone, telegram or personal delivery at least
three day before the date of the meeting. Notice shall be deemed to have been
given by telegram or cablegram at the time notice is filed with the transmitting
agency. Attendance by a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of business because the meeting is not lawfully called.
Section 4.5 QUORUM. At meetings of the Board of Directors, a majority of
the directors then in office shall be necessary to constitute a quorum for the
transaction of business.
Section 4.6 VOTE REQUIRED FOR ACTION. Except as otherwise provided in
these by-laws, by the articles of incorporation of the corporation or by law,
the act of a majority of the directors present at a meeting at which a quorum is
present at the time shall be the act of the Board of Directors.
Section 4.7 ACTION BY DIRECTORS WITHOUT A MEETING. Any action which may
be taken at any meeting of the Board of Directors, or at any meeting of a
committee of directors, may be taken without a meeting if a written consent
thereto shall be signed by all directors, or all the members of the committee,
as the case may be, and if such written consent is filed with the minutes of the
proceedings of the Board or the committee. Such consent shall have the same
force and effect as a unanimous vote of the Board of Directors or the committee.
ARTICLE FIVE
NOTICE AND WAIVER
Section 5.1 PROCEDURE. Whenever these by-laws require notice to be given
to any shareholder or director, the notice shall be given as prescribed in
Section 2.5 or 4.4, whichever is applicable. Whenever notice is given to a
shareholder or director by mail, the notice shall be sent first class mail by
depositing the same in a post office or letter box in a postage prepaid, sealed
envelope, addressed to the shareholder or director at his last known address,
and such notice shall be deemed to have been given at the time the same is
deposited in the United States mail.
Section 5.2 WAIVER. Except as limited by the Georgia Business Corporation
Code, whenever any notice is required to be given to any shareholder or director
by law, by the articles of incorporation of the corporation, or these by-laws, a
waiver thereof in the proxy of such shareholder or otherwise give in writing,
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whether before or after the meeting to which the waiver pertains, shall be
effective and binding on such shareholder or director; provided, however, that
no such waiver shall apply by its terms to more than one required notice.
ARTICLE SIX
OFFICERS
Section 6.1 NUMBER. The officers of the corporation shall consist of a
Chairman, President, one or more Vice President, Secretary and Treasurer. In
addition, the Board of Directors may from time to time elect or provide for the
appointment of such other officers or assistant officers as it deems necessary
for the efficient management of the corporation, or as shall otherwise be
required by law or regulation. Any two or more offices may be held by the same
person, except the offices of President and Secretary may not be held by the
same person. The Board of Directors shall have the power to establish and
specify the duties for all officers of the corporation.
Section 6.2 ELECTION AND TERM. All officers shall be elected by the Board
of Directors and shall serve at the will of the Board of Directors and until
their successors have been elected and have qualified, or until their earlier
death, resignation, removal, retirement or disqualification.
Section 6.3 COMPENSATION. The compensation of all officers of the
corporation shall be fixed by the Board of Directors or by a committee of the
Board of Directors, if such committee is designated and assigned such authority
as provided in Section 3.8.
Section 6.4 REMOVAL. Any officer or agent elected by the Board of
Directors may be removed by a majority of the Board of Directors with our
without prejudice to any contract right of such officer.
Section 6.5 CHAIRMAN OF THE BOARD. The Board of Directors may elect a
Chairman of the Board of Directors who shall preside and act as chairman at all
meetings of the shareholders and the Board of Directors and who shall be the
Chief Executive Officer of the Corporation. He shall have general control and
supervision over the business and affairs of the corporation. He shall see that
all orders and resolutions of the Board of Directors are carried into effect.
Section 6.6 PRESIDENT. The President shall be the chief operating officer
of the corporation and in the absence or disability of the Chairman, or at the
direction of the Chairman, perform the duties and exercise the powers of the
Chairman.
Section 6.7 SECRETARY. The Secretary shall keep accurate records of the
acts and proceedings of all meetings of shareholders, directors and committees
of directors. He shall have authority to give all notices required by law or
these by-laws. He shall be custodian of the corporate books, records, contracts
and other documents. The Secretary may affix the corporation's seal to any
lawfully executed documents requiring it and shall sign such instruments as may
require his signature.
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ARTICLE SEVEN
DIVIDENDS
Section 7.1 TIME AND CONDITIONS OF DECLARATION. Dividends on the
outstanding shares of the corporation may be declared by the Board of Directors
at any regular or special meeting and paid in cash or property only out of the
retained earnings of the corporation and only when the corporation meets
applicable legal requirements for paid-in capital and/or appropriated net
earnings.
Section 7.2 SHARE DIVIDENDS - TREASURY SHARES. Dividends declared by the
Board of Directors may be paid in shares of the corporation out of any treasury
shares that have been reacquired with capital funds of the corporation.
Section 7.3 SHARE DIVIDENDS - UNISSUED SHARES. Dividends declared by the
Board of Directors may be paid in authorized by unissued shares of the
corporation out of any retained earnings of the corporation, provided that such
shares shall be issued at not less than the par value thereof. There shall be
transferred to the capital stock account at the time such dividend is paid an
amount of retained earnings at least equal to the aggregate par value of the
shares to be issued as a dividend, and after payment of the dividend, the
corporation shall continue to maintain the paid-in capital and/or appropriate
retained earnings requirements of applicable law.
Section 7.4 SHARE SPLITS. A split or dividend of the issued shares of any
class into a greater number of shares of the same class without increasing the
capital stock of the corporation shall not be construed to be a share dividend
within the meaning of this Article.
ARTICLE EIGHT
SHARES
Section 8.1 AUTHORIZATION AND ISSUANCE OF SHARES. The par value and the
maximum number of shares of any class of the corporation which may be issued and
outstanding shall be set forth from time to time in the articles of
incorporation of the corporation. The Board of Directors may increase or
decrease the number of issued and outstanding shares of the corporation within
the maximum number of shares authorized by the articles of incorporation and the
minimum capitalization requirements of Georgia law.
Section 8.2 SHARE CERTIFICATES. The interest of each shareholder in the
corporation shall be evidenced by a certificate or certificates representing
shares of the corporation which shall be in such form as the Board of Directors
may from time to time adopt in accordance with Georgia law. Share certificates
shall be consecutively numbered, shall be in registered form, and shall indicate
the date of issuance. All such information shall be entered on the
corporation's books. Each certificate shall be signed by the Chairman,
President or Vice President and the Secretary or an Assistant Secretary and
shall be sealed with the seal of the corporation or a facsimile thereof;
provided, however, that where such certificate is signed by a transfer agent, or
registered by a registrar, the
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signatures of such officers may be facsimiles. In case any officer or officers
who shall have signed or whose facsimile signature shall have been placed upon a
share certificate shall have ceased for any reason to be such officer or
officers of the corporation before such certificate is issued, such certificate
may be issued by the corporation with the same effect as if the person or person
who signed such certificate or whose facsimile signature shall have been used
thereon had not ceased to be such officer or officers.
Section 8.3 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS.
Prior to due presentation for transfer or registration of its shares, the
corporation may treat the registered owner of the shares as the person
exclusively entitled to vote such shares, to receive any dividend or other
distribution with respect to such shares, and for all other purposes; and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 8.4 TRANSFER OF SHARES. Transfers of shares shall be made upon
the stock transfer books of the corporation only upon direction of the person
named in the share certificate representing the shares to be transferred, or by
an attorney of such person lawfully constituted in writing; and before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyer, the provisions of Section 8.6 of these by-laws shall have been
satisfied.
Section 8.5 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any
of the provisions of Section 8.4 of these by-laws, the corporation is under a
duty to register the transfers of its shares only if:
(a) the shares certificate is endorsed by the appropriate person or persons;
and
(b) reasonable assurance is given that these endorsements are genuine and
effective; and
(c) the corporation has no duty to inquire into adverse claims or has
discharged any such duty; and
(d) any applicable law relating to the collection of taxes has been complied
with; and
(e) the transfer is in fact rightful or is to a bona fide purchaser.
Section 8.6 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming
a share certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors may require and
shall, if the Board of Directors so requires, give the corporation a bond of
indemnity in form and amount, and with one or more sureties satisfactory to the
Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen, or destroyed.
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<PAGE>
Section 8.7 FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
Board of Directors may fix in advance a date as the record date, such date to be
not more than fifty days (and, in the case of a shareholders meeting, not less
than ten days) prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
Section 8.8 RECORD DATE IF NONE FIXED. If no record date is fixed as
provided in Section 8.7 of these by-laws, then the record date for any
determination of shareholders which may be proper or required by law shall be
the date on which notice is mailed in the case of a shareholders meeting, or the
date on which the Board of Directors adopts a resolution declaring a dividend in
the case of a payment of a dividend.
ARTICLE NINE
INDEMNIFICATION
Section 9.1 INDEMNIFICATION. The Company shall indemnify each officer and
director of the Company, whether or not then in office, and in the event of his
death, his legal representative, against any expense (including attorney's
fees). judgments, fines, and amounts paid in settlement, actually or reasonably
incurred by any such person in connection with any threatened, pending or
completed action, suit, or proceeding, including but not limited to an action,
suit, or proceeding, brought by or in the name of the Company to procure a
judgment in its favor, as and to the full extent provided by the Official Code
of Georgia Annotated Section 14-2-156.
Section 9.2 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in
defending any action, suit, or proceeding referred to above may be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, trustee, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the corporation as provided above.
Section 9.3 INSURANCE. The corporation, upon the affirmative vote of a
majority of its Board of Directors may purchase and maintain insurance on behalf
of any person who is or was a director, trustee, officer, employee or agent of
the corporation, or is or was serving, at the request of the corporation as
director, trustee, officer, employee or agent of another firm, corporation,
trust or other organization or enterprise against liability asserted against him
and incurred by him an any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the foregoing provision of these by-laws.
13
<PAGE>
Section 9.4 RIGHTS NOT EXCLUSIVE. The foregoing rights of indemnification
or reimbursement shall not be exclusive of other rights to which the persons
referred to above, or their heirs, executors or administrators, may be entitled
as a matter of law, and the corporation may indemnify such persons to the extent
permitted by applicable law.
ARTICLE TEN
MISCELLANEOUS
Section 10.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors
shall have power to determine which accounts, books and records of the
corporation shall be open to the inspection of shareholders, except such
accounts, books and records that are specifically open to inspection by law, and
the Board of Directors shall have power to fix reasonable rules and regulations
not in conflict with applicable law for the inspection of accounts, books and
records which by law or by determination of the Board of Directors shall be open
to inspection.
Section 10.2 FISCAL YEAR. The fiscal year of the corporation shall be the
calendar year.
Section 10.3 SEAL. The corporate seal shall be in such form as the Board
of Directors may from time to time determine.
Section 10.4 ANNUAL STATEMENTS. The corporation shall prepare such
financial statements showing the results of its operations during its fiscal
year as shall be required by applicable laws, rules and regulations. Upon
receipt of written request, the corporation promptly shall mail to any
shareholder of record a copy of the most recent such financial statement.
Section 10.5 CONTRACTS, CHECKS, DRAFTS, REPORTS, ETC. Such of the
officers or employees of the corporation as may from time to time be designated
by the Board of Directors or by the executive committee, if one has been
designated, shall have power and authority to sign contracts, checks, drafts and
like instruments and to endorse checks, bills of exchange, orders, drafts and
vouchers made payable or endorsed to the corporation, whether in its own right
or in any fiduciary capacity. No officer or employee, however, may on behalf of
the corporation, execute or deliver any check, draft or other like instrument in
favor of himself.
Section 10.6 LEGAL RESTRICTIONS. All matters covered in these by-laws
shall be subject to such restrictions as shall be imposed on this corporation by
applicable State and Federal laws, rules and regulations, including, but not
limited to the Georgia Business Corporation Code, the Georgia Financial
Institutions Code, and the Bank Holding Company Act of 1956.
Section 10.7 CONFLICT. The articles of incorporation of this corporation
shall control in the event of any conflict between such articles of
incorporation and these by-laws.
14
<PAGE>
ARTICLE ELEVEN
AMENDMENTS
Section 11.1 POWER TO AMEND BY-LAWS. The Board of Directors shall have
power to alter, amend or repeal these by-laws or adopt new by-laws, but any by-
laws adopted by the Board of Directors may be altered, amended or repealed, and
new by-laws adopted, by the shareholders. The shareholders may prescribe that
any by-law or by-laws adopted by them shall not be altered, amended or repealed
by the Board of Directors.
Section 11.2 CONDITIONS. Action taken by the shareholders with respect to
by-laws shall be taken by an affirmative vote of a majority of all shares
entitled to elect directors, and action by the Board of Directors with respect
to by-laws shall be taken by an affirmative vote of a majority of all directors
then holding office.
Section 11.3 INSPECTION. A copy of the by-laws, with all amendments
thereto, shall at all times be kept in a convenient place in the main office of
the corporation and shall be open to inspection by all shareholders during
normal business hours. The directors may furnish a copy of the by-laws, and all
amendments thereto, to all shareholders; provided that all amendments and
alterations of these by-laws made by the Board of Directors shall be furnished
to the shareholders at the first meeting of the shareholders thereafter.
15
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
The Company 1
A History of 100 Shares 2
Letter to Stockholders 3
Selected Consolidated Financial and Other Data 4
Management's Discussion and Analysis of Financial Condition and Results
of Operations 5
Consolidated Financial Statements
Consolidated Balance Sheets 24
Consolidated Statements of Income 25
Consolidated Statements of Stockholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 29
Report of Independent Public Accountants 41
1995 Form 10-K 42
Boards of Directors and Senior Management 44
Corporate Information 45
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
THE COMPANY
Allied Bankshares, Inc. [the "Company"] is a Georgia corporation and multibank
holding company organized in 1984 by Boone A. Knox, its Chairman of the Board of
Directors and Chief Executive Officer. The Company provides financial services
through three commercial banks which offer a variety of banking and other
financial services to individuals and businesses. The Company considers the
market for all its subsidiaries to be east central Georgia encompassing an area
from Atlanta to Augusta.
Each of the subsidiary banks, Allied Bank of Georgia, Bank of Millen and Bank
of Morgan County, is an FDIC-insured, state-chartered financial institution
having an operating history of at least 80 years in its respective community.
The Company operates its subsidiary banks on a relatively decentralized basis to
allow them to respond to the differing needs and demands of their markets.
The Company engages in mortgage banking through Knox Mortgage Company, a
subsidiary of Allied Bank of Georgia. Knox Mortgage Company was organized in
1968 and was acquired by Allied Bank of Georgia in 1982.
1
<PAGE>
- --------------------------------------------------------------------------------
A HISTORY OF 100 SHARES
The Company had no operations prior to its reorganization with Bank of Thomson
in January 1985, which was accounted for as a pooling of interests.
The following table shows the increase in value of 100 shares of Bank of
Thomson stock purchased in February 1973 at $75 per share which was exchanged
for common stock of the Company in January 1985 and held through December 31,
1995, adjusted for a 10% stock dividend declared in January 1996.(1)
<TABLE>
<CAPTION>
NUMBER OF CUMULATIVE
DATE DESCRIPTION SHARES SHARES
- ---------------------------------------------------------------------------------
<C> <S> <C> <C>
2-73 Purchase 100 Shares 100 100
Bank of Thomson at $75 per share
STOCK DIVIDENDS PAID
2-78 50% Stock Dividend 50 150
1-85 Exchange Bank of Thomson Stock for Allied
Bankshares, Inc. Stock at 18.66 to 1 Exchange
Rate 2,799 2,799
2-85 50% Stock Dividend 1,399 4,198
12-86 100% Stock Dividend 4,198 8,396
6-87 5% Stock Dividend 419 8,815
12-87 25% Stock Dividend 2,203 11,018
8-88 25% Stock Dividend 2,754 13,772
5-92 10% Stock Dividend 1,377 15,149
11-92 10% Stock Dividend 1,514 16,663
6-93 10% Stock Dividend 1,666 18,329
12-93 25% Stock Dividend 4,582 22,911
12-94 25% Stock Dividend 5,727 28,638
1-96 10% Stock Dividend (1) 2,864 31,502
- ---------------------------------------------------------------------------------
12-95 Total Shares 31,502 31,502
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
(1) IN JANUARY 1996, THE COMPANY DECLARED A
10% STOCK DIVIDEND PAYABLE ON MARCH 1, 1996 TO STOCKHOLDERS OF RECORD AS OF
FEBRUARY 9, 1996.
<TABLE>
<CAPTION>
CASH DIVIDENDS PAID
- ------------------------------------------
DATE AMOUNT
- ------------------------------------------
<S> <C> <C>
1974 $ 175
1975 200
1976 200
1977 250
1978 300
1979 360
1980 375
1981 488
1982 600
1983 675
1984 675
1985 1,124
1986 1,125
1987 --
1988 1,791
1989 3,443
1990 4,200
1991 4,407
1992 6,073
1993 7,623
1994 9,164
1995 10,081
- ------------------------------------------
Total Cash
Dividends $ 53,329
- ------------------------------------------
- ------------------------------------------
</TABLE>
<TABLE>
<S> <C>
SUMMARY
Market Value of 31,502 Shares of Allied Bankshares, Inc. Common Stock
at $9.43 Per Share at December 31, 1995 $ 297,064
Cash Dividends Received 1973-1995 53,329
- --------------------------------------------------------------------------------
350,393
Less Cost of 100 Original Shares of Bank of Thomson Stock Purchased
in February 1973 at $75 Per Share (7,500)
- --------------------------------------------------------------------------------
Net Increase in Value 1973-1995 $ 342,893
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
DEAR STOCKHOLDERS:
We achieved record earnings and made considerable progress during 1995, our
first full fiscal year after having made three acquisitions in September 1994.
Net income for 1995 was $9.2 million or $.73 per share as compared to $7.5
million or $.63 per share for 1994. Two factors, both a result from our 1994
acquisitions, were important in achieving these record results. First, we were
able to increase our net interest income due to an expanded customer account
base. Second, we were able to reduce non-interest expense through aggressive
cost controls and consolidation and elimination of duplicate support activities.
As a result, taxable-equivalent net interest income increased $2.5 million or
10.7% while non-interest expense declined $.2 million. The returns on average
assets and average equity were 1.73% and 14.68%, respectively, for 1995 as
compared to 1.64% and 14.55%, respectively, for 1994.
Stockholders' equity increased $11.2 million or 19.8% at December 31, 1995 as
compared to December 31, 1994. This was a result of 1995 record earnings of $9.2
million less dividends of $4.0 million paid to stockholders plus an increase of
$6.1 million in unrealized gains on securities. The increase in unrealized gains
on securities was due to a decline in interest rates experienced during 1995,
which favorably impacted the value of our investment securities.
In January 1996, the Board of Directors declared a 10% stock dividend payable
on March 1, 1996. This continues the present policy of paying periodic stock
dividends.
For 1996, we plan to continue to expand in our existing markets. Allied Bank
of Georgia announced in January plans to open two new branches, one on Broad
Street in downtown Augusta and the other in a new Wal-Mart Superstore presently
under construction in Thomson. After the opening of these two new branches,
Allied will have 26 branch locations providing financial services to our banking
customers in eight counties in Georgia.
