U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
_
|X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee required, effective October 7, 1996]
For fiscal year ended December 31, 1996
Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No fee required]
For the transition period from ___________ to ____________
Commission file number 0-24008
BUTTON GWINNETT FINANCIAL CORPORATION
(Name of Small Business Issuer in Its Charter)
Georgia 58-1766331
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2230 Scenic Highway, Snellville, Georgia 30278
(Address of Principal Executive Offices) (Zip Code)
(770) 978-3242
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 par value
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for past 90 days.
Yes X No_________
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
(Cover page continued)
State issuer's revenues for its most recent fiscal year: $15,742,835
Aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within the past 60 days:
$12,891,606 as of March 28, 1997.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,360,864 as of
March 28, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 Annual Report to Shareholders are
incorporated by reference into Part II.
Portions of the Registrant's Proxy Statement for the 1997 Annual
Meeting of Shareholders are incorporated by reference into Part III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
Button Gwinnett Financial Corporation (the "Company") is the surviving
corporation resulting from the merger (the "Merger") of Button Gwinnett
Bancorp, Inc. ("BGB"), a Georgia corporation, and The Gwinnett Financial
Corporation ("GFC"), a Georgia corporation, on January 25, 1994. Following
the Merger, the Company held all of the common stock of two subsidiary banks,
The Bank of Gwinnett County (the "Bank"), a banking corporation chartered by
the State of Georgia, and Button Gwinnett National Bank ("BGNB"), a national
banking association. On September 25, 1993, the Bank acquired the assets and
liabilities of one of the two offices of BGNB which was located at 2230 Scenic
Highway, Snellville, Georgia, and the Company sold BGNB (then consisting of the
assets and liabilities associated with the other office of BGNB which was
located at 4640 Jimmy Carter Boulevard, Norcross, Georgia) to Mountain Holding
Corporation. This acquisition and sale is referred to herein as the
"Reorganization."
The Company was organized to facilitate the Bank's ability to serve
its customers' requirements for financial services. The holding company
structure also provides flexibility for expansion of the Company's banking
business through the possible acquisition of other financial institutions and
the provision of additional banking-related services that a traditional
commercial bank may not provide under present laws. It is expected that the
Company may make additional acquisitions in the future in the event that such
acquisitions are deemed to be in the best interests of the Company and its
shareholders. Such acquisitions, if any, will be subject to certain regulatory
approvals and requirements. See Item 1 "Description of Business - Supervision
and Regulation."
From time to time, management of the Company reviews the permissible
nonbanking activities in which the Company could engage, but currently has no
specific plans with respect to any nonbanking activities. The Company's future
nonbanking activities may include financial and other activities permitted by
law, and such activities could be conducted by subsidiary corporations that
have not yet been organized. Commencement of nonbanking operations by
subsidiaries, if they are organized, will be contingent upon the approval by
the Board of Directors of the Company and by appropriate regulatory authorities.
The Bank
The Bank is a full-service commercial bank. The Bank offers personal
and business checking accounts, interest-bearing checking accounts, and various
types of certificates of deposit. The Bank also provides financing for
commercial transactions, makes secured and unsecured loans and provides other
financial services to its customers.
Market Area and Competition
Gwinnett County, the Bank's primary service area, is located 25 miles
northeast of downtown Atlanta, Georgia. Gwinnett County was chartered by the
Georgia legislature in 1818 and was named for Button Gwinnett, a signer of the
Declaration of Independence. Gwinnett County has 13 municipalities, including
Lawrenceville, Snellville, Buford, Lilburn, Duluth and Norcross. The County
Seat is Lawrenceville.
The banking industry in Georgia is highly competitive. In recent years,
intense market demands, economic pressures, changing interest rates and
increased customer awareness of product and service differences among financial
institutions have forced banks to diversify their services and become more cost
effective. The Bank faces strong competition in attracting deposits and making
loans. Its most direct competition for deposits comes from savings
institutions, commercial banks, credit unions and issuers of securities such
as shares in money market funds. Interest rates, convenience of office
locations and marketing are all significant factors in the Bank's competition
for deposits.
Competition for loans comes from savings institutions, commercial banks,
insurance companies, consumer finance companies, credit unions and other
institutional lenders. The Bank competes for loan originations through the
interest rates and loan fees it charges and the efficiency and quality of
services it provides. Competition is affected by the general availability of
lendable funds, general and local economic conditions, current interest rate
levels and other factors that are not readily predictable.
Deposits
The Bank offers a wide range of commercial and consumer deposit
accounts, including noninterest bearing checking accounts, money market
checking accounts (consumer and commercial), negotiable order of withdrawal
("NOW") accounts, individual retirement accounts, time certificates of deposit,
and regular savings accounts. The sources of deposits typically are residents
and businesses and their employees within the Bank's market area, and are
obtained through personal solicitation by the Bank's officers and directors,
direct mail solicitation, and advertisements published in the local media.
The Bank pays competitive interest rates on time and savings deposits and has
implemented a service charge fee schedule competitive with other financial
institutions in the Bank's market area, covering such matters as maintenance
fees on checking accounts, per item processing fees on checking accounts,
returned check charges, and the like.
Lending Activities
The Bank makes primarily real estate-construction loans, commercial
loans, and to a lesser extent consumer loans. As of December 31, 1996 such
loans constituted 30.9%, 58.6% and 10.5%, respectively, of total loans.
Real Estate Loans
The Bank makes single-family residential construction loans for one-to
four-unit structures. The Bank requires a first lien position on the land
associated with the construction projects and offers these loans only to
qualified residential building contractors. Loan disbursements require on-site
inspections to assure the project is on budget and that the loan proceeds are
being used in accordance with the plans, specifications and survey for the
construction project and not being diverted to another project. The loan to
value ratio for such loans is predominately 75% of the appraised value based
on plans and specifications, and is a maximum of 80% if the loan is amortized.
Loans for construction can present a high degree of risk to the lender,
depending on, among other things, whether the builder can sell the home to a
buyer, whether the buyer can obtain permanent financing, whether the transaction
produces income in the interim, and the nature of changing economic conditions.
The Bank also makes acquisition and development loans to Bank-approved
developers for the purpose of developing acreage into single-family lots on
which houses will be built. Loan disbursements require on-site inspections
to assure the project is on budget and that the loan proceeds are being used
for the development project and not being diverted to another project. The
loan-to-value ratio for such loans does not exceed 75% of the discounted value,
as defined in the appraisal report. Loans for acquisition and development can
present a high degree of risk to the lender, depending upon, among other
things, whether the developer can find builders to buy the