We hope that you enjoy your association with Allied and will follow our
progress as presented in this annual report. We promise to continue to do our
best to be deserving of your trust and confidence in the years to come.
Sincerely,
Boone A. Knox James H. Rigsby, Jr.
Chairman President
January 31, 1996
3
<PAGE>
- --------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The information presented below should be read in conjunction with the
consolidated financial statements, the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets $ 538,399 $ 535,840 $ 448,946 $ 410,196 $ 397,977
Securities 96,736 98,303 96,069 59,046 39,250
Mortgage-backed securities 76,363 63,865 57,606 86,220 96,748
Loans, net of unearned income 307,968 312,202 234,910 227,103 211,772
Allowance for loan losses 4,312 4,635 3,848 3,920 2,851
Goodwill and intangible assets 14,473 13,426 4,933 5,410 6,169
Deposits 421,585 414,813 363,091 342,376 332,559
Short-term borrowings 39,232 49,485 14,786 16,266 16,462
Long-term debt 1,050 1,164 6,226 1,289 3,202
Stockholders' equity 67,635 56,452 52,056 42,035 37,506
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Interest income $ 43,637 $ 35,724 $ 33,363 $ 34,782 $ 34,056
Interest expense 19,455 13,846 13,134 16,046 19,325
- -------------------------------------------------------------------------------------------------------------------------
Net interest income 24,182 21,878 20,229 18,736 14,731
Provision for loan losses 700 489 520 1,465 3,104
- -------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 23,482 21,389 19,709 17,271 11,627
Non-interest income 5,594 5,050 5,071 5,338 5,304
Non-interest expense 15,724 15,879 13,689 13,541 11,287
- -------------------------------------------------------------------------------------------------------------------------
Income before provision for income
taxes 13,352 10,560 11,091 9,068 5,644
Provision for income taxes 4,190 3,020 3,222 2,465 1,307
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 9,162 $ 7,540 $ 7,869 $ 6,603 $ 4,337
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data(1)
Book value per share at year-end $ 5.36 $ 4.47 $ 4.47 $ 3.63 $ 2.82
Net income per common share 0.73 0.63 0.68 0.57 0.37
Cash dividends per share 0.32 0.29 0.24 0.19 0.14
Weighted average shares outstanding
(IN THOUSANDS) 12,614 11,901 11,611 11,579 11,613
Ratios
Net income as a percentage of:
Average total assets 1.73% 1.64% 1.84% 1.64% 1.31%
Average stockholders' equity 14.68 14.55 17.30 16.37 14.13
Cash dividend payout 43.80 44.02 33.66 31.32 35.00
Average earning assets to average total
assets 90.50 91.81 91.50 91.10 93.58
Average loans to average deposits 76.64 71.70 67.74 66.32 94.81
Average stockholders' equity to average
total assets 11.76 11.26 10.63 10.05 9.25
Net interest margin (taxable-equivalent
basis) 5.34 5.48 5.46 5.39 5.56
Net loan charge-offs to average loans 0.33 0.21 0.27 0.18 1.43
Allowance for loan losses to net loans
(year-end) 1.40 1.48 1.64 1.73 1.35
Nonperforming loans to net loans
(year-end) 1.29 1.45 0.40 0.78 1.78
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ALL SHARE AND PER SHARE DATA HAVE BEEN RESTATED TO REFLECT THE EFFECT OF ALL
STOCK DIVIDENDS INCLUDING A 10% STOCK DIVIDEND DECLARED ON JANUARY 16, 1996
TO BE PAID ON MARCH 1, 1996.
4
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All financial data reflects the acquisition of First Savings Bank, F.S.B. in
1994 which was accounted for as a pooling-of-interests. All share and per share
data have been adjusted to reflect all stock dividends paid and declared through
January 31, 1996. On September 30, 1994, the Company acquired Citizens Bank &
Trust and Jefferson Bancshares, Inc., (the "1994 Acquisitions") which were
accounted for as purchases. The following discussion and analysis reflects these
purchased entities from the date of their acquisition.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 ("1995") COMPARED WITH YEAR ENDED DECEMBER 31,
1994 ("1994")
Net Income per share for 1995 increased 15.9% or $.10 per share to $.73 per
share from $.63 per share for 1994. Net income was $9.2 million for 1995 as
compared to $7.5 million for 1994. The increase in net income was attributable
to an increase in taxable equivalent net interest income of $2.5 million, an
increase in non-interest income of $.5 million and a decrease in non-interest
expense of $.2 million offset by an increase in the provision for loan losses of
$.2 million and an increase in the provision for income taxes of $1.2 million.
The returns on average assets and average equity for 1995 were 1.73% and
14.68%, respectively, as compared to 1.64% and 14.55%, respectively for 1994.
YEAR ENDED DECEMBER 31, 1994 ("1994") COMPARED WITH YEAR ENDED DECEMBER 31,
1993 ("1993")
Net Income per share for 1994 decreased $.05 per share or 6.7% to $.70 per
share as compared to $.75 per share for 1993. Net income was $7.5 million for
1994 as compared to $7.9 million for 1993. The decrease in net income was
primarily attributable to an increase in non-interest expense offset by an
increase in taxable equivalent net interest income and a decrease in the
provision for loan losses.
The returns on average assets and average equity for 1994 were 1.64% and
14.55%, respectively as compared to 1.84% and 17.30%, respectively for 1993.
5
<PAGE>
- --------------------------------------------------------------------------------
NET INTEREST INCOME/MARGINS
1995 COMPARED TO 1994
Taxable equivalent net interest income for 1995 increased by $2.5 million as
compared to 1994. The increase was attributable to a $3.0 million increase due
to volume offset by a $.5 million decrease due to rate. The increase in volume
of net interest income is primarily attributable to the inclusion of a full year
of operations of income and expenses for the 1994 Acquisitions.
The Company's net interest margin decreased to 5.34% in 1995 as compared to
5.48% in 1994. The decrease in the Company's net interest margin was primarily
due to an increase in the average rate paid on interest-bearing deposits
partially offset by a higher average rate earned on loans.
1994 COMPARED TO 1993
Taxable equivalent net interest income increased by $1.8 million, the result
of a favorable volume increase of $2.1 million offset by an unfavorable decrease
due to rate of $.3 million. The volume increase is a result of growth in
interest-earning assets due to the 1994 Acquisitions.
The Company's net interest margin increased to 5.48% in 1994 as compared to
5.46% in 1993. The increase in the Company's net interest margin was primarily
due to a decrease in the average rate paid on interest-bearing deposits and an
increase in the average yield on securities.
In October 1994, during the conversion of the accounting system of First
Savings Bank, F.S.B. to the Company's accounting system, a defalcation involving
fraudulent loans was discovered. The loans were made prior to the consummation
of this acquisition. These loans, totaling $1.9 million, were charged off by the
Company in the fourth quarter of 1994. A claim of $1.9 million was filed against
the Company's bonding insurance company which was settled during 1995. This
claim was recorded as a recovery of charged-off loans as of December 31, 1994
and was included in other assets as a receivable.
CASH FLOWS
1995 CASH FLOWS
Cash and cash equivalents decreased $3.9 million for 1995 as compared to 1994.
During 1995 the Company generated $12.3 million from operating activities, $31.7
million from investing activities and spent $47.9 million on financing
activities. Net cash provided by operating activities increased $7.8 million
primarily due to increases in mortgage loans sold and increased interest and
fees on loans.
The Company's cash flows generated from investing activities included $25.7
million from the assumption of deposits from the purchase of the Washington,
Georgia branch in 1995 and the collection of the $1.8 million receivable from
the Company's bonding insurance company.
The increased cash flow from operations and investing activities was used to
fund a decrease in deposits, reduce funds purchased, reduce short-term debt and
pay increased cash dividends to stockholders.
At December 31, 1995, the Company had available a $50.0 million line of credit
from the Federal Home Loan Bank of Atlanta for short-term or long-term
borrowings. Short-term borrowings outstanding at December 31, 1995 were $29.0
million. No long-term borrowings under this line were outstanding. The available
balance under this line was $21.0 million. An unused short-term commercial bank
line of credit for $15.0 million also was available.
1994 CASH FLOWS
Cash and cash equivalents decreased $14.0 million for 1994 compared to 1993.
During 1994 the Company generated $4.5 million of cash from operating
activities, spent $30.7 million in investing activities and generated $12.2
million from financing activities. Cash used in investing activities for 1994
included $7.1 million used as part of the consideration paid for the purchase of
Citizens and $842,000 used as part of the consideration paid for the purchase of
Jefferson. Other uses of cash were an increase in loans made to customers of
$18.7 million and a decrease in deposits of $14.8 million. At December 31, 1994,
the Company had short-term lines of credit totaling $60 million of which $42.7
million was available and $17.3 million was owed and had no unused long-term
credit lines outstanding.
6
<PAGE>
- --------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------- ------------------------------- -----------------------------
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
($ IN THOUSANDS) BALANCES EXPENSE RATES BALANCES EXPENSE RATES BALANCES EXPENSE RATES
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets
Loans, net of unearned income
Taxable(1) $309,426 $32,280 10.43% $ 262,587 $ 25,163 9.58% $ 232,067 $22,420 9.66%
Tax-exempt(2) 1,476 165 11.18 2,184 201 9.20 2,313 250 10.81
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans 310,902 32,445 10.44 264,771 25,364 9.58 234,380 22,670 9.67
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 60,273 4,251 7.05 56,357 4,060 7.20 65,833 5,188 7.88
- ---------------------------------------------------------------------------------------------------------------------------------
Securities
Taxable 59,211 3,850 6.50 57,180 3,611 6.32 50,211 3,004 5.98
Tax-exempt(2) 41,387 4,042 9.77 38,678 3,751 9.70 34,463 3,421 9.93
- ---------------------------------------------------------------------------------------------------------------------------------
Total securities 100,598 7,892 7.85 95,858 7,362 7.68 84,674 6,425 7.59
- ---------------------------------------------------------------------------------------------------------------------------------
Funds sold 8,193 499 6.09 5,617 205 3.65 6,263 199 3.18
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-earning
assets 479,966 45,087 9.39 422,603 36,991 8.75 391,150 34,482 8.82
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest-earning assets
Cash 17,859 18,057 18,098
Premises and equipment 13,403 10,711 9,836
Allowance for loan losses (4,259) (4,060) (3,173)
Other assets 9,275 6,622 6,660
Goodwill and intangible assets 14,111 6,358 4,963
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest-earning
assets 50,389 37,688 36,384
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $530,355 $ 460,291 $ 427,534
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders'
Equity
Interest-bearing liabilities
Interest-bearing deposits
NOW deposit accounts $ 76,990 $ 1,904 2.47% $ 65,734 $ 1,380 2.10% $ 49,435 $ 1,202 2.43%
Money market deposit accounts 19,076 597 3.13 23,982 546 2.28 26,388 676 2.56
Savings 27,137 669 2.47 25,771 477 1.85 21,252 626 2.95
Other time 230,639 12,917 5.60 210,105 9,805 4.67 210,214 9,686 4.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 353,842 16,087 4.55 325,592 12,208 3.75 307,289 12,190 3.97
- ---------------------------------------------------------------------------------------------------------------------------------
Other interest-bearing
liabilities
Funds purchased 3,483 212 6.09 3,575 170 4.76 2,752 99 3.60
Short-term borrowings 51,323 3,073 5.99 24,212 1,180 4.87 25,825 730 2.83
Long-term debt 1,156 83 7.18 6,215 288 4.65 2,553 115 4.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total other
interest-bearing
liabilities 55,962 3,368 6.02 34,002 1,638 4.82 31,130 944 3.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 409,804 19,455 4.75 359,594 13,846 3.85 338,419 13,134 3.88
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest-bearing liabilities
and stockholders' equity
Demand deposits 51,842 43,695 38,687
Other liabilities 6,318 5,177 4,930
Stockholders' equity 62,391 51,825 45,498
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest-bearing
liabilities and
stockholders' equity 120,551 100,697 89,115
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $530,355 $ 460,291 $ 427,534
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 4.64% 4.90% 4.94%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income $25,632 $ 23,145 $21,348
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest margin 5.34% 5.48% 5.46%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INTEREST INCOME ON LOANS INCLUDES LOAN FEES OF $2.3 MILLION, $2.1 MILLION,
AND $1.8 MILLION IN THE THREE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993,
RESPECTIVELY. NONACCRUAL LOANS ARE INCLUDED IN AVERAGE BALANCES OF LOANS.
INCOME ON SUCH LOANS, IF RECOGNIZED, IS RECORDED ON A CASH BASIS.
(2) TAX-EXEMPT INTEREST ON LOANS AND INVESTMENT SECURITIES INCLUDES THE EFFECT
OF A TAXABLE-EQUIVALENT ADJUSTMENT WHICH TOTALED $1,450,000, $1,267,000,
AND $1,119,000 FOR 1995, 1994 AND 1993, RESPECTIVELY, AND IS BASED ON A
FEDERAL TAX RATE OF 35% FOR 1995 AND 34% FOR 1994 AND 1993. ALL YEARS
INCLUDE STATE TAX AS APPLICABLE AND HAVE BEEN ADJUSTED FOR THE EFFECT OF
DISALLOWED INTEREST EXPENSE TO CARRY TAX-EXEMPT OBLIGATIONS.
7
<PAGE>
- --------------------------------------------------------------------------------
The following table presents the changes in the Company's taxable-equivalent net
interest income as a result of changes in volume and rate from 1994 to 1995 and
from 1993 to 1994.
<TABLE>
<CAPTION>
CHANGE FROM 1994 TO 1995 CHANGE FROM 1993 TO 1994
----------------------------- -----------------------------
($ IN THOUSANDS) VOLUME RATE TOTAL VOLUME RATE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, net
Taxable $ 4,487 $ 2,630 $ 7,117 $ 2,946 $ (203) $ 2,743
Tax-exempt (65) 29 (36) (14) (35) (49)
- --------------------------------------------------------------------------------------------------------------------------
Total loans 4,422 2,659 7,081 2,932 (238) 2,694
- --------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 282 (91) 191 (747) (381) (1,128)
- --------------------------------------------------------------------------------------------------------------------------
Securities
Taxable 128 111 239 415 192 607
Tax-exempt 263 28 291 420 (90) 330
- --------------------------------------------------------------------------------------------------------------------------
Total securities 391 139 530 835 102 937
- --------------------------------------------------------------------------------------------------------------------------
Funds sold 94 200 294 (20) 26 6
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 5,189 2,907 8,096 3,000 (491) 2,509
- --------------------------------------------------------------------------------------------------------------------------
Interest Expense
Interest-bearing deposits 1,059 2,820 3,879 726 (708) 18
- --------------------------------------------------------------------------------------------------------------------------
Other interest-bearing liabilities
Funds purchased (4) 46 42 30 41 71
Short-term borrowings 1,320 573 1,893 (46) 496 450
Long-term debt (235) 30 (205) 165 8 173
- --------------------------------------------------------------------------------------------------------------------------
Total other interest-bearing liabilities 1,081 649 1,730 149 545 694
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,140 3,469 5,609 875 (163) 712
- --------------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,049 $ (562) $ 2,487 $ 2,125 $ (328) $ 1,797
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS TABLE SHOWS THE CHANGE IN NET INTEREST INCOME FOR THE COMPARATIVE PERIODS
BASED EITHER ON CHANGES IN AVERAGE BALANCES OR CHANGES IN AVERAGE RATES FOR
EARNING ASSETS AND SOURCES OF FUNDS ON WHICH INTEREST IS RECEIVED OR PAID.
BECAUSE OF THE NUMEROUS AND SIMULTANEOUS BALANCE AND RATE CHANGES DURING ANY
YEAR, IT IS NOT POSSIBLE TO ALLOCATE THE CHANGES PRECISELY BETWEEN BALANCES AND
RATES. FOR PURPOSES OF THIS TABLE, CHANGES THAT ARE NOT SOLELY DUE TO BALANCE
CHANGES OR SOLELY DUE TO RATE CHANGES HAVE BEEN ATTRIBUTED TO RATES.
8
<PAGE>
- --------------------------------------------------------------------------------
NON-INTEREST INCOME
Non-interest income increased by $544,000 in 1995 as compared to 1994. Service
charges on deposit accounts, credit life insurance commissions and gain on sales
of mortgage loans increased, while gain on sales of mortgage-servicing rights,
mortgage servicing fees, gain from premiums on expired options, gain on sales of
securities, net and other income all declined.
Non-interest income decreased by $21,000 in 1994 as compared to 1993. The
decrease was due to decreases in gain on sales of mortgage loans, gain on sales
of mortgage servicing rights, credit life insurance commissions, and gain on
sales of investments in other financial institutions, offset by increases in
service charges on deposit accounts, gain on sales of securities, gain from
premium on expired options, and other income. Gain on sales of mortgage loans
declined due to decreased mortgage originations caused by rising mortgage
interest rates. Service charges on deposit accounts increased due to increased
account volume resulting from the 1994 Acquisitions. The entire deferred gain on
the sale of Databank South, Inc. was fully recognized in 1994.
The following table presents the principal components of non-interest income
for the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $3,296 $2,799 $2,094
Gain on sales of mortgage loans 828 572 1,555
Gain on sales of securities, net 316 326 261
Gain on sales of mortgage servicing rights -- 207 219
Credit life insurance commissions 219 146 222
Mortgage servicing fees 121 150 200
Gain on sales of investments in other financial
institutions 155 -- 117
Gain on sale of Databank South, Inc. -- 119 67
Gain on sale of fixed assets 127 73 (137)
Gain from premium on expired options 60 106 --
Other income 472 552 473
- ---------------------------------------------------------------------------------
Total non-interest income $5,594 $5,050 $5,071
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Non-interest income as a percentage of average total
assets 1.05% 1.10% 1.19%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
NON-INTEREST EXPENSE
Non-interest expense declined $155,000 in 1995 as compared to 1994 primarily due
to declines in other expense, merger expenses, write-off of fixed assets
acquired by merger, FDIC insurance premiums, legal and professional expense and
computer expense. These declines were offset by increases in amortization of
goodwill and intangible assets, salaries and other personnel benefits, net
occupancy and equipment expense and postage expense.
Non-interest expense increased $2.2 million in 1994 as compared to 1993 due to
increases in all expense categories. The largest increases were merger expenses,
the write-off of computer equipment related to the acquisition of First Savings
Bank, F.S.B. and amortization expense.
The following table presents the principal components of non-interest expense
for the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and other personnel benefits $ 8,014 $ 7,470 $ 6,953
Net occupancy and equipment expense 2,215 2,198 1,974
Computer expense 846 850 696
FDIC insurance premiums 660 841 739
Amortization of goodwill and intangible
assets 1,189 635 433
Legal and professional expense 443 530 337
Office supplies 466 369 259
Postage 310 290 218
Merger expense -- 272 --
Write-off of fixed assets acquired by merger -- 198 --
Other expense 1,581 2,226 2,080
- --------------------------------------------------------------------------------
Total non-interest expense $ 15,724 $ 15,879 $ 13,689
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Non-interest expense as a percentage of
average total assets 2.96% 3.45% 3.20%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
LOANS
The Company's loan portfolio consists of the following categories of loans:
COMMERCIAL, FINANCIAL AND AGRICULTURAL
Commercial, financial and agricultural loans consist of all business and
agricultural loans not secured by real estate. The borrowers in this
9
<PAGE>
- --------------------------------------------------------------------------------
category are mostly small to medium sized businesses. Most loans in this
category are collateralized. Types of collateral include marketable securities,
certificates of deposit, accounts receivable, inventory, or equipment.
REAL ESTATE LOANS
Construction Loans -- Construction loans are made primarily by the Company's
wholly owned mortgage banking subsidiary, Knox Mortgage Company. Loans
classified as construction loans are short-term loans made to finance the
construction of residential (1-4 family) dwellings, have permanent take-out
mortgages approved and will be fully repaid upon completion of the construction
period. Construction loans require site inspections and evaluations prior to the
payment of draws, retainage holdbacks, and maintenance of certain required loan
to value levels throughout the construction period.
Mortgage Loans -- Mortgage loans are long-term real estate loans made to
finance residential (1-4 family) dwellings and some commercial properties. Knox
Mortgage Company originates FHA, VA and conventional mortgage loans and is
approved by the U.S. Department of Housing and Urban Development ("HUD") as a
seller servicer of loans. The Company's underwriting requirements conform to
current HUD, Federal National Mortgage Association and other governmental agency
requirements.
Other Loans -- Other real estate loans include all loans secured by real
estate which were made for commercial, financial, or agricultural purposes which
are not construction or mortgage loans. Included in this category are
second-mortgage real estate loans.
CONSUMER LOANS
Consumer loans consist of installment payment loans secured by non-business
personal property. Personal automobile loans are included in this category. The
Company does not make credit card loans.
LOANS HELD-FOR-SALE
Loans held-for-sale consists of mortgage loans originated by Knox Mortgage
Company which are held for short periods and then sold. These loans are carried
at lower of cost or fair market value.
LENDING STRATEGY
The Company's policy is not to purchase loans and not to lend outside of the
Company's market area. Other than a portfolio of mortgage loans that has been
held for a number of years by Knox Mortgage Company, all future mortgage loan
originations by Knox Mortgage Company are intended to be sold in the secondary
market and are considered held-for-sale.
LOAN CONCENTRATIONS
The Company's loan portfolio does not contain any concentrations of loans
exceeding 10% of total loans which are not otherwise disclosed as a category of
loans in the following table.
The following table presents the composition of the Company's loan portfolio
net, of unearned income, at December 31 for the past five years:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 49,551 $ 48,325 $ 40,137 $ 41,506 $ 40,078
Real Estate
Construction 9,841 12,257 7,713 6,791 3,815
Mortgage 53,050 55,829 47,647 46,868 49,112
Other(1) 153,665 145,165 94,299 88,812 79,579
Consumer 39,458 49,037 40,961 38,554 35,635
Mortgage Loans held for sale 2,403 1,589 4,153 4,572 3,553
- -----------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $ 307,968 $ 312,202 $ 234,910 $ 227,103 $ 211,772
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)A MAJORITY OF THESE LOANS ARE FOR COMMERCIAL AND CONSUMER PURPOSES WHERE REAL
ESTATE WAS TAKEN AS COLLATERAL.
Loans may be periodically renewed with principal reductions and appropriate
interest rate adjustments. Loan maturities distribution is based on expected
cash flows which may differ from the contractual terms and actual cash flow
maturities of loans, as borrowers have the right to prepay
10
<PAGE>
- --------------------------------------------------------------------------------
without prepayment penalties. The following table presents the Company's loan
maturities as of December 31, 1995:
<TABLE>
<CAPTION>
WITHIN AFTER 5
($ IN THOUSANDS) 1 YEAR 1-5 YEARS YEARS TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 41,319 $ 8,105 $ 127 $ 49,551
Real Estate
Construction 9,841 -- -- 9,841
Mortgage 5,448 21,792 25,810 53,050
Other 95,924 53,904 3,837 153,665
Consumer 25,551 13,655 252 39,458
Loans held for sale 2,403 -- -- 2,403
- --------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $ 180,486 $ 97,456 $ 30,026 $ 307,968
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table presents an interest rate sensitivity analysis of the
Company's loan portfolio at December 31, 1995:
<TABLE>
<CAPTION>
WITHIN AFTER 5
($ IN THOUSANDS) 1 YEAR 1-5 YEARS YEARS TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans with:
Predetermined interest rates $ 88,550 $ 86,310 $ 28,100 $ 202,960
Floating or adjustable rates 91,936 11,146 1,926 105,008
- --------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $ 180,486 $ 97,456 $ 30,026 $ 307,968
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NONPERFORMING ASSETS
The following table presents a history of the Company's nonperforming assets
at year end for the past five years:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 1,785 $ 2,064 $ 587 $ 1,107 $ 2,617
Loans past due 90 days or more 2,193 2,458 363 665 1,152
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 3,978 4,522 950 1,772 3,769
Other real estate owned 2,218 1,676 832 222 551
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 6,196 $ 6,198 $ 1,782 $ 1,994 $ 4,320
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, other than as disclosed in the above nonperforming
assets table, there were no significant loans outstanding where known
information about possible credit problems of the borrowers would cause
management to have serious doubts as to the ability of such borrowers to comply
with the present loan repayment terms.
IMPAIRED AND NONACCRUAL LOANS
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("FAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
as amended by FAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures," which requires that the Company evaluate
the collectibility of both contractual interest and principal of loans when
assessing the need for a loss accrual. A loan is considered impaired when, based
on current information and events, it is probable that the Company will be
unable to collect all amounts due according to the contractual amounts of the
loan agreement. All loans determined to be impaired are placed on nonaccrual
status. The amount of impairment is measured based on the present value of
future expected cash flows or the fair value of the collateral, less estimated
selling costs, if the loan is collateral dependent or foreclosure is probable.
If nonaccruing loans had been accruing interest under their original terms,
$.2 million, $.2 million, and $.1 million of interest income would have been
recognized in 1995, 1994 and 1993, respectively.
CREDIT UNDERWRITING AND MONITORING
At December 31, 1995 and 1994 the Company experienced a high level of
nonperforming assets as a result of its three acquisitions consummated in 1994.
The Company's ratio of allowance for loan losses to nonperforming assets was
69.6% and 74.8% at December 31, 1995 and 1994, respectively. Although this
coverage has declined, the Company believes that the allowance for loan losses
is adequate. The Company intends to
11
<PAGE>
- --------------------------------------------------------------------------------
reduce the level of nonperforming assets in a rational manner and thereby reduce
the carrying costs of the nonperforming assets to the Company.
Because of an unusually high level of loan charge-offs experienced during
1991, several steps were taken to improve the Company's credit underwriting and
credit monitoring functions. The Company's loan policy was revised to provide
better guidance to its loan officers concerning acceptable loan quality,
repayment terms and lending limits. A formal loan classification and grading
system was implemented during 1993 requiring all loans to be reviewed and
assigned a rating. The loan committees of each of the subsidiary banks now meet
at least weekly. Outside directors of each subsidiary bank attend each loan
committee meeting.
PROVISION FOR LOAN LOSSES
Provision for loan losses is based upon a current evaluation of economic
conditions, changes in the character and size of the loan portfolio, net
charge-offs and other pertinent indicators derived from reviewing the loan
portfolio. This provision is added to the allowance for loan losses of each
subsidiary bank during each accounting period. The allowance for loan losses was
$4.31 million at December 31, 1995, representing 1.40% of year-end net loans
outstanding, compared with $4.64 million at December 31, 1994, which represented
1.48% of year-end net loans outstanding. The allowance for loan losses is
reviewed quarterly based on an evaluation of current risk characteristics of the
loan portfolio as well as the impact of prevailing and expected economic and
business conditions. Management considers the allowance for loan losses adequate
to cover possible loan losses on the loans outstanding. However, should economic
conditions deteriorate, additional charges to the provision for loan losses may
be required.
The Company, through its provision for loan losses, increased the allowance
for loan losses by $.7 million, $.5 million, and $.5 million in 1995, 1994 and
1993, respectively. Charge-offs totaled $1.3 million, $2.8 million, and $1.0
million in 1995, 1994 and 1993, respectively, while recoveries were $.3 million,
$2.2 million, and $.3 million in 1995, 1994 and 1993, respectively. The Company
actively monitors and pursues collection of its loan charge-offs.
The following table presents a five-year history of the Company's loan loss
experience:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning of year $ 4,635 $ 3,848 $ 3,920 $ 2,861 $ 2,734
- ---------------------------------------------------------------------------------------------------------------------------------
Charge-offs
Commercial 236 226 251 443 2,043
Real Estate 91 513 235 159 447
Consumer 1,024 2,019 469 535 804
- ---------------------------------------------------------------------------------------------------------------------------------
Total charge-offs 1,351 2,758 955 1,137 3,294
- ---------------------------------------------------------------------------------------------------------------------------------
Recoveries
Commercial 3 41 77 108 52
Real Estate 28 107 59 376 55
Consumer 297 2,052 181 247 210
- ---------------------------------------------------------------------------------------------------------------------------------
Total recoveries 328 2,200 317 731 317
- ---------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (1,023) (558) (638) (406) (2,977)
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 700 489 520 1,465 3,104
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance of purchased banks -- 856 46 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of year $ 4,312 $ 4,635 $ 3,848 $ 3,920 $ 2,861
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of allowance for loan losses to net loans (year-end) 1.40% 1.48% 1.64% 1.73% 1.35%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans 0.33% 0.21% 0.27% 0.18% 1.43%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
The following table presents the Company's allocation of the allowance for loan
losses:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
Commercial, financial
and agricultural $ 614 16% $ 660 15% $ 488 17% $ 568 18% $ 296 19%
Real Estate -
Construction 126 3 135 4 104 3 101 3 30 2
Mortgage 764 17 821 18 623 20 591 21 376 23
Other 1,758 50 1,890 48 1,527 40 1,499 39 1,265 38
Consumer 528 13 567 14 560 18 545 17 388 17
Mortgage loans held for
sale -- 1 -- 1 -- 2 -- 2 -- 1
Unallocated 522 -- 562 -- 546 -- 616 -- 506 --
- -----------------------------------------------------------------------------------------------------------------------------
Total $4,312 100% $4,635 100% $3,848 100% $3,920 100% $2,861 100%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SHORT-TERM LIQUIDITY
The Company intends to satisfy its liquidity on a short term basis by managing
its cash and due from banks, federal funds sold and purchased, securities
maturities, paydowns received from the mortgage-backed security portfolio and
short-term line of credit as necessary. At December 31, 1995, the Company had
$21.0 million of its $50.0 million line of credit available from the Federal
Home Loan Bank of Atlanta. This line is available for both short-term borrowings
and long-term debt. The Company had available at December 31, 1995 an unused
short-term bank line of credit of $15 million. Additionally, the subsidiary
banks had funds purchased lines of credit aggregating $12 million at December
31, 1995, of which $1.2 million was borrowed and $10.8 million was available.
LONG-TERM LIQUIDITY
The Company intends to satisfy its long-term liquidity needs through the
structuring of the maturities of investment securities, repayments of principal
received from mortgage-backed securities and the pricing and maturities on loans
and deposits offered to customers. The Company's long-term debt at December 31,
1995 was $1.1 million of variable-rate Industrial Development Authority Bonds
which require an annual principal reduction through 2005. The Company plans to
continue using a combination of long-term debt and short-term borrowings to meet
its financing needs. Management believes that adequate additional long-term
financing is available from the Federal Home Loan Bank of Atlanta or other
sources at reasonable rates if needed. At December 31, 1995 the Company had
$21.0 million in unused commitments for long-term or short-term financing from
the Federal Home Loan Bank of Atlanta. In January 1996, the Company increased
its total line of credit from the Federal Home Loan Bank of Atlanta from $50.0
million to $60.0 million. Subsequent thereto, the Company borrowed an additional
$25.0 million under the line for 5 years at a fixed rate of 5.755% and purchased
$22.6 million of mortgage-backed securities.
CASH DIVIDENDS
The Company's present policy for payment of cash dividends from its subsidiaries
to the Parent Company is 50% of the previous year's earnings of each subsidiary.
Cash dividends paid in 1995 from the bank subsidiaries to the Parent Company
totaled $4.5 million. In 1994 cash dividends paid to the Parent Company from its
subsidiaries totaled $13.5 million. These funds were used to reduce short-term
borrowings incurred in connection with the 1994 Acquisitions.
Cash dividends per share increased $.03 to $.32 per share in 1995 from $.29
per share in 1994. The cash dividend payout ratio decreased to 43.80% of 1995
net income from 44.02% of 1994 net income. The Company presently intends to
continue paying quarterly cash dividends.
13
<PAGE>
- --------------------------------------------------------------------------------
STOCK DIVIDENDS
In January 1996, the Company declared a 10% stock dividend payable on March 1,
1996. The Company plans to continue to declare stock dividends periodically.
INTEREST RATE SENSITIVITY
At December 31, 1995, the Company's interest rate sensitivity position was
liability sensitive. Should interest rates decline, the Company's net interest
margin will increase. Conversely, should interest rates increase, the Company's
interest expense will increase faster than its interest income on interest
earning assets, causing the net interest margin to decrease. The Company has
historically been liability sensitive primarily due to a trend of marketing
shorter term deposits and borrowing short-term funds at variable rates of
interest as opposed to fixing a longer term constant rate. The Company believes
that it can adjust its interest rate sensitivity position in a timely manner to
respond to changes in market rates.
The following table represents the Company's interest sensitivity gap between
interest-earning assets and interest-bearing liabilities at December 31, 1995:
<TABLE>
<CAPTION>
ASSETS AND LIABILITIES REPRICING WITHIN (1)
-----------------------------------------------------------------------------
3 MONTHS OR 4 TO 6 7 TO 12 1 TO 5 OVER 5
($ IN THOUSANDS) LESS MONTHS MONTHS 1 YEAR YEARS YEARS TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Securities (2) $ 3,248 $ 298 $ 1,225 $ 4,771 $ 57,816 $ 34,149 $ 96,736
Mortgage-backed securities (2) 1,881 1,796 3,395 7,072 26,212 43,079 76,363
Interest-bearing due from banks -- -- -- -- 318 -- 318
Funds sold 870 -- -- 870 -- -- 870
Loans, net of unearned income (3)(4) 119,076 25,890 35,518 180,486 97,456 30,026 307,968
- ----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 125,075 27,984 40,138 193,199 181,802 107,254 482,255
- ----------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
NOW and money market accounts (5) 99,514 -- -- 99,514 -- -- 99,514
Savings deposits 26,324 -- -- 26,324 -- -- 26,324
Other time deposits 52,340 46,772 68,495 167,607 70,434 -- 238,041
Funds purchased 1,240 -- -- 1,240 -- -- 1,240
Short-term borrowings 39,122 3 107 39,232 -- -- 39,232
Long-term debt -- -- -- -- 425 625 1,050
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 218,540 46,775 68,602 333,917 70,859 625 405,401
- ----------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap (93,465) (18,791) (28,464) (140,718) 110,943 106,629 76,854
- ----------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap $ (93,465) $(112,256) $(140,720) $(140,718) $ (29,773) $ 76,854 $ 76,854
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE REPRICING DATES (WHICH MAY DIFFER FROM MATURITY DATES) FOR VARIOUS
ASSETS AND LIABILITIES DO NOT CONSIDER EXTERNAL FACTORS THAT MIGHT AFFECT
THE INTEREST RATE SENSITIVITY OF ASSETS AND LIABILITIES.
(2) REPRICING PERIOD FOR SECURITIES AND MORTGAGE-BACKED SECURITIES IS BASED ON
CONTRACTUAL MATURITIES WHICH MAY DIFFER FROM ACTUAL MATURITIES BECAUSE
BORROWERS MAY HAVE THE RIGHT TO CALL OR PREPAY OBLIGATIONS WITH OR WITHOUT
CALL OR PREPAYMENT PENALTIES.
(3) INCLUDES NONACCRUAL LOANS.
(4) LOAN REPRICING DISTRIBUTION IS BASED ON EXPECTED CASH FLOWS WHICH MAY DIFFER
FROM THE CONTRACTUAL TERMS AND ACTUAL CASH FLOWS OF LOANS AS BORROWERS HAVE
THE RIGHT TO PREPAY WITHOUT PREPAYMENT PENALTIES.
(5) NOW, MONEY MARKET AND SAVINGS ACCOUNTS FOR REPRICING PURPOSES ARE CONSIDERED
TO REPRICE WITHIN 3 MONTHS OR LESS.
A pro-forma interest sensitivity gap table which includes the effects of the
purchase of $22.6 million of mortgage-backed securities funded by an increase in
long-term debt of $25.0 million (both transactions incurred in January 1996) is
as follows:
<TABLE>
<CAPTION>
ASSETS AND LIABILITIES REPRICING WITHIN (1)
-----------------------------------------------------------------------------
3 MONTHS OR 4 TO 6 7 TO 12 1 TO 5 OVER 5
($ IN THOUSANDS) LESS MONTHS MONTHS 1 YEAR YEARS YEARS TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative interest sensitivity gap at
December 31, 1995....................... $ (93,465) $(112,256) $(140,720) $(140,718) $ (29,773) $ 76,854 $ 76,854
Mortgage-backed securities............ -- -- -- -- 4,695 17,913 22,608
Long-term debt........................ -- -- -- -- -- (25,000) (25,000)
----------- --------- --------- --------- --------- --------- ---------
Pro-forma interest sensitivity gap at
December 31, 1995....................... $ (93,465) $(112,256) $(140,720) $(140,718) $ (25,078) $ 69,767 $ 74,462
----------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- ---------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES PORTFOLIO
The following table presents carrying values and fair values of securities held
by the Company at December 31, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
1995 1994
------------------------------------------ -------------------------------------------
AVAILABLE-FOR-SALE AMORTIZED CARRYING UNREALIZED UNREALIZED AMORTIZED CARRYING UNREALIZED UNREALIZED
($ IN THOUSANDS) COST VALUE GAINS LOSSES COST VALUE GAINS LOSSES
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries $ 45,059 $ 46,077 $1,028 $ 10 $ 47,298 $ 44,501 $ 9 $2,806
U.S. Government Agencies 5,199 5,267 154 86 -- -- -- --
Obligations of States and Political
Subdivisions 39,831 41,087 1,422 166 37,413 36,072 517 1,858
Other Securities 4,198 4,305 158 51 3,071 3,068 -- 3
- ----------------------------------------------------------------------------------------------------------------------------------
Total 94,287 96,736 2,762 313 87,782 83,641 526 4,667
Mortgage-backed Securities 75,386 76,363 1,247 270 57,194 55,069 305 2,430
- ----------------------------------------------------------------------------------------------------------------------------------
Total $169,673 $173,099 $4,009 $583 $144,976 $138,710 $831 $7,097
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1993
-------------------------------------------
AVAILABLE-FOR-SALE AMORTIZED CARRYING UNREALIZED UNREALIZED
($ IN THOUSANDS) COST VALUE GAINS LOSSES
- ----------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries $ 48,639 $ 50,490 $1,851 --
U.S. Government Agencies 1,000 1,012 12 --
Obligations of States and Political
Subdivisions 33,655 35,978 2,355 32
Other Securities 2,249 2,333 84 --
- ----------------------------------------
Total 85,543 89,813 4,302 32
Mortgage-backed Securities 53,629 55,790 2,247 86
- ----------------------------------------
Total $139,172 $145,603 $6,549 $118
- ----------------------------------------
- ----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------------------------------ -----------------------------------------
HELD-TO-MATURITY AMORTIZED FAIR UNREALIZED UNREALIZED AMORTIZED FAIR UNREALIZED UNREALIZED
($ IN THOUSANDS) COST VALUE GAINS LOSSES COST VALUE GAINS LOSSES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasuries $ -- $ -- $ -- $ -- $ 3,655 $ 3,511 $ -- $ 144
U.S. Government
Agencies -- -- -- -- 5,646 5,347 5 304
Obligations of States
and Political
Subdivisions -- -- -- -- 5,361 5,285 49 125
Other Securities -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- -- 14,662 14,143 54 573
Mortgage-backed Securities -- -- -- -- 8,796 8,263 46 579
- --------------------------------------------------------------------------------------------------------------------------------
Total $ -- $ -- $ -- $ -- $23,458 $22,406 $100 $1,152
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1993
-------------------------------------
HELD-TO-MATURITY AMORTIZED FAIR UNREALIZED UNREALIZED
($ IN THOUSANDS) COST VALUE GAINS LOSSES
<S> <C> <C> <C> <C>
- ----------------------------------------
U.S. Treasuries $ -- $ -- $ -- $ --
U.S. Government
Agencies 2,397 2,477 80 --
Obligations of States
and Political
Subdivisions 3,088 3,285 198 1
Other Securities 771 771 -- --
- ----------------------------------------
Total 6,256 6,533 278 1
Mortgage-backed Securities 1,816 1,902 86 --
- ----------------------------------------
Total $8,072 $8,435 $364 $ 1
- ----------------------------------------
- ----------------------------------------
</TABLE>
The Company reclassified all held-to-maturity securities as available-for-sale
effective December 1, 1995. At the date of reclassification, held-to-maturity
securities and mortgage-backed securities, carried at amortized cost, totaled
$22.9 million. Unrealized gains were $.3 million and unrealized losses were $.5
million. The unrealized loss, net of tax, transferred was $135,000, which was
recorded as a separate component of stockholders' equity. Management believes
that this reclassification will provide the Company greater flexibility in
managing liquidity and interest-rate risk.
In connection with the 1994 Acquisitions (refer to Note 2 to the Consolidated
Financial Statements), the Company acquired collateralized mortgage obligations
("CMOs"). At December 31, 1995, the Company had included in mortgage-backed
securities available-for-sale approximately $4.3 million in CMOs with a book
value of $4.5 million, all of which had floating interest rates. CMOs present
some degree of risk, in that the mortgages collateralizing the securities can
prepay, thereby affecting the yield of the securities and their carrying
amounts. Such an occurrence is most likely in periods of low interest rates when
many borrowers refinance their mortgages, creating prepayment on their existing
mortgages.
Additionally, through its 1994 acquisitions, the Company acquired agency
securities with forward coupon rate increases, commonly known as "step-ups". At
December 31, 1995, the Company had approximately $2.5 million of such step-ups
with a book value of $2.5 million, with maturities out to the year 2000. These
step-up securities utilize a strategy of avoiding purchases of fixed rate
securities that would have provided lower than desirable yields in a rising rate
environment. Step-ups are callable by the issuer at predetermined call dates,
generally on each interest payment date. Step-ups present some degree of risk
that the security will be called in a declining rate environment, resulting in
the Company's reinvesting the proceeds at a lower yield than was available at a
fixed longer-term rate when the security was originally purchased and the risk
that yield increases in a rising rate environment will be less than the yield
that would currently be available in the marketplace at the time of scheduled
rate increases.
15
<PAGE>
- --------------------------------------------------------------------------------
The following table represents maturities and weighted-average yields of
securities at December 31, 1995. Yields are based on amortized cost of
securities. Maturities are based on contractual maturities. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AFTER 1 AFTER 5
YEAR BUT YEARS BUT
AVAILABLE-FOR-SALE WITHIN 1 WITHIN WITHIN AFTER 10
($ IN THOUSANDS) YEAR 5 YEARS 10 YEARS YEARS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. treasuries $ 3,310 5.85% $42,767 6.06% $ -- --% $ -- --% $ 46,077
U.S. government agencies -- -- 4,906 4.78 361 3.33 -- -- 5,267
Mortgage-backed securities 7,072 7.23 26,212 7.24 13,580 7.27 29,499 7.45 76,363
Obligations of states and political subdivisions 1,461 9.33 10,143 9.78 7,584 8.71 21,899 8.30 41,087
Other securities -- -- -- -- -- -- 4,305 7.02 4,305
- ------------------------------------------------------------------------------------------------------------------------------------
Total $11,843 7.10% $84,028 6.80% $21,525 7.71% $55,703 7.75% $173,099
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CAPITAL
At December 31, 1995, the Company was well above the minimum capital ratios
required under the risk-based capital guidelines.
At December 31, 1995, the Company's capital ratios were as follows:
<TABLE>
<S> <C>
Tier 1 Capital to Risk-Based Assets 16.72 %
Tier 2 Capital to Risk-Based Assets 18.13 %
Leverage Ratio 9.68%
</TABLE>
Capital is considered to be adequate to meet present operating needs and
presently anticipated future operating requirements. However, future
acquisitions may require additional new equity capital. Management is not aware
of any trends, events or uncertainties that will have or are reasonably likely
to have a material effect on the Company's capital resources or operations.
DEPOSITS
The following table presents the average amount outstanding and the average rate
paid on deposits by the Company for the years 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE
($ IN THOUSANDS) AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing demand deposits $ 51,842 0.00% $ 43,695 0.00% 38,687 0.00%
Interest-bearing deposits:
NOW deposit accounts 76,990 2.47 65,734 2.10 49,435 2.43
Money market deposit accounts 19,076 3.13 23,982 2.28 26,388 2.56
Savings 27,137 2.47 25,771 1.85 21,252 2.95
Other time 230,639 5.60 210,105 4.67 210,214 4.61
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 405,684 3.97% $ 369,287 3.31% $ 345,976 3.52%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Included in non-interest-bearing demand deposits at December 31, 1995, 1994
and 1993 are various state, county and municipal deposits aggregating
approximately $7.4 million, $5.5 million and $8.0 million, respectively. In
addition, state, county, and municipal deposits included in interest-bearing
deposits amounted to $37.0 million, $49.0 million, and $30.0 million at December
31, 1995, 1994 and 1993, respectively.
The following table presents the maturities of the Company's other time
deposits at December 31, 1995.
<TABLE>
<CAPTION>
OTHER TIME OTHER TIME
DEPOSITS DEPOSITS
$100,000 LESS THAN
($ IN THOUSANDS) OR GREATER $100,000 TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Months to Maturity
3 or less $15,576 $ 36,764 $ 52,340
Over 3 through 6 13,760 33,012 46,772
Over 6 through 12 11,402 57,093 68,495
Over 12 8,519 61,915 70,434
- --------------------------------------------------------------------------------------
Total $49,257 $188,784 $238,041
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
SHORT-TERM BORROWINGS AND FUNDS PURCHASED
The following table presents certain information concerning the Company's
short-term borrowings and funds purchased for the years ended December 31, 1995,
1994 and 1993.
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at year-end
Bank lines of credit $ -- $ 9,835 $ --
Repurchase agreements 8,504 28,518 10,085
Advances from Federal Home Loan Bank 29,000 7,500 2,500
U.S. Treasury tax and loan and other 1,615 3,570 2,138
Current maturities of long-term debt 113 62 63
- ----------------------------------------------------------------------------------
Total short-term borrowings $39,232 $49,485 $14,786
- ----------------------------------------------------------------------------------
Funds purchased $ 1,240 $12,150 $ 7,477
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Average interest rates at year-end
Bank lines of credit --% 7.25% --%
Repurchase agreements 5.30 5.34 3.03
Advances from Federal Home Loan Bank 6.76 4.99 4.00
U.S. Treasury tax and loan and other 5.30 5.25 2.76
Funds purchased 5.85 6.05 3.50
- ----------------------------------------------------------------------------------
Maximum amount outstanding at any month-end
Bank lines of credit $ 9,825 $ 9,835 $ --
Repurchase agreements 23,713 28,518 23,850
Advances from Federal Home Loan Bank 31,500 11,500 11,500
U.S. Treasury tax and loan and other 9,514 3,580 2,851
Current maturities of long-term debt 113 62 63
Total short-term borrowings 74,616 53,485 38,264
Funds purchased 9,880 12,150 7,477
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Aggregate short-term borrowings
Average amount outstanding $51,323 $24,212 $25,825
Weighted-average interest rate 5.99% 4.87% 2.83%
Aggregate funds purchased
Average amount outstanding $ 3,483 $ 3,575 $ 2,752
Weighted-average interest rate 6.09% 4.76% 3.60%
</TABLE>
SUPERVISION AND REGULATION
GENERAL
The Company is a registered bank holding company subject to regulation by the
Federal Reserve under the Bank Holding Company Act of 1956, as amended (the
"Act"). The Company is required to file financial information with the Federal
Reserve periodically and is subject to periodic examination by the Federal
Reserve.
The Act requires every bank holding company to obtain the prior approval of
the Federal Reserve (i) before it may acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank that is not already
controlled; (ii) before it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of a bank; and (iii) before it
may merge or consolidate with any other bank holding company. In addition, a
bank holding company is generally prohibited from engaging in, or acquiring
direct or indirect control of voting shares of any company engaged in
non-banking activities. This prohibition does not apply to activities found by
the Federal Reserve, by order or regulation, to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. Some of the
activities that the Federal Reserve has determined by regulation or order to be
closely related to banking are: making or servicing loans and certain types of
leases; performing certain data processing services; acting as fiduciary or
investment or financial advisor; providing discount brokerage services; and
making investments in corporations or projects designed primarily to promote
community welfare.
The Company must also register with the State of Georgia Department of Banking
and Finance, (the "DBF") and must file periodic information with the DBF. Such
registration includes information with respect to the financial condition,
operations, management and intercompany relationships of the Company and its
subsidiary banks (the "Banks") and related matters. The DBF may also require
such other information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may make examinations of the
Company and each of the banks other than a national bank.
The Company is an "affiliate" of the Banks under the Federal Reserve Act,
which imposes certain restrictions on (i) loans by the Banks to the Company,
(ii) investments in the stock or securities of the Company by the Banks, (iii)
the Banks taking the stock or securities of an "affiliate" as collateral for
loans by it to a borrower and (iv) the purchase of assets from the Company by
the Banks. Further, a bank holding company and its subsidiaries are prohibited
from engaging in
17
<PAGE>
- --------------------------------------------------------------------------------
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.
The Banks, as state banking associations, are subject to the supervision of,
and are regularly examined by, the Federal Deposit Insurance Corporation (the
"FDIC") and the DBF. Both the FDIC and the DBF must grant prior approval of any
merger, consolidation or other corporate reorganization involving the Banks. The
Financial Institutions Reform, Recovery and Enforcement Act of 1989 provides
that a bank can be held liable for any loss incurred by, or reasonably expected
to be incurred by, the FDIC in connection with the default of a commonly
controlled institution.
PAYMENT OF DIVIDENDS
The Company is a legal entity separate and distinct from the Banks. Most of the
revenues of the Company result from dividends paid to it by the Banks. There are
statutory and regulatory requirements applicable to the payment of dividends by
the Banks as well as by the Company to its shareholders.
The Banks are state chartered banks which are regulated by the DBF and the
FDIC. Under the regulations of the DBF, dividends may be declared out of the
retained earnings of a state bank without first obtaining the written permission
of the DBF only if the bank meets all the following requirements:
(a) Total classified assets as of the most
recent examination of the bank do not exceed 80% of equity capital (as
defined by regulation);
(b) The aggregate amount of dividends
declared or anticipated to be declared in the calendar year does not exceed
50% of the net profits after taxes but before dividends for the previous
calendar year; and
(c) The ratio of equity capital to adjusted
assets shall not be less than 6%.
The payment of dividends by the Company and the Banks may also be affected or
limited by other factors, such as the requirements to maintain adequate capital
above regulatory guidelines. In addition, if, in the opinion of the applicable
regulatory authority, a bank under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending upon the financial
condition of the bank, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and desist from such
practice. The FDIC has issued a policy statement which provides that insured
banks should generally only pay dividends out of current operating earnings.
MONETARY POLICY
The results of operations of the Banks are affected by credit policies of
monetary authorities, particularly the Federal Reserve. The instruments of
monetary policy employed by the Federal Reserve include open market operations
in U.S. government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements against bank deposits. In view of changing
conditions in the national economy and in the money markets, as well as the
effect of action by monetary and fiscal authorities, including the Federal
Reserve, no prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand, or the business and earnings of the Banks.
CAPITAL ADEQUACY
The Federal Reserve and the FDIC have implemented substantially identical
risk-based rules for assessing bank and bank holding company capital adequacy.
These regulations establish minimum capital standards in relation to assets and
off-balance sheet exposures as adjusted for credit risk. Banks and bank holding
companies are required to have (1) a minimum level of total capital (as defined)
to risk weighted assets of eight percent (8%); (2) a minimum Tier One Capital
(as defined) to risk weighted assets of four percent (4%); and (3) a minimum
stockholders' equity to risk weighted assets of four percent (4%). In addition,
the Federal Reserve and the FDIC have established a minimum three percent (3%)
leverage ratio of Tier One Capital to total assets for the most highly rated
banks and bank holding companies. "Tier One Capital" generally consists of
common equity, minority interests in equity accounts of consolidated
subsidiaries and certain perpetual preferred stock, less certain intangibles.
The Federal Reserve and the FDIC will require a bank holding company and a bank,
respectively, to maintain a leverage ratio greater than three percent (3%) if it
is experiencing or anticipating significant growth or is operating with less
than well-diversified risks in the opinion of the Federal Reserve. The Federal
Reserve and the FDIC use the leverage ratio in tandem with the risk-based ratio
to assess capital adequacy of banks and bank holding companies.
18
<PAGE>
- --------------------------------------------------------------------------------
The FDIC, the Office of the Comptroller of the Currency (the "OCC") and the
Federal Reserve have proposed amending the capital adequacy standards to provide
for the consideration of interest rate risk in the overall determination of a
bank's capital ratio, requiring banks with greater interest rate risk to
maintain adequate capital for the risk. The proposed revisions are not expected
to have a significant effect on the Company's capital requirements, if adopted
in their current form.
In addition, the Federal Deposit Insurance Act includes prompt corrective
action provisions. The "prompt corrective action" provisions set forth five
regulatory zones in which all banks are placed largely based on their capital
positions. Regulators are permitted to take increasingly harsh action as a
bank's financial condition declines. Regulators are also empowered to place in
receivership or require the sale of a bank to another depository institution
when a bank's capital leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision
than banks with lesser amounts of capital.
The FDIC has adopted regulations implementing the prompt corrective action
provisions, which place financial institutions in the following five categories
based upon capitalization ratios: (1) a "well capitalized" institution has a
total risk-based capital ratio of at least 10%, a Tier One risk-based ratio of
at least 6% and leverage ratio of at least 5%; (2) an "adequately capitalized"
institution has a total risk-based capital ratio of at least 8%, a Tier One
risk-based ratio of at least 4% and a leverage ratio of at least 4%; (3) an
"undercapitalized" institution has a total risk-based capital ratio of under 8%,
a Tier One risk-based ratio of under 4% or a leverage ratio of under 4%; (4) a
"significantly undercapitalized" institution has a total risk-based capital
ratio of under 6%, a Tier One risk-based ratio of under 3% or a leverage ratio
of under 3%; and (5) a "critically undercapitalized" institution has a leverage
ratio of 2% or less. Institutions in any of the three undercapitalized
categories would be prohibited from declaring dividends or making capital
distributions. The FDIC regulations also establish procedures for "downgrading"
an institution to a lower capital category based on supervisory factors other
than capital. Under the FDIC's regulations all of the Banks meet the
requirements of "well capitalized" institutions at December 31, 1995.
Set forth below are pertinent capital ratios for each of the Banks as of
December 31, 1995.
<TABLE>
<CAPTION>
MINIMUM BANK OF
CAPITAL ALLIED BANK BANK OF MORGAN
REQUIREMENT OF GEORGIA MILLEN COUNTY
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital to Risk-based Assets: 4.00% (1) 14.23% 14.91% 23.48%
Total Capital to Risk-based Assets: 8.00% (2) 15.80 14.91 24.40
Leverage Ratio (Tier 1 Capital to Total assets):
3.00% (3) 8.37 7.88 13.34
</TABLE>
(1)Minimum for "Well Capitalized" Banks = 6%
(2)Minimum for "Well Capitalized" Banks = 10%
(3)Minimum for "Well Capitalized" Banks = 5%
RECENT LEGISLATIVE AND REGULATORY ACTION
On April 19, 1995, the four federal bank regulatory agencies adopted revisions
to the regulations promulgated pursuant to the Community Reinvestment Act (the
"CRA"), which are intended to set distinct assessment standards for financial
institutions. The revised regulation contains three evaluation tests: (i) a
lending test which will compare the institution's market share of loans in low-
and moderate-income areas to its market share of loans in its entire service
area and the percentage of a bank's outstanding loans to low- and moderate-
income areas or individuals, (ii) a services test which will evaluate the
provisions of services that promote the availability of credit to low- and
moderate-income areas, and (iii) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA performance
of financial institutions. The rule became effective on January 1, 1996, at
which time evaluation under streamlined procedures began for institutions with
assets of less than $250 million that are owned by a holding company with total
assets of less than $1 billion. It is not expected that these regulations will
have any appreciable impact upon the Company and the Banks.
Congress and various federal agencies (including, in addition to the bank
regulatory agencies, HUD, the Federal Trade Commission and the Department of
Justice) (collectively the "Federal
19
<PAGE>
- --------------------------------------------------------------------------------
Agencies") responsible for implementing the nations fair lending laws have been
increasingly concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In recent years,
the Department of Justice has filed suit against financial institutions, which
it determined had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Most, if not all, of these
suits have been settled (some for substantial sums) without a full adjudication
on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining whether lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Opportunity Act and the Fair Housing Act. In the policy statement,
three methods of proving lending discrimination were identified: (1) overt
evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis, (2) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (3) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral on their face and
are applied equally, unless the practice can be justified on the basis of
business necessity.
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory Improvement
Act"). The Regulatory Improvement Act contains funding for community development
projects through banks and community development financial institutions and also
numerous regulatory relief provisions designed to eliminate certain duplicate
regulations and paperwork requirements.
On September 29, 1994, President Clinton signed the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Federal Interstate Bill")
which amends federal law to permit bank holding companies to acquire existing
banks in any state effective September 29, 1995, and any interstate bank holding
company is permitted to merge its various bank subsidiaries into a single bank
with interstate branches after May 31, 1997. States have the authority to
authorize interstate branching prior to June 1, 1997, or alternatively, to opt
out of interstate branching prior to that date. The Georgia Financial
Institutions Code was amended in 1994 to permit the acquisition of a Georgia
bank or bank holding company by out-of-state bank holding companies beginning
July 1, 1995. On September 29, 1995, the interstate banking provisions of the
Georgia Code were superseded by the Federal Interstate Bill.
On January 26, 1996, the Georgia legislature adopted a bill (the "Georgia
Intrastate Bill") to permit, effective July 1, 1996, any Georgia bank or group
of affiliated banks under one holding company to establish new or additional
branch banks in any three counties within the State of Georgia in which it is
not currently operating. After July 1, 1998, all restrictions on state-wide
branching would be removed. Prior to adoption of the Georgia Intrastate Bill,
Georgia only permitted branching via merger or consolidation with an existing
bank or in certain other limited circumstances. Although Governor Miller has not
yet signed the Georgia Intrastate Bill into law, he is expected to do so.
FDIC INSURANCE ASSESSMENTS FOR THE BANKS.
The Banks are subject to FDIC deposit insurance assessments for the Bank
Insurance Fund (the "BIF"). In the first six months of 1995, the Banks were
assessed $.23 per $100 of deposits based upon a risk-based system whereby banks
are assessed on a sliding scale depending upon their placement in nine separate
supervisory categories, from $.23 per $100 of deposits for the healthiest banks
(those with the highest capital, best management and best overall condition) to
as much as $.31 per $100 of deposits for the less-healthy institutions, for an
average $.259 per $100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for the healthiest banks
83% from $.23 per $100 of deposits to $.04 per $100 of deposits, while retaining
the $.31 level for the riskiest banks. The new rate took effect on September 29,
1995. On September 15, 1995, the FDIC refunded $173,000 to the Banks for premium
overpayments in the second and third quarter of 1995. On November 14, 1995, the
FDIC again lowered the BIF premium for healthy banks from $.04 per $100 of
deposits to zero for the highest rated institutions (92% of the industry). As a
result, each of the Banks will pay only the legally
20
<PAGE>
- --------------------------------------------------------------------------------
required annual minimum payment of $2,000 per year for insurance beginning in
January 1996.
Allied Bank of Georgia has approximately $120 million of deposits which are
subject to FDIC deposit insurance assessments for the Savings Association
Insurance Fund ("SAIF"). These SAIF deposits are assessed FDIC insurance
premiums at a rate of $.23 per $100 of deposits. A summary of expected FDIC
insurance premium expense for 1996 based on current deposits and rates is as
follows:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
<S> <C>
Allied Bank of Georgia...................................... $ 278
Bank of Morgan County....................................... 2
Bank of Millen.............................................. 2
-----
Total expected premium...................................... $ 282
-----
-----
</TABLE>
At December 31, 1995, the FDIC deposit insurance premium rates for bank
deposits insured by the SAIF were $.23 per $100 while the rate for bank deposits
insured by the BIF was $.00 per $100. Congress is considering legislation which,
if enacted would consolidate the SAIF and BIF. Prior to consolidation, the SAIF
would be recapitalized by a one-time assessment of $.85 per $100 of SAIF insured
deposits. Should this one-time assessment of $.85 per $100 of SAIF insured
deposits be enacted into law, in the period of enactment the Company would incur
a one-time charge to FDIC insurance expense of approximately $1.0 million based
on total SAIF deposits of $120 million.
LEGAL PROCEEDINGS
The Company is from time to time subject to legal proceedings relating to the
normal business of its banks. Presently, there are no significant legal matters
or proceedings in progress.
COMPETITION
All aspects of the Company's business are highly competitive. The Company faces
aggressive competition from other lending institutions and from other providers
of financial services. The deregulation of financial institutions and the
increased ability of nonbanking financial institutions to provide services
previously reserved for commercial banks has intensified competition. Because
nonbanking financial institutions are not subject to the same regulatory
restrictions as banks and bank holding companies, in many instances, they may
operate with greater flexibility.
PROPERTIES
The Company's headquarters is located at 149 Main Street in Thomson, Georgia.
The Company has 24 banking locations. The Company's largest facility is a 20,000
square-foot building located in Martinez, Georgia. This building, the largest
banking facility in Columbia County, serves as a branch office for Allied Bank
of Georgia and Knox Mortgage Company. This building is financed by Industrial
Development Authority Bonds with a balance outstanding of $1,125,000 at December
31, 1995. Twenty of the Company's banking offices are located in the Augusta
Metropolitan Statistical area. (Notes 1 and 10)
EMPLOYEES
At December 31, 1995, the Company and its wholly owned subsidiaries had 299
full-time-equivalent employees. Management believes that its employee relations
are satisfactory.
21
<PAGE>
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QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of the unaudited quarterly financial data of the Company for the years
ended December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1995 QUARTERS ENDED
- --------------------------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA) DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 11,110 $ 11,038 $ 10,734 $ 10,755
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net interest income 6,062 6,104 5,839 6,177
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Provision for loan losses 311 85 100 204
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 3,550 3,241 3,228 3.333
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income 2,428 2,248 2,181 2,305
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income per share 0.19 0.18 0.18 0.18
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1994 1994 QUARTERS ENDED
- --------------------------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA) DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 10,938 $ 8,448 $ 8,286 $ 8,052
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net interest income 6,466 5,205 5,196 5,011
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Provision for loan losses 300 73 53 63
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 2,857 2,018 2,865 2,820
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income 1,931 1,502 2,065 2,042
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income per share 0.15 0.14 0.17 0.17
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
FOURTH QUARTER 1995 VS. FOURTH QUARTER 1994
RESULTS OF OPERATIONS
Net income for the fourth quarter of 1995 was $2.4 million or $.19 per share
as compared to $1.9 million or $.15 per share for the fourth quarter of 1994.
The increase in net income of $.5 million or $.04 per share was the result of an
increase in non-interest income of $.5 million and a decline in non-interest
expense of $.6 million offset by a decline in taxable-equivalent net interest
income of $.4 million and an increase in provision for income taxes of $.2
million. Non-interest income increased primarily due to increases in net gain on
sales of mortgage loans and sales of securities. Mortgage loan origination
activity increased during the fourth quarter due to declining interest rates.
Non-interest expense declined significantly as the Company eliminated duplicate
systems and realized cost savings from the consolidation of the operations of
the 1994 Acquisitions. The net interest margin for the fourth quarter declined
from 5.61% to 5.27%. Taxable-equivalent net interest income declined due to a
decrease in volume and rate primarily caused by increased competition for
deposits which resulted in higher deposit rates.
22
<PAGE>
- --------------------------------------------------------------------------------
NASDAQ STOCK MARKET DATA
The Company's common stock trades on The NASDAQ Stock Market under the symbol
ABGA. The following table shows per share prices as reported by NASDAQ after
adjustment for all stock dividends paid and declared through January 31, 1996:
<TABLE>
<CAPTION>
1995 HIGH LOW CLOSE
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter $11.59 $ 9.32 $ 9.43
- --------------------------------------------------------------------------
Third Quarter 11.36 9.55 10.45
- --------------------------------------------------------------------------
Second Quarter 10.45 9.09 10.11
- --------------------------------------------------------------------------
First Quarter 10.45 8.64 10.00
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1994 HIGH LOW CLOSE
- ----------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter $10.91 $ 8.64 $ 8.86
- ----------------------------------------------------------------
Third Quarter 11.27 10.00 10.27
- ----------------------------------------------------------------
Second Quarter 11.45 10.00 10.73
- ----------------------------------------------------------------
First Quarter 11.82 10.55 10.91
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
At December 31, 1995, the Company had 12,611,622 shares of common stock
outstanding which was held by 1,342 stockholders of record. Total stockholders
are estimated to be approximately 2,300.
23
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
Allied Bankshares, Inc. and subsidiaries
($ IN THOUSANDS, EXCEPT SHARE DATA)
- -------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- -------------------------------------------------------------------------
Assets
Cash and Due From Banks $ 23,494 $ 28,159
- -------------------------------------------------------------------------
Interest-Bearing Deposits 318 918
- -------------------------------------------------------------------------
Funds Sold and Securities Purchased Under
Agreements to Resell 870 110
- -------------------------------------------------------------------------
Securities Available-For-Sale(1) (Note 3) 96,736 83,641
- -------------------------------------------------------------------------
Securities (Note 3) (fair value of $14,143) -- 14,662
- -------------------------------------------------------------------------
Mortgage-Backed Securities Available-For-Sale(2)
(Note 3) 76,363 55,069
- -------------------------------------------------------------------------
Mortgage-Backed Securities (Note 3) (fair value of
$8,263) -- 8,796
- -------------------------------------------------------------------------
Loans (Notes 4 and 5) 308,285 312,580
Less: Unearned Income (317) (378)
Allowance for Loan Losses (4,312) (4,635)
- -------------------------------------------------------------------------
Loans, net 303,656 307,567
- -------------------------------------------------------------------------
Premises and Equipment, net (Notes 2 and 10) 13,809 13,307
- -------------------------------------------------------------------------
Goodwill and Intangible Assets, net (Note 2) 14,473 13,426
- -------------------------------------------------------------------------
Other Assets 8,680 10,185
- -------------------------------------------------------------------------
Total Assets $ 538,399 $ 535,840
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Liabilities
Deposits (Note 7)
Non-Interest-Bearing $ 57,706 $ 54,097
Interest-Bearing:
NOW and Money Market Accounts 99,514 103,622
Savings 26,324 28,873
Other Time 238,041 228,221
- -------------------------------------------------------------------------
Total Deposits 421,585 414,813
- -------------------------------------------------------------------------
Funds Purchased 1,240 12,150
- -------------------------------------------------------------------------
Short-Term Borrowings (Note 10) 39,232 49,485
- -------------------------------------------------------------------------
Long-Term Debt (Note 10) 1,050 1,164
- -------------------------------------------------------------------------
Other Liabilities 7,657 1,776
- -------------------------------------------------------------------------
Total Liabilities 470,764 479,388
- -------------------------------------------------------------------------
Commitments and Contingencies (Notes 4, 9, 10 and
11)
Stockholders' Equity (Note 2)
Preferred Stock, $1 par value, 25,000,000 shares
authorized; none issued -- --
Common Stock, $1 par value, 50,000,000 shares
authorized;
12,648,943 shares issued, 12,611,622 shares
outstanding at December 31, 1995 and
12,621,877 shares issued and outstanding at
December 31, 1994 12,649 12,622
Additional Paid-In Capital 34,749 34,520
Retained Earnings 18,460 13,311
Less: Treasury Stock, at cost, 33,927 shares (348) --
Unrealized Gains (Losses) on Securities, net 2,125 (4,001)
- -------------------------------------------------------------------------
Total Stockholders' Equity 67,635 56,452
- -------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 538,399 $ 535,840
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
(1) Includes unrealized gains (losses) on
securities available-for-sale, net $ 2,449 $ (4,141)
(2) Includes unrealized gains (losses) on
mortgage-backed securities available-for-sale,
net 977 (2,125)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE
SHEETS.
24
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Allied Bankshares, Inc. and subsidiaries
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans
Taxable Interest $32,280 $25,163 $22,420
Tax-Exempt Interest 107 162 192
Interest on Mortgage-Backed Securities 4,251 4,060 5,188
Interest on Investment Securities
Taxable Interest 3,850 3,611 3,004
Tax-Exempt Interest 2,650 2,523 2,360
Interest on Funds Sold 499 205 199
- -----------------------------------------------------------------------------
Total Interest Income 43,637 35,724 33,363
- -----------------------------------------------------------------------------
INTEREST EXPENSE
Interest on Deposits 16,087 12,208 12,190
Interest on Funds Purchased 212 170 99
Interest on Short-Term Borrowings 3,073 1,180 730
Interest on Long-Term Debt 83 288 115
- -----------------------------------------------------------------------------
Total Interest Expense 19,455 13,846 13,134
- -----------------------------------------------------------------------------
Net Interest Income 24,182 21,878 20,229
Provision for Loan Losses (Note 5) 700 489 520
- -----------------------------------------------------------------------------
Net Interest Income After Provision for Loan
Losses 23,482 21,389 19,709
- -----------------------------------------------------------------------------
NON-INTEREST INCOME
Service Charges on Deposit Accounts 3,296 2,799 2,094
Gain on Sales of Mortgage Loans Held-For-Sale, net 828 572 1,555
Gain on Sales of Securities, net 316 326 261
Gain on Sales of Mortgage Servicing Rights -- 207 219
Credit Life Insurance Commissions 219 146 222
Mortgage Servicing Fees 121 150 200
Gain on Sales of Investments in Other Financial
Institutions 155 -- 117
Gain on Sale of Databank South, Inc. -- 119 67
Gain (Loss) on Sales of Fixed Assets 127 73 (137)
Gain From Premium on Expired Options 60 106 --
Other Income 472 552 473
- -----------------------------------------------------------------------------
Total Non-Interest Income 5,594 5,050 5,071
- -----------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and Other Personnel Benefits (Note 8) 8,014 7,470 6,953
Net Occupancy and Equipment Expense 2,215 2,198 1,974
Computer Expense 846 850 696
FDIC Insurance Premiums 660 841 739
Amortization of Goodwill and Intangible Assets 1,189 635 433
Legal and Professional Expense 443 530 337
Office Supplies 466 369 259
Postage Expense 310 290 218
Merger Expense -- 272 --
Write-Off of Fixed Assets Acquired by Merger -- 198 --
Other Expense 1,581 2,226 2,080
- -----------------------------------------------------------------------------
Total Non-Interest Expense 15,724 15,879 13,689
- -----------------------------------------------------------------------------
Income Before Provision for Income Taxes 13,352 10,560 11,091
Provision for Income Taxes (Note 6) 4,190 3,020 3,222
- -----------------------------------------------------------------------------
Net Income $ 9,162 $ 7,540 $ 7,869
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net Income Per Common Share $ .73 $ .63 $ .68
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Weighted Average Common Shares Outstanding (IN
THOUSANDS) 12,614 11,901 11,611
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
25
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Allied Bankshares, Inc. and subsidiaries
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL UNREALIZED GAINS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND COMMON PAID-IN RETAINED TREASURY (LOSSES) ON
1993 STOCK CAPITAL EARNINGS STOCK SECURITIES, NET TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $ 11,578 $ 26,571 $ 3,886 $ -- $ $ 42,035
Net Income -- -- 7,869 -- 7,869
Cash Dividends Declared by Pooled Companies:
Allied Bankshares, Inc. - $.24 per share -- -- (2,533) -- (2,533)
First Savings Bank, F.S.B. - $.10 per share -- -- (116) -- (116)
Issuance of 65,963 Shares Through Dividend
Reinvestment Plan 66 499 -- -- 565
Purchase of Fractional Shares -- -- (8) -- (8)
Change in Unrealized Gains (Losses) on
Securities, net -- -- -- -- 4,244 4,244
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 11,644 27,070 9,098 -- 4,244 52,056
Net Income -- -- 7,540 -- -- 7,540
Cash Dividends Declared by Pooled Companies:
Allied Bankshares, Inc. - $.29 per share -- -- (3,212) -- -- (3,212)
First Savings Bank, F.S.B. - $.09 per share -- -- (107) -- -- (107)
Issuance of 35,401 Shares Through Dividend
Reinvestment Plan 35 318 -- -- -- 353
Purchase of Fractional Shares -- -- (8) -- -- (8)
Issuance of 915,016 Shares for Acquisitions 915 7,072 -- -- -- 7,987
Exercise of Stock Options of Acquired Company 28 60 -- -- -- 88
Change in Unrealized Gains (Losses) on
Securities, net -- -- -- -- (8,245) (8,245)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 12,622 34,520 13,311 -- (4,001) 56,452
Net Income -- -- 9,162 -- -- 9,162
Cash Dividends Declared - $.32 per share -- -- (4,013) -- -- (4,013)
Issuance of 27,066 Shares Through Dividend
Reinvestment Plan 27 229 -- -- -- 256
Purchase of 33,927 Shares of Treasury Stock -- -- -- (348) -- (348)
Change in Unrealized Gains (Losses) on
Securities, net, Due to the Reclassification of
Securities From Held-To-Maturity to
Available-For-Sale (Note 3) -- -- -- -- (135) (135)
Change in Unrealized Gains (Losses) on
Securities, net -- -- -- -- 6,261 6,261
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 12,649 $ 34,749 $ 18,460 $ (348) $ 2,125 $ 67,635
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
26
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Allied Bankshares, Inc. and subsidiaries
($ IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Decrease) Increase In Cash And Cash Equivalents
Cash Flows From Operating Activities
Mortgage Loans Sold $ 49,255 $ 38,819 $ 67,873
Interest and Fees on Loans 31,969 24,594 22,704
Interest on Mortgage-backed Securities 4,309 4,309 5,184
Interest on Securities and Interest-bearing Deposits in Banks 6,619 5,600 5,770
Interest on Funds Sold 499 205 142
Service Charges on Deposit Accounts 3,296 2,799 2,094
Other Non-Interest Income 812 680 719
Mortgage Loans Originated for Sale (49,241) (42,565) (65,924)
Interest Paid on Deposits (14,285) (11,987) (11,922)
Interest Paid on Borrowings (3,697) (1,290) (971)
Salaries and Other Personnel Benefits (8,014) (7,470) (6,953)
Other Non-Interest Expense (5,571) (6,363) (5,290)
Income Taxes Paid (4,565) (3,322) (4,642)
Income Tax Refunds Received 935 479 --
- ---------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 12,321 4,488 8,784
- ---------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Consideration Paid for Citizens Bank & Trust, net of acquired cash
equivalents -- (7,131) --
Consideration Paid for Jefferson Bancshares, Inc., net of acquired
cash equivalents -- (842) --
Proceeds From Assumption of Branch Deposits 25,733 -- 2,157
Net Decrease in Interest Bearing Deposits 600 13 414
Proceeds From Sales of Mortgage-Backed Securities 9,242 -- --
Principal Payments on Mortgage-Backed Securities Available-For-Sale 6,630 12,612 --
Principal Payments on Mortgage-Backed Securities -- 662 43,885
Purchases of Mortgage-Backed Securities (25,030) (16,406) (14,231)
Proceeds From Maturities of Securities Available-For-Sale 5,748 4,678 --
Proceeds From Maturities of Securities -- 1,305 4,652
Proceeds From Sales of Securities Available-For-Sale 4,491 17,882 4,348
Purchases of Securities Available-For-Sale (1,907) (22,701) --
Purchases of Securities -- (1,096) (40,868)
Proceeds From Premiums on Sales of Securities Options 60 106 --
Principal Collected on Loans/(Loans Made to Customers) Net 3,424 (18,654) (8,550)
Recoveries on Loans Previously Charged-Off 328 2,200 317
Proceeds From Sale of Investments in Other Financial Institutions 678 -- 882
Purchases of Investments in Other Financial Institutions (298) -- --
Proceeds From the Sale of Databank South, Inc. -- 445 253
Purchases of Premises and Equipment (635) (1,823) (1,208)
Proceeds From Sales of Premises and Equipment 498 330 240
Proceeds From Sale of Mortgage Servicing Rights -- 207 289
Capitalized Costs of Acquisitions -- (333) --
Receivable From Bonding Company 1,778 (1,853) --
Other, Net 327 (290) (148)
- ---------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities 31,667 (30,689) (7,568)
- ---------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Net (Decrease) Increase in Deposits (22,511) (14,829) 16,595
Net (Decrease) Increase in Funds Purchased (10,910) 1,853 3,807
Net (Decrease) Increase in Short-term Borrowings (10,304) 33,139 (1,480)
Proceeds From the Issuance of Long-term Debt -- -- 5,000
Repayment of Long-term Debt (63) (5,062) (63)
Issuance of Common Stock Through Dividend Reinvestment Plan 256 353 565
Exercise of Stock Options -- 88 --
Purchase of Fractional Shares -- (8) (8)
Purchase of Treasury Stock (348) -- --
Cash Dividends Paid (4,013) (3,319) (2,649)
- ---------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Financing Activities (47,893) 12,215 21,767
- ---------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (3,905) (13,986) 22,983
Cash And Cash Equivalents At Beginning of Year 28,269 42,255 19,272
- ---------------------------------------------------------------------------------------------------------
Cash And Cash Equivalents At End of Year $ 24,364 $ 28,269 $ 42,255
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
27
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Allied Bankshares, Inc. and subsidiaries
($ IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 9,162 $ 7,540 $ 7,869
- --------------------------------------------------------------------------------------------------------
Adjustments To Reconcile Net Income To Net Cash Provided By Operating
Activities
Depreciation and Amortization 2,123 1,759 2,002
Provision for Loan Losses 700 489 520
Gain on Sales of Mortgage Loans Held-For-Sale, net (828) (572) (1,555)
Gain on Sales of Securities, net (316) (326) (261)
Gain on Sale of Databank South, Inc. -- (119) (67)
Gain on Sales of Mortgage Servicing Rights -- (207) (219)
Gain on Sales of Investments in Other Financial Institutions (155) -- (117)
(Gain) Loss on Sales of Fixed Assets (127) (73) 137
Writedown of Fixed Assets Acquired by Merger -- 198 --
Gain From Premiums on Expired Options (60) (106) --
Decrease (Increase) in Mortgage Loans Held-For-Sale 14 (3,746) 1,942
Increase in Interest Receivable (173) (1,226) (17)
Increase (Decrease) in Other Assets, net 20 131 (92)
Increase in Interest Payable 1,473 569 241
(Benefit) Provision for Deferred Taxes (1,558) 1,732 66
Increase (Decrease) in Income Taxes Payable 2,117 (1,555) (1,175)
Increase in Other Liabilities, net (71) -- (490)
- --------------------------------------------------------------------------------------------------------
Total Adjustments 3,159 (3,052) 915
- --------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities $ 12,321 $ 4,488 $ 8,784
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Non-Cash Transactions:
Change in Unrealized Gain (Loss) on Securities Available-For-Sale $ 6,590 $ (8,411)
Change in Unrealized Gain (Loss) on Mortgage-Backed Securities
Available-For-Sale 3,102 (4,286)
Transfer of Mortgage Loans Held-For-Sale to Mortgage Loans
Held-For-Investment at Fair Value -- 6,882
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
28
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allied Bankshares, Inc. and subsidiaries
December 31, 1995, 1994 and 1993
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company are in accordance with
generally accepted accounting principles and conform to general practices within
the banking and mortgage banking industries. The significant accounting and
reporting policies of the Company not described elsewhere in these notes to
consolidated financial statements are discussed below.
NATURE OF OPERATIONS. Allied Bankshares, Inc. and subsidiaries (the "Company")
is a multibank holding company engaged primarily in the banking business in East
Central Georgia. Through a subsidiary, the Company also engages in the mortgage
banking business. The Company's three full service community banks offer full
service banking and financial services to individuals and businesses. The
Company does not offer trust or brokerage services.
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 dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates; however, in
the opinion of management such variances would not be material to the financial
position or results of operations of the Company.
CONSOLIDATION. The consolidated financial statements include the accounts of
Allied Bankshares, Inc. (the "Parent Company") and its wholly-owned subsidiaries
after elimination of all significant intercompany balances and transactions.
Results of operations of companies purchased are included from the dates of
acquisition. (Note 2).
PREMISES AND EQUIPMENT. Premise and equipment are stated at cost, less
accumulated depreciation and amortization. For financial reporting purposes,
depreciation and amortization are provided using primarily the straight-line
method over the estimated useful lives or lease terms of the assets, which are
as follows: buildings 15 to 30 years; furniture and equipment 3 to 10 years.
Leasehold improvements are amortized over the term of the lease or the estimated
life of the improvements, whichever is shorter.
Premises and equipment at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Land $ 1,703 $ 1,558
Buildings and Improvements 13,082 12,346
Furniture and Equipment 7,781 7,346
- --------------------------------------------------------------
22,566 21,250
Less Accumulated Depreciation and
Amortization (8,757) (7,943)
- --------------------------------------------------------------
Premises and Equipment, net $ 13,809 $ 13,307
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
GOODWILL AND INTANGIBLE ASSETS. Goodwill from purchased companies is being
amortized using the straight-line method over 15 to 25 years. Other intangible
assets represent premiums paid for deposits and are being amortized using the
straight-line method over periods not exceeding 10 years.
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES. In March 1995, the Financial
Accounting Standards Board (the "FASB") issued Statement of Financial Accounting
Standards ("FAS") No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" ("FAS 121"). This statement
requires that long-lived assets and certain identifiable intangibles be reviewed
whenever events or circumstances change which might cause impairment of the
asset. The Company will adopt FAS 121 on January 1, 1996, and does not expect
the effect of implementation of this statement to be material to its results of
operations or financial position.
LOANS. Interest income on loans is accrued based upon the outstanding principal
amounts except for those classified as nonaccrual loans. The accrual of interest
is discontinued when it appears that future collection of principal or interest
in accordance with the contractual terms of the loan agreement may be doubtful.
Interest income on nonaccrual loans is recognized on a cash basis unless there
is doubt about the collectibility of principal. The policy of the Company is to
reverse all previously accrued interest when a loan is classified as nonaccrual.
A loan is considered impaired when, based on current information and events,
it is probable that
29
<PAGE>
- --------------------------------------------------------------------------------
the Company will be unable to collect all amounts due according to the
contractual amounts of the loan agreement. Once a loan is determined to be
impaired, the loan is placed on nonaccrual status and the amount of impairment
is measured, based on the present value of future expected cash flows or the
fair value of the collateral, less estimated selling costs, if the loan is
collateral dependent or foreclosure is probable.
On January 1, 1995, the Company adopted FAS No. 114, "Accounting by Creditors
for Impairment of a Loan" as amended by FAS No. 118 "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures-an amendment of FASB
Statement No. 114" ("FAS 114").
The adoption of FAS 114 had no significant impact on the Company's financial
position and results of operations.
OTHER REAL ESTATE. Other real estate includes foreclosed properties. Such
properties are carried at the lower of the recorded investment in the loan or
fair value of the foreclosed properties, less estimated selling costs. The
recorded investment is the sum of the outstanding principal loan balance plus
any accrued interest that has not been received and acquisition costs associated
with the property. Any excess of the recorded investment over the fair value of
the property at the time of foreclosure is charged to the allowance for loan
losses. Any subsequent write-downs are charged against non-interest expense.
Revenues and expenses associated with operating or disposing of foreclosed
properties are recorded during the period in which they are incurred.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is based upon the
Company's current loss experience, management's overall evaluation of the
inherent risks in the loan portfolio and detailed evaluations of the
collectibility of the loans and the underlying value of the collateral.
LOAN ORIGINATION FEES AND RELATED COSTS. Fees and direct costs associated with
the loan origination process are deferred and amortized as level yield
adjustments over the respective loan terms. Fees received for providing loan
commitments and letters of credit facilities are deferred until the loan is
advanced and then recognized over the term of the loan as an adjustment of the
yield. Fees on commitments and letters of credit that expire are recognized as
noninterest income.
LOANS HELD-FOR-SALE. Loans held-for-sale consists of mortgage loans originated
by Knox Mortgage Company which are held for short periods and then sold and are
carried at the lower of cost or fair market value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES. Effective December 31,
1993, the Company adopted FAS 115 "Accounting for Certain Investments in Debt
and Equity Securities." Debt and equity securities are classified into one of
three categories: held-to-maturity, available-for-sale, or trading. Securities
classified as held-to-maturity are carried at amortized cost as the Company has
the ability and the positive intent to hold those securities to maturity. The
Company had no securities classified as trading at December 31, 1995 and 1994.
Securities not classified as either trading or held-to-maturity are classified
as available-for-sale and measured at fair value. Unrealized gains and losses
for available-for-sale securities are excluded from earnings and reported net of
taxes as a separate component of stockholders' equity. Available-for-sale
securities includes securities that management intends to use as a part of the
Company's asset/liability management strategy or that may be sold in response to
changes in interest rates, liquidity needs, or for other purposes.
On December 1, 1995, the Company changed the classification for all
held-to-maturity securities to available-for-sale as permitted by the FASB
Special Report entitled "A Guide to Implementation of Statement No. 115 on
Accounting for Certain Investments in Debt and Equity Securities". Accordingly,
at December 31, 1995, all investment and mortgage-backed securities were
classified as available-for-sale (Note 3).
Amortization of premium and accretion of discount are computed under the
interest method. Realized and unrealized gains and losses are determined using
the specific identification method.
DERIVATIVE FINANCIAL INSTRUMENTS. FAS No. 119, "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments" ("FAS 119")
broadens the disclosure requirements for all derivative financial instruments.
The Company adopted FAS 119 effective January 1, 1995. The effect of the
adoption was immaterial to the Company's financial position and results of
operations. The Company does not engage in interest-rate exchange or hedging
transactions. The Company may, on occasion, write covered call options on
securities it owns (Note 11).
30
<PAGE>
- --------------------------------------------------------------------------------
MORTGAGE BANKING ACTIVITIES. In May 1995, the FASB issued FAS No. 122,
"Accounting for Mortgage Servicing Rights, an amendment of FAS No. 65" ("FAS
122"), which requires that a mortgage banking enterprise measure originated
mortgage servicing rights at cost by allocating the cost of mortgage loans
between the mortgage servicing rights and the mortgage loans (without the
mortgage servicing rights) based on their relative fair values if it sells or
securitizes mortgage loans and retains the servicing rights and if it is
practicable to estimate their fair values.
The Company plans to adopt FAS 122 effective January 1, 1996, and expects that
the effect of adoption will not significantly impact its financial position or
results of operations.
INCOME TAXES. Balance sheet amounts of deferred income taxes are recognized
using an asset and liability method based on the temporary differences between
the bases of assets and liabilities as measured by tax laws and their bases as
reported in the financial statements. The effect on deferred taxes of a change
in the tax rates is recognized in income in the period that includes the
enactment date (Note 6).
SHARE INFORMATION. Earnings per common share are based on the weighted average
common shares and common stock equivalents outstanding during the period. All
prior years' share and per share data have been restated for the effect of all
stock dividends paid or declared by the Company through January 31, 1996
including a 10% stock dividend declared in January 1996 payable on March 1,
1996. The Board of Directors has authorized the repurchase of shares of the
Company's common stock to be held by the Company for general corporate purposes.
During 1995, the Company repurchased 33,927 shares of its common stock which is
being held as treasury stock.
DIVIDENDS AND CAPITAL REQUIREMENTS. Substantially all of the retained earnings
of the Parent Company are undistributed earnings of its banking subsidiaries,
which are restricted as to payment to the Parent Company by various regulations
administered by bank regulatory authorities. These regulations require each
subsidiary bank to maintain minimum capital ratios. Also, dividends exceeding
50% of the prior year's net income must be approved by the regulatory
authorities. Retained earnings of the banking subsidiaries of the Company which
are available to be paid to the Parent Company in the form of dividends under
these regulations and without prior approval were approximately $5.0 million at
December 31, 1995. At December 31, 1995, the Company and each of its bank
subsidiaries have capital in excess of fully phased-in minimum requirements.
CASH FLOWS. For purposes of the statement of cash flows, cash and cash
equivalents include cash and due from banks, funds sold and securities purchased
under agreements to resell. Generally, funds are sold for one-day periods.
Maturities of cash equivalents are not greater than 90 days from the date of
purchase.
BASIS OF PRESENTATION. Certain 1994 and 1993 amounts have been reclassified to
conform with the 1995 presentation.
NOTE 2 BUSINESS COMBINATIONS
During 1994 the Company was a party to business combinations as described below:
<TABLE>
<CAPTION>
INSTITUTION ASSETS LOANS DEPOSITS EQUITY
- --------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Jefferson Bancshares, Inc. ("Jefferson") $ 14,328 $ 8,990 $ 12,143 $ 2,131
Citizens Bank & Trust ("Citizens") 67,086 48,087 54,408 7,739
First Savings Bank, FSB ("First") 78,687 65,049 67,389 6,714
</TABLE>
On September 30, 1994, the Company acquired 100% of the outstanding stock of
First in exchange for 1,137,849 shares of the Company's common stock. The
acquisition of First has been accounted for as a pooling of interests and
accordingly, the accompanying consolidated financial statements for prior
periods presented have been restated. The following table shows the effect of
the results of operations of First for the periods prior to the combination:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Net Interest Income:
Allied $ 19,469 $ 16,926
First 2,409 3,303
- --------------------------------------------------------------
Total Net Interest Income $ 21,878 $ 20,229
- --------------------------------------------------------------
- --------------------------------------------------------------
Net Income:
Allied $ 7,115 $ 6,919
First 425 950
- --------------------------------------------------------------
Total Net Income $ 7,540 $ 7,869
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
Merger expenses of $272,000 related to the First acquisition were charged to
expense in 1994. Additionally in 1994, the Company wrote off $198,000 related to
fixed assets of First.
31
<PAGE>
- --------------------------------------------------------------------------------
On September 30, 1994, the Company acquired 100% of the outstanding stock of
Jefferson and its wholly owned banking subsidiary, Bank of Jefferson County
("Jefferson Bank") in exchange for 155,344 shares of common stock of the Company
and $1.4 million in cash. On the acquisition date Jefferson was merged into the
Parent Company and Jefferson Bank was merged into Allied Bank of Georgia.
On September 6, 1994, the Company acquired 55% of the outstanding stock of
Citizens for $9.3 million in cash. On September 30, 1994, the remaining 45% of
Citizens was acquired in exchange for 759,672 shares of common stock of the
Company. Citizens was merged into Allied Bank of Georgia on the acquisition
date.
The acquisitions of Jefferson and Citizens were accounted for as purchases and
the results of operations are included in the consolidated statement of income
from the date of acquisition.
Had the acquisitions of Jefferson and Citizens occurred on January 1, 1993,
unaudited consolidated results of operations on a pro forma basis after
considering the effect of the pooling of interests, discussed above, would have
been as follows:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------
($ IN THOUSANDS
EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net Interest Income $ 24,876 $ 23,605
- --------------------------------------------------------------
- --------------------------------------------------------------
Net Income $ 7,265 $ 7,748
- --------------------------------------------------------------
- --------------------------------------------------------------
Earnings Per Share $ 0.57 $ 0.62
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
The Jefferson and Citizens acquisitions resulted in $.6 million and $8.2
million of goodwill, respectively, which is being amortized on a straight-line
basis over 15 years.
In connection with the acquisitions there were no material intercompany
transactions and no material differences in accounting policies and procedures.
PURCHASE OF DEPOSITS AND BRANCH. On May 12, 1995, the Company purchased a
branch banking location in Washington, Georgia from First Union National Bank of
Georgia for a deposit premium of $2.2 million. The Company received $25.7
million in cash in connection with the purchase as follows:
<TABLE>
<CAPTION>
($ IN THOUSANDS)
<S> <C>
Loans $ (272)
Fixed Assets (1,246)
Deposit Premium (2,183)
Other (52)
Deposits Acquired 29,283
Interest Payable on Deposits 203
- ----------------------------------------------------------
Net Cash Received $25,733
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
PURCHASE AND SALE OF SUBSIDIARY. On May 28, 1992, the Company sold its 100%
ownership of the stock of its data processing subsidiary, Databank South, Inc.
for $1.8 million. The sale resulted in a total gain of $.5 million, of which $.3
million was recognized in 1992 and the remaining deferred gain of $.2 million
was to be recognized as the remaining payments on the note receivable of $.7
million from the sale were collected. Monthly payments of $25,000, including
interest at 8%, were due through July 1995. For 1993 collections on the note
totaled $.3 million resulting in the recognition of $.1 million of the deferred
gain. During 1994 the note was paid in full resulting in the recognition of the
remaining deferred gain in the amount of $.1 million.
Concurrent with the sale of Databank South, Inc. in 1992, the Company and its
subsidiaries entered into a 4 year data processing contract with Databank South,
Inc. (now named Provesa) which management believes is priced at current market
rates.
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3 SECURITIES
Investment securities and mortgage-backed securities were as follows at December
31, 1995, and 1994:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
1995 1994
------------------------------------------------- -------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED AMORTIZED UNREALIZED UNREALIZED
COST FAIR VALUE GAINS LOSSES COST FAIR VALUE GAINS LOSSES
- --------------------------------------------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries $ 45,059 $ 46,077 $1,028 $ 10 $ 47,298 $ 44,501 $ 9 $2,806
U.S. Government Agencies 5,199 5,267 154 86 -- -- -- --
Obligations of States and
Political Subdivisions 39,831 41,087 1,422 166 37,413 36,072 517 1,858
Other Securities 4,198 4,305 158 51 3,071 3,068 -- 3
- --------------------------------------------------------------------------------------------------------------------------------
Total 94,287 96,736 2,762 313 87,782 83,641 526 4,667
Mortgage-backed
Securities 75,386 76,363 1,247 270 57,194 55,069 305 2,430
- --------------------------------------------------------------------------------------------------------------------------------
Total $169,673 $173,099 $4,009 $ 583 $144,976 $138,710 $ 831 $7,097
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
HELD-TO-MATURITY
1995 1994
------------------------------------------------- -------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED AMORTIZED UNREALIZED UNREALIZED
COST FAIR VALUE GAINS LOSSES COST FAIR VALUE GAINS LOSSES
- --------------------------------------------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries $ -- $ -- $ -- $ -- $ 3,655 $ 3,511 $ -- $ 144
U.S. Government Agencies -- -- -- -- 5,646 5,347 5 304
Obligations of States and
Political Subdivisions -- -- -- -- 5,361 5,285 49 125
- --------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- -- 14,662 14,143 54 573
Mortgage-backed
Securities -- -- -- -- 8,796 8,263 46 579
- --------------------------------------------------------------------------------------------------------------------------------
Total $ -- $ -- $ -- $ -- $ 23,458 $ 22,406 $ 100 $1,152
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and estimated fair value of securities at December 31,
1995, by contractual maturity are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE-FOR-SALE COST VALUE
- ----------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Due Within 1 Year $ 4,711 $ 4,771
Due After 1 Year Through 5 Years 56,265 57,816
Due After 5 Years Through 10 Years 7,566 7,945
Due After 10 Years 25,745 26,204
Mortgage-backed Securities 75,386 76,363
- ----------------------------------------------------------------
Total $ 169,673 $ 173,099
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
Proceeds from sales of securities were $13.7 million, $17.9 million, and $4.3
million, in 1995, 1994 and 1993, respectively. Realized gains were $462,000,
$326,000, and $261,000. Realized losses were $146,000, $0.0 and $0.0. All
securities sold in 1995 and 1994 were from the available-for-sale
classification. The income tax provisions applicable to securities transactions
for the years 1995, 1994 and 1993 were approximately $120,000, $117,000, and
$89,000, respectively.
The carrying amount of investment securities pledged to secure public
deposits, trust and other funds and short-term borrowings was $94.6 million and
$91.0 million at December 31, 1995 and 1994, respectively. No securities of a
single issuer, excluding U.S. Government and U.S. Government agencies, held by
the Company exceeded 10% of total stockholders' equity in 1995 and 1994. The
Company's investment securities portfolio at December 31, 1995 and 1994,
included state, county and municipal obligations with a carrying value of $41.1
million and $41.4 million, respectively, which were all issued by the State of
Georgia or
33
<PAGE>
- --------------------------------------------------------------------------------
counties and municipalities within the State of Georgia.
The Company acquired certain derivative marketable securities in connection
with its 1994 Acquisitions (Note 2). The Company has not and does not intend to
purchase additional derivative securities. At December 31, 1995 and 1994,
derivative marketable securities were as follows:
<TABLE>
<CAPTION>
1995 1994 (1)
---------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
- ----------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Collateralized
Mortgage
Obligations $ 4,471 $ 4,252 $ 7,436 $ 6,568
Step-up Bonds 2,497 2,489 2,896 2,573
- ----------------------------------------------------------------
Total $ 6,968 $ 6,741 $ 10,332 $ 9,141
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
(1) ALL DERIVATIVE MARKETABLE SECURITIES WERE CLASSIFIED AS HELD-TO-MATURITY
AT DECEMBER 31, 1994.
TRANSFER OF SECURITIES FROM HELD-TO-MATURITY TO AVAILABLE-FOR-SALE. On December
1, 1995 the Company reassessed the appropriateness of the classifications of all
securities held at that time and determined that all securities classified as
held-to-maturity should be reclassified as available-for-sale in accordance with
the one-time reassessment prescribed by the FASB Special Report "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities". The amortized cost, fair value, unrealized gain and
unrealized loss on the date of transfer, December 1, 1995, for all securities
transferred, was as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR UNREALIZED UNREALIZED
COST VALUE GAIN LOSS
- ----------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasuries $ 3,258 $ 3,285 $ 30 $ 3
U.S. Government Agencies 5,341 5,254 11 98
Obligations of States and Political
Subdivisions 5,415 5,597 188 6
- ----------------------------------------------------------------------------------------------
Total 14,014 14,136 229 107
Mortgage-backed securities 8,871 8,532 76 415
- ----------------------------------------------------------------------------------------------
Total Securities Transferred $ 22,885 $ 22,668 $ 305 $ 522
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 LOANS
The composition of the Company's loan portfolio at December 31, 1995 and 1994
was as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Commercial, Financial and Agricultural $ 49,551 $ 48,325
Real Estate:
Construction 9,841 12,257
Mortgage 53,050 55,829
Other 153,665 145,165
Consumer 39,775 49,415
Mortgage Loans Held For Sale 2,403 1,589
- --------------------------------------------------------------
Total loans $ 308,285 $ 312,580
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
The Company through its subsidiaries, makes consumer, commercial, residential
mortgage and construction loans to customers mostly in the East Central part of
Georgia. Although the Company has a diversified loan portfolio, a substantial
portion of its debtors' ability to pay is dependent upon the residential and
commercial real estate sector of the economy.
In the normal course of business the Company extends loans to its directors,
executive officers, principal stockholders and their affiliates at terms and
rates comparable, in the opinion of management, to other loans of similar credit
risk. These loans to 32 persons and their related interests totaled
approximately $8.3 million and $8.2 million at December 31, 1995 and 1994,
respectively. During 1995, additional loans of $3.4 million were made and
repayments totaled $3.3 million. None of these loans were restructured or on
nonaccrual status as of December 31, 1995 and 1994.
At December 31, 1995 and 1994, the Company had outstanding irrevocable letters
of credit aggregating $.6 million and $1.4 million, respectively.
Nonperforming assets at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans $ 1,785 $ 2,064
Accruing loans past due 90 days or more 2,193 2,458
Other real estate owned 2,218 1,676
- --------------------------------------------------------------
Total nonperforming assets $ 6,196 $ 6,198
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
During 1995, 1994 and 1993 no interest income was recognized on nonaccrual
loans. If the nonaccruing loans had been accruing interest under their original
terms, $.2 million, $.2 million, and $.1 million of additional interest income
would have been recognized in 1995, 1994 and 1993, respectively.
34
<PAGE>
- --------------------------------------------------------------------------------
At December 31, 1995 and 1994, the Company's investment in impaired loans and
the related allowance was as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Loans for which a valuation allowance is
required $ 882 $ 1,026
Loans for which no valuation allowance
is required 1,136 2,600
- --------------------------------------------------------------
Total impaired loans $ 2,018 $ 3,626
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, the required valuation allowances of $.9
million and $1.0 million, respectively, were included in the Company's allowance
for loan losses of $4.3 million and $4.6 million, respectively (Note 5).
NOTE 5 ALLOWANCE FOR LOAN LOSSES
Transactions in allowance for loan losses for the years ended December 31, 1995,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year $ 4,635 $ 3,848 $ 3,920
Provision for loan losses 700 489 520
Allowances of purchased banks -- 856 46
Recoveries on loans previously charged
off 328 2,200 317
Loans charged off (1,351) (2,758) (955)
- -------------------------------------------------------------------------
Balance, end of year $ 4,312 $ 4,635 $ 3,848
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
It is the opinion of management that the allowance for loan losses was
adequate at December 31, 1995, based on known conditions. However, ultimate
losses may vary from management's estimates. Any necessary adjustments are
reported in the periods when they become known.
NOTE 6 INCOME TAXES
The provision for income taxes for the three years ended December 31, 1995 was
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Provision for federal income taxes:
Current $ 5,234 $ 1,370 $ 2,894
(Prepaid) deferred (1,314) 1,383 61
- -------------------------------------------------------------------------
Total provision for federal income
taxes 3,920 2,753 2,955
- -------------------------------------------------------------------------
Provision (benefit) for state income
taxes:
Current 514 (82) 262
Deferred (244) 349 5
- -------------------------------------------------------------------------
Total provision for state income
taxes 270 267 267
- -------------------------------------------------------------------------
Total $ 4,190 $ 3,020 $ 3,222
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
The Company's provision for income taxes for the three years ended December
31, 1995 differs from the amount computed by applying the statutory federal
income tax rate of 35% for 1995 and 34% for 1994 and 1993 to income before
income taxes. A reconciliation of that difference was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Tax provision at federal statutory rate $ 4,673 $ 3,591 $ 3,771
Increase (decrease) resulting from:
Tax-exempt interest (947) (958) (883)
State income taxes, net of federal
benefit 175 176 174
Disallowed interest deduction 106 84 70
Amortization of intangible assets 251 94 44
Recapture previously untaxed loan loss
reserve from acquired entity -- 273 --
Restoration of deferred tax asset from
acquired entity -- (240) --
Other (68) -- 46
- -------------------------------------------------------------------------
Total $ 4,190 $ 3,020 $ 3,222
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
Temporary differences resulting in deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
DEFERRED TAX
----------------------------------------------
1995 1994
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
- ----------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan loss reserve $ 788 -- $ 1,025 $ --
Unrealized gains/losses on securities
available-for-sale -- 1,301 2,265 --
Depreciation -- 353 -- 325
Accretion discount on securities -- 1 -- 269
Mark-to-market of mortgage-backed
securities 38 -- -- 1,428
Net operating loss carryforward from
acquired entity 238 -- 215 --
Other 13 (1) -- 93
- ----------------------------------------------------------------------------------------
Total deferred federal income taxes $ 1,077 $ 1,654 $ 3,505 $ 2,115
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
The Company and its subsidiaries file consolidated tax returns where
permissible. Each subsidiary remits current taxes to or receives current refunds
from the Parent Company based on what would be required had the subsidiary filed
an income tax return as a separate entity.
35
<PAGE>
- --------------------------------------------------------------------------------
NOTE 7 DEPOSITS AND RESERVE REQUIREMENTS
Included in non-interest-bearing deposits at December 31, 1995 and 1994, are
various state, county and municipal deposits aggregating approximately $7.4
million and $5.5 million, respectively. In addition, state, county and municipal
deposits in interest-bearing deposits approximated $37.0 million, and $49.0
million at December 31, 1995 and 1994, respectively.
Included in other time deposits at December 31, 1995 and 1994, are
certificates of deposit in denominations of $100,000 or more aggregating
approximately $49.3 million and $53.6 million, respectively.
The Federal Reserve Board requires that the Company's subsidiary banks
maintain reserves based on their average deposits in the form of vault cash and
average deposit balances at correspondent banks which are members of the Federal
Reserve Bank. For the year ended December 31, 1995, the Company's subsidiary
banks' reserve requirements averaged approximately $4.7 million.
NOTE 8 EMPLOYEE BENEFITS
The Company has a qualified profit-sharing plan which covers substantially all
full-time employees. Contributions by the Company are discretionary and amounted
to $423,000, $247,000, and $78,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
The Company does not provide any significant post-retirement or
post-employment benefits.
NOTE 9 COMMITMENTS AND CONTINGENCIES
LITIGATION. Management, after consultation with legal counsel, is not aware of
any significant litigation or claims against the Company. In the normal course
of business the Company may become subject to such litigation or claims.
PROPOSED ONE-TIME FDIC INSURANCE PREMIUM ASSESSMENT OF SAIF DEPOSITS. Congress
is considering legislation which, if enacted, would consolidate the Savings
Association Insurance Fund ("SAIF") and the Bank Insurance Fund. Prior to
consolidation, the SAIF would be recapitalized by a one-time assessment of $.85
per $100 of SAIF insured deposits. Should this one-time assessment of $.85 per
$100 of SAIF insured deposits be enacted into law, in the period of enactment,
the Company would incur a one-time charge to FDIC insurance expense of $1.0
million based on total SAIF deposits of $120 million.
NOTE 10 LONG-TERM DEBT AND SHORT-TERM BORROWINGS
The Company's long-term debt at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
Industrial Development Authority Bonds
bearing interest at 75% of the daily
bank prime rate, as defined (6.375% at
December 31, 1995), secured by a bank
building and land with a net book
value of $1.7 million. Interest is
payable quarterly, with annual
principal reductions due through 2005. $ 1,125 1,175
Other 38 51
Less current maturities (113) (62)
- --------------------------------------------------------------
Total Long-term Debt $ 1,050 $ 1,164
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
Short-term borrowings and related interest rates at December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
RATE AMOUNT RATE AMOUNT
- ------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Repurchase agreements 5.30% $ 8,504 5.34% $ 28,518
Bank line of credit -- -- 7.25 9,835
Advances From Federal Home Loan Bank 6.76 29,000 4.99 7,500
U.S. Treasury tax and loan and other 5.30 1,615 5.25 3,570
Current maturities of long-term debt 6.38 113 6.38 62
- ------------------------------------------------------------------------------------------
Total Short-term Borrowings $ 39,232 $ 49,485
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
Parent Company short-term borrowings at December 31, 1995 and 1994 consisted
of the following:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
RATE AMOUNT RATE AMOUNT
- ------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Repurchase agreements 5.30% $ 3,250 5.34% $ 6,675
Bank line of credit -- -- 7.25 9,835
- ------------------------------------------------------------------------------------------
Total Parent Company short-term
borrowings $ 3,250 $ 16,510
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
The Company's principal payments on long-term debt due after 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C>
1996 $ 113
1997 113
1998 112
1999 100
2000 100
Thereafter 625
--------------------------------------------------------------------
Total long-term debt $1,163
Less current maturities (113)
--------------------------------------------------------------------
Total long-term debt $1,050
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
The Company, through its subsidiary bank, Allied Bank, had a line of credit
for $50.0 million with the Federal Home Loan Bank of Atlanta (the "FLHB") at
December 31, 1995 and 1994 which was available for either long-term or
short-term borrowings. FHLB advances are secured by residential (1-4 units)
first mortgage loans of Allied Bank including Knox Mortgage Company, a wholly
owned subsidiary of Allied Bank. Allied Bank is required to maintain at all
times unencumbered first mortgage collateral or pledged investment securities
with a lendable collateral value, as determined by FHLB, at least equal to 100%
of Allied Bank's outstanding advances. Also, Allied Bank is required to purchase
capital stock of FHLB equal to 5% of the outstanding credit drawn under the
line. This stock is pledged to FHLB as additional collateral. Interest is paid
by Allied Bank monthly either based on the short-term overnight daily rate set
by FHLB or, in the case of fixed rate short-term borrowings, the agreed upon
rate. Short-term borrowings due FHLB at December 31, 1995 and 1994 were $29.0
million, and $7.5 million, respectively. Available borrowings under the line at
December 31, 1995 and 1994 were $21.0 million and $42.5 million, respectively.
In January 1996, the Company increased its total line of credit from the
Federal Home Loan Bank of Atlanta from $50.0 million to $60.0 million.
Subsequent thereto, the Company borrowed an additional $25.0 million and
purchased $22.6 million of mortgage-backed securities.
At December 31, 1995, the Company had available a short-term line of credit of
$15 million with First Union National Bank of Georgia which was secured by 100%
of the stock of its three subsidiary banks. Interest is payable quarterly at the
Federal Funds rate plus 1%. At December 31, 1995, no balance was outstanding
under this line.
Additionally, the three subsidiary banks had short-term lines of credit
available to be used for funds purchased totalling $12 million at December 31,
1995, of which $1.2 million was outstanding and $10.8 million was available.
NOTE 11 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates, including
commitments to extend credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated balance sheets. The contract amounts of these instruments
reflect the extent of involvement the Company has in particular classes of
financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being funded, the total commitment amounts do not necessarily represent
future liquidity requirements. The bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the bank upon extension of credit, is based on management's
credit evaluation of the counterparty. Collateral held varies but generally
includes residential and income-producing commercial properties.
At December 31, 1995 and 1994, total commitments to extend credit were
approximately $25.8 million and $21.0 million, respectively, and were to the
banks' normal customer base.
The Company may write call options (obligations to sell a fixed quantity of
securities at the holder's request at a stated price within a specified term)
and put options (obligations to purchase a fixed quantity of securities at the
holder's request at a stated price at a specified term) on securities in the
available-for-sale category. The
37
<PAGE>
- --------------------------------------------------------------------------------
Company generally owns or has entered into, commitments to purchase the
underlying securities for call options written. Gains from premiums on expired
options totaled $60,000 and $106,000 during 1995 and 1994, respectively. No
options contracts were outstanding at December 31, 1995 and 1994.
The Company does not engage in interest-rate swap or financial futures
transactions.
NOTE 12 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating the
fair values of financial instruments:
Cash and cash equivalents -- The carrying amounts reported in the consolidated
balance sheets for cash and funds sold approximate those assets' fair values.
Interest-bearing deposits -- The carrying amounts reported in the consolidated
balance sheets approximate the fair values due to the short-term nature of such
instruments.
Securities -- Fair values for securities are based on quoted market prices
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Loans receivable -- The fair values for certain mortgage loans are based on
quoted market prices for loans with similar characteristics. Loans with no
quoted prices are valued based on expected yields, expected maturity and credit
quality adjusted for differences in loan characteristics. The carrying value of
accrued interest approximates its fair value.
Deposit liabilities -- The fair values for demand deposits, NOW accounts,
savings accounts and certain money market accounts are, by definition, equal to
the amount payable on demand at the reporting date, i.e., their carrying
amounts. Fair values for certificates of deposit are estimated by comparing
current interest rates to a schedule of aggregated expected maturities.
Short-term borrowings -- The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values due to the short-term nature of such instruments.
Long-term debt -- The fair values of the Company's long-term debt approximates
the carrying value as nearly all of the Company's long-term debt is priced at
variable rates tied to changes in the prime rate of interest.
Off-Balance Sheet Instruments -- Off-balance sheet instruments include
commitments to extend credit and standby letters of credit. The fair value of
such instruments is based on fees currently charged for similar arrangements in
the marketplace, adjusted for changes in terms and credit risk as appropriate.
The carrying value of unamortized fees was considered representative of the fair
values of the related commitments, which were not considered significant as of
December 31, 1995 and 1994.
Comparative fair value information of financial assets and financial
liabilities with respective carrying values at December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks $ 23,494 $ 23,494 $ 28,159 $ 28,159
Interest-bearing deposits 318 318 918 918
Funds sold 870 870 110 110
Securities available-for-sale 96,736 96,736 83,641 83,641
Securities -- -- 14,662 14,143
Mortgage-backed securities
available-for-sale 76,363 76,363 55,069 55,069
Mortgage-backed securities -- -- 8,796 8,263
Loans, net 303,656 303,910 307,567 306,532
Other assets 8,680 8,680 10,185 10,185
- ----------------------------------------------------------------------------------------
FINANCIAL LIABILITIES
Deposits 421,585 422,122 414,813 406,581
Funds purchased 1,240 1,240 12,150 12,150
Short-term borrowings 39,232 39,232 49,485 49,485
Long-term debt 1,050 1,050 1,164 1,164
Other liabilities 7,657 7,657 1,776 1,776
- ----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
NOTE 13 PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
PARENT COMPANY -------------------
BALANCE SHEETS 1995 1994
- ---------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash on Deposit at Subsidiary Banks $ 1,422 $ 11,115
Securities (1)(2) 3,582 6,902
Investment In Capital Stock of Subsidiaries Stated on the
Basis of the
Company's Equity in Subsidiaries' Capital Accounts:
Banks (3)(4) 52,976 41,677
Nonbanks 959 954
Goodwill and Intangible Assets 10,223 10,913
Other Assets 2,010 1,702
- ---------------------------------------------------------------------------------
Total Assets $ 71,172 $ 73,263
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LIABILITIES
Other Liabilities $ 287 $ 301
Short-term Borrowings (Note 10) 3,250 16,510
- ---------------------------------------------------------------------------------
Total Liabilities 3,537 16,811
- ---------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (NOTE 2)
Preferred Stock, $1 par value, 25,000,000 shares authorized;
none issued -- --
Common Stock, $1 par value, 50,000,000 shares authorized;
12,648,943 shares issued, 12,611,622 shares outstanding at
December 31, 1995 and
12,621,877 shares issued and outstanding at December 31,
1994 12,649 12,622
Additional Paid-In Capital 34,749 34,520
Retained Earnings 18,460 13,311
Less: Treasury Stock, at cost, 33,927 shares (348) --
Unrealized Gains (Losses) on Securities, net 2,125 (4,001)
- ---------------------------------------------------------------------------------
Total Stockholders' Equity 67,635 56,452
- ---------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 71,172 $ 73,263
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
(1) Includes unrealized gains (losses) on securities
available-for-sale, net $ 293 $ (391)
(2) Includes unrealized gains (losses) on mortgage-backed
securities available-for-sale, net -- (143)
(3) Includes unrealized gains (losses) on securities
available-for-sale, net 2,156 (3,750)
(4) Includes unrealized gains (losses) on mortgage-backed
securities available-for-sale, net 977 (1,982)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PARENT COMPANY -----------------------
STATEMENTS OF INCOME 1995 1994 1993
- -------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends From Subsidiary Banks $4,450 $13,500 $3,123
Interest Income 596 550 598
Gain on Sale of Databank South, Inc. -- 119 67
Gain on Sales of Investments in Other Financial
Institutions 155 -- 117
Gain on Sales of Securities, net 16 -- 250
Other Income 6 31 2
- -------------------------------------------------------------------------------------
Total Income 5,223 14,200 4,157
- -------------------------------------------------------------------------------------
EXPENSES
Interest on Short-Term Borrowings 632 465 246
Amortization of Goodwill 719 281 134
Other Expense 581 512 375
- -------------------------------------------------------------------------------------
Total Expenses 1,932 1,258 755
- -------------------------------------------------------------------------------------
Income Before Income Tax Benefit and Equity in Undistributed
Earnings
(Distributions in Excess of Earnings) of Subsidiaries 3,291 12,942 3,402
Income Tax Benefit (Provision) 175 121 (167)
- -------------------------------------------------------------------------------------
Income Before Equity in Undistributed Earnings
(Distributions in Excess of Earnings) of Subsidiaries 3,466 13,063 3,235
- -------------------------------------------------------------------------------------
Equity in Undistributed Earnings (Distributions in Excess of
Earnings) of Subsidiaries
Banks 5,691 (5,546) 4,612
Nonbanks 5 23 22
- -------------------------------------------------------------------------------------
Total Equity in Undistributed Earnings (Distributions in
Excess of Earnings) of Subsidiaries 5,696 (5,523) 4,634
- -------------------------------------------------------------------------------------
Net Income $9,162 $ 7,540 $7,869
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PARENT COMPANY --------------------------
STATEMENTS OF CASH FLOWS 1995 1994 1993
- --------------------------------------------------------------------------------------------------
($ IN THOUSANDS)
<S> <C> <C> <C>
(Decrease) Increase in Cash and Cash Equivalents
Cash Flows From Operating Activities
Dividends From Subsidiary Banks $ 4,450 $13,500 $ 3,123
Interest Income 641 543 582
Other Income 6 30 2
Interest on Short-Term Borrowings (710) (370) (272)
Other Expense (531) (589) (214)
Income Taxes Paid (4,565) (3,322) (4,642)
Income Tax Refunds Received 935 479 --
Income Tax Payments Received From Subsidiaries 2,867 2,198 3,893
- --------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 3,093 12,469 2,472
- --------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Consideration Paid for Citizens Bank & Trust -- (9,275) --
Consideration Paid for Jefferson Bancshares, Inc. -- (1,358) --
Proceeds From Sales of Securities -- -- 4,337
Purchases of Securities -- -- (3,990)
Proceeds From Sales of Investments in Other Institutions 678 -- 882
Proceeds From Principal Collections of Mortgage-Backed Securities
Available-For-Sale 162 193 --
Proceeds From Sales of Securities Available-For-Sale 4,010 -- --
Proceeds From Principal Collections of Mortgage-Backed Securities -- -- 375
Proceeds From Sale of Databank South, Inc. -- 445 253
Purchases of Premises and Equipment (1) -- (2)
Purchases of Investments in Other Financial Institutions (298) -- --
Other, net 28 294 127
- --------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities 4,579 (9,701) 1,982
- --------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash Dividends Paid (4,013) (3,319) (2,649)
Net (Decrease) Increase in Short-Term Borrowings (13,260) 8,973 (441)
Issuance of Common Stock Through Dividend Reinvestment Plan 256 353 565
Purchase of and Retirement of Common Stock (348) -- --
Exercise of Stock Options From Acquired Company -- 88 --
Purchase of Fractional Shares -- (8) (8)
- --------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Financing Activities (17,365) 6,087 (2,533)
- --------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (9,693) 8,855 1,921
Cash and Cash Equivalents at Beginning of Year 11,115 2,260 339
- --------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,422 $11,115 $ 2,260
- --------------------------------------------------------------------------------------------------
Net Income $ 9,162 $ 7,540 $ 7,869
- --------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash Provided By Operating
Activities
(Equity in Undistributed Earnings) Distributions in Excess of
Earnings of Subsidiaries (5,696) 5,523 (4,634)
Depreciation and Amortization 733 320 166
Gain on Sales of Securities, net (16) -- (250)
Deferred Tax Benefit (99) (197) (8)
Decrease (Increase) in Interest Receivable 47 -- (14)
Decrease in Other Assets 100 -- --
(Decrease) Increase in Interest Payable (78) 95 (26)
Increase (Decrease) in Accrued Expenses Payable (66) (124) 177
Increase in Due From Affiliates, net (938) (569) (624)
Gain On Sale of Databank South, Inc. -- (119) (67)
Gain On Sales of Investments in Other Financial Institutions (155) -- (117)
- --------------------------------------------------------------------------------------------------
Total Adjustments (6,121) 4,929 (5,397)
- --------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities $ 3,093 $12,469 $ 2,472
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF
ALLIED BANKSHARES, INC.:
We have audited the accompanying consolidated balance sheets of ALLIED
BANKSHARES, INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31,
1995 and 1994 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Allied
Bankshares, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
January 31, 1996
Atlanta, Georgia
41
<PAGE>
- --------------------------------------------------------------------------------
1995 FORM 10-K
Securities and Exchange Commission
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d)
of The Securities Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number 0-15518
ALLIED BANKSHARES, INC.
Incorporated in the State of Georgia
I.R.S. Employer Identification
Number 58-1599653
Address: 149 Main Street
Thomson, Georgia 30824
Telephone: (706) 595-9500
Securities Registered Pursuant to Section 12(g) of
the Act: Common Stock -- $1.00 par value
As of January 31, 1996, Allied Bankshares, Inc. had 12,611,622 shares of
common stock outstanding.
Allied (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
The aggregate market value of Allied common stock held by non-affiliates on
January 31, 1996, was approximately $83.6 million.
DOCUMENTS INCORPORATED BY REFERENCE
Part III information is incorporated herein by reference pursuant to Instruction
G of Form 10-K. Allied has filed a definitive Proxy Statement with the
Commission.
FORM 10-K CROSS REFERENCE INDEX
Certain information required by Form 10-K is incorporated by reference from the
Allied Bankshares, Inc. Annual Report to Shareholders as indicated below. Except
for parts of the Allied Annual Report expressly incorporated herein by
reference, this Annual Report is not to be deemed filed with the Securities and
Exchange Commission.
<TABLE>
<S> <C> <C>
PART I PAGE
Item 1 Business.............................................................. 1-3
Item 2 Properties............................................................ 21
Item 3 Legal Proceedings..................................................... 21
Item 4 Not Applicable
PART II
Item 5 Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters........................................... 4,13,18,23
Item 6 Selected Consolidated Financial and Other Data........................ 4
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 5-23
Item 8 Financial Statements and Supplemental Data............................ 22,24-41
Item 9 Not Applicable
PART III
Item 10 Directors and Executive Officers of the Registrant.................... *
Item 11 Executive Compensation................................................ *
Item 12 Security Ownership of Certain Beneficial Owners and Management........ *
Item 13 Certain Relationships and Related Transactions........................ *
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....... 43
</TABLE>
* Part III information is incorporated herein by reference pursuant to
Instruction G of Form 10-K. Allied has filed a definitive Proxy Statement with
the Commission.
- ----------------------------------------------
Certain statistical data required by the Securities and Exchange Commission are
included on pages 4-22.
- ----------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements Filed. See Consolidated Financial Statements on pages 24
through 41 of this Annual Report and Form 10-K.
All financial statement schedules are omitted because the data are either not
applicable or are discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial statements or related
footnotes.
The Company's significant subsidiaries (as defined) are Allied Bank of
Georgia, Thomson, Georgia, Bank of Morgan County, Rutledge, Georgia, and Bank of
Millen, Millen, Georgia.
The Company's Articles of Incorporation, Bylaws and certain other documents
are filed as Exhibits to this Report or incorporated by reference herein
pursuant to the Securities Exchange Act of 1934. Shareholders may obtain the
list of such Exhibits and copies of such documents upon request to: Secretary,
Allied Bankshares, Inc., P.O. Box 1020, Thomson, Georgia 30824. A copying fee
will be charged for the Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf on March 11, 1996, by the undersigned, thereunto duly authorized.
Allied Bankshares, Inc.
(Registrant)
Boone A. Knox
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 11, 1995 by the following persons on behalf of
the Registrant and in the capacities indicated.
Boone A. Knox
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Ben O. Howell, Jr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
DIRECTORS
<TABLE>
<S> <C>
Boone A. Knox Brooks Pennington, III
Robert E. Knox, Jr. James H. Rigsby, Jr.
John W. Lee Jack B. Smith
Brooks Pennington James E. Wilson, Jr.
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
BOARDS OF DIRECTORS AND SENIOR MANAGEMENT
ALLIED
BANKSHARES, INC.
BOARD OF DIRECTORS
BOONE A. KNOX
Chairman of the Board and Chief Executive Officer
Allied Bankshares, Inc.
Thomson, Georgia
ROBERT E. KNOX, JR.
Partner
Knox & Swan
Attorneys-at-Law
Thomson, Georgia
JOHN W. LEE
Retired President and
Chief Operating Officer
GIW Industries, Inc.
Grovetown, Georgia
BROOKS PENNINGTON
Chairman of the Board
Pennington Seed, Inc.
Madison, Georgia
BROOKS PENNINGTON, III
President and
General Counsel
Pennington Seed, Inc.
Madison, Georgia
JAMES H. RIGSBY, JR.
President and
Chief Operating Officer
Allied Bankshares, Inc.
Thomson, Georgia
JACK B. SMITH
Retired - Chairman
Hoover Treated Wood Products
Thomson, Georgia
JAMES E. WILSON, JR.
Vice President
Wilson Homes, Inc.
Thomson, Georgia
SENIOR MANAGEMENT
BOONE A. KNOX
Chairman of the Board and Chief Executive Officer
JAMES H. RIGSBY, JR.
President and
Chief Operating Officer
W. TATTNALL THOMPSON, IV
Vice President
BEN O. HOWELL, JR.
Secretary/Treasurer and
Chief Financial Officer
ALLIED BANK OF GEORGIA
BOARD OF DIRECTORS
CHARLES G. CAYE, JR.
President
W. C. Caye & Co.
Atlanta, Georgia
EDGAR D. CLARY, III
President
Clary Construction Co.
Harlem, Georgia
JOE H. COLLINS
Former President
Fairfield Financial Corporation
Martinez, Georgia
B. J. CUNNINGHAM
Retired - Military Civil Service
Harlem, Georgia
LLOYD DEFOOR
Realtor
Harlem, Georgia
MICHAEL B. DUDLEY
Owner
Secretary/Treasurer
R. A. Dudley Nurseries, Inc.
Thomson, Georgia
JOHN G. HOWELL
Retired
Thomson, Georgia
DR. CARROLL HUGHES
Dentist
Thomson, Georgia
THOMAS T. JOHNSON
Pharmacist
Hephzibah Pharmacy
Hephzibah, Georgia
BOONE A. KNOX
Chairman of the Board and Chief Executive Officer
Allied Bankshares, Inc.
Thomson, Georgia
JEFFERSON B. A. KNOX
Division President
Allied Bank of Georgia
Martinez, Georgia
ROBERT E. KNOX, JR.
Partner
Knox & Swan
Attorneys-at-Law
Thomson, Georgia
DONALD E. MCCORKLE
President
McCorkle Nurseries, Inc.
Dearing, Georgia
HENRY G. NEAL
Retired - Executive Secretary
Board of Regents
University System of Georgia
B. DEWAYNE PATRICK
City Administrator
City of Thomson
Thomson, Georgia
J. DOUGLAS PENTECOST
Division President
Allied Bank of Georgia
Thomson, Georgia
J. ROBERT RICHARDS, SR.
President
Richards Motors, Inc.
Augusta, Georgia
JAMES H. RIGSBY, JR.
President and
Chief Operating Officer
Allied Bankshares, Inc.
Thomson, Georgia
CAREY TANKERSLY, JR.
Insurance Agent
Harlem, Georgia
W. TATTNALL THOMPSON, IV
Executive Vice President
Allied Bank of Georgia
Thomson, Georgia
MAYDEAN H. WELLS
Accounting Manager
Southern Roofing & Insulating Co.
Hephzibah, Georgia
SENIOR MANAGEMENT
BOONE A. KNOX
Chairman of the Board
JAMES H. RIGSBY, JR.
President and
Chief Executive Officer
W. TATTNALL THOMPSON, IV
Executive Vice President
DIVISION PRESIDENTS
OWEN J. CRICKENBERGER
Richmond Division
JEFFERSON B. A. KNOX
Columbia Division
ISSAC J. MULLING
Jefferson Division
JAMES D. PENTECOST
McDuffie Division
SENIOR VICE PRESIDENTS
REMER Y. BRINSON, III
JACKIE S. BROOKS
WALTER H. MASSINGALE
KENNETH L. USRY
BANK OF MILLEN
BOARD OF DIRECTORS
HAROLD N. BRANTLEY
Retired
Millen, Georgia
ROBERT A. MCMILLAN
Owner
Millen Fish Company
Millen, Georgia
JOHN W. NEWTON
Farmer
Millen, Georgia
KIRK B. ROCKER
President
Bank of Millen
WATSON W. ROCKER
Past President
Bank of Millen
Millen, Georgia
ROBERT G. STEPHENS
Retired
Millen, Georgia
W. TATTNALL THOMPSON, IV
Vice President
Allied Bankshares, Inc.
Thomson, Georgia
ERNEST M. THORNE, JR.
Chairman of the Board
Bank of Millen
President
Millen Fertilizer Sales, Inc.
Millen, Georgia
LAMAR WILSON
Retired
Millen, Georgia
SENIOR MANAGEMENT
KIRK B. ROCKER
President
<PAGE>
- --------------------------------------------------------------------------------
BANK OF MORGAN COUNTY
BOARD OF DIRECTORS
NORRIS BRYANS
Farmer and Investor
Newborn, Georgia
JUDY GILBERT
Real Estate Agent
Baldwin Realty
Madison, Georgia
HUBERT G. HERNDON, JR.
President
Bank of Morgan County
Madison, Georgia
CHARLES W. MERRITT, JR.
Attorney
Madison, Georgia
W. MICHAEL NABORS
Real Estate Agent
Madison, Georgia
BROOKS PENNINGTON
Chairman of the Board
Pennington Seed, Inc.
Madison, Georgia
BROOKS PENNINGTON, III
Chairman of the Board
Bank of Morgan County
President and
General Counsel
Pennington Seed, Inc.
Madison, Georgia
W. GRAHAM PONDER
Newspaper Publisher
THE MADISONIAN
Madison, Georgia
ROBERT SERVICE
Owner
State Farm Insurance Agency
Madison, Georgia
W. BONNY SHEPHERD
Farmer
Rutledge, Georgia
W. TATTNALL THOMPSON, IV
Vice President
Allied Bankshares, Inc.
Thomson, Georgia
SENIOR MANAGEMENT
HUBERT G. HERNDON, JR.
President
WILLIAM E. OXFORD
Executive Vice President
KNOX MORTGAGE COMPANY
BOARD OF DIRECTORS
BOONE A. KNOX
Chairman and
Chief Executive Officer
Knox Mortgage Company
ANDREW H. KNOX
President
Watson & Knox, Inc.
Real Estate and Insurance
DONALD T. MCNEILL
President
Knox Mortgage Company
JAMES H. RIGSBY, JR.
President and
Chief Operating Officer
Allied Bankshares, Inc.
W. TATTNALL THOMPSON, IV
Vice President
Allied Bankshares, Inc.
SENIOR MANAGEMENT
BOONE A. KNOX
Chairman and
Chief Executive Officer
DONALD T. MCNEILL
President
STEPHEN O. GRIFFIN
Senior Vice President
JOHN A. ROX, III
Executive Vice President
CORPORATE INFORMATION
CORPORATE HEADQUARTERS:
Allied Bankshares, Inc.
P.O. Box 1020
149 Main Street
Thomson, Georgia 30824
(706) 595-9500
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
(212) 936-5100
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Atlanta, GA
LEGAL COUNSEL
Kilpatrick & Cody
Atlanta, Georgia
Hull, Towill, Norman & Barrett
Augusta, Georgia
Knox & Swan
Thomson, Georgia
COMMON STOCK LISTING
Traded on the NASDAQ
National Market System
Stock Symbol: ABGA
INVESTOR RELATIONS
Analysts, investors and
others seeking more
information should contact:
Ben O. Howell, Jr., Secretary
P. O. Box 1020
Thomson, Georgia 30824
(706) 595-1142
NOTICE OF ANNUAL MEETING
The Annual Meeting will be
held at 1:30 p.m.,
Tuesday, April 9, 1996,
Thomson-McDuffie County Library,
338 Main Street,
Thomson, Georgia
ALLIED BANKSHARES, INC.
P.O. Box 1020
Thomson, Georgia 30824
(404) 595-9500
45
<PAGE>
EXHIBIT (21) -- SUBSIDIARIES OF THE REGISTRANT
Allied Bankshares, Inc. -- (Registrant)
List of Subsidiaries
12-31-95
<TABLE>
<CAPTION>
NAMES UNDER WHICH
STATE OF SUBSIDIARY DOES
NAME OF SUBSIDIARY INCORPORATION BUSINESS
---------------------- --------------------- --------------------------------
<S> <C> <C>
Allied Bank of Georgia Georgia Allied Bank of Georgia
Bank of Morgan County Georgia Bank of Morgan County
Bank of Millen Georgia Bank of Millen
Georgia State Bank Building Corporation Georgia Georgia State Bank
Building Corporation
Knox Mortgage Company Georgia Knox Mortgage Company
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 23,494
<INT-BEARING-DEPOSITS> 318
<FED-FUNDS-SOLD> 870
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,099
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 307,968
<ALLOWANCE> 317
<TOTAL-ASSETS> 538,399
<DEPOSITS> 421,585
<SHORT-TERM> 39,232
<LIABILITIES-OTHER> 7,657
<LONG-TERM> 1,050
0
0
<COMMON> 12,649
<OTHER-SE> 54,986
<TOTAL-LIABILITIES-AND-EQUITY> 538,399
<INTEREST-LOAN> 33,287
<INTEREST-INVEST> 6,500
<INTEREST-OTHER> 499
<INTEREST-TOTAL> 43,637
<INTEREST-DEPOSIT> 16,087
<INTEREST-EXPENSE> 19,455
<INTEREST-INCOME-NET> 24,182
<LOAN-LOSSES> 700
<SECURITIES-GAINS> 316
<EXPENSE-OTHER> 15,274
<INCOME-PRETAX> 13,352
<INCOME-PRE-EXTRAORDINARY> 13,352
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,162
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
<YIELD-ACTUAL> 5.34
<LOANS-NON> 1,785
<LOANS-PAST> 2,193
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,635
<CHARGE-OFFS> 1,351
<RECOVERIES> 328
<ALLOWANCE-CLOSE> 4,312
<ALLOWANCE-DOMESTIC> 3,790
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 522
</TABLE>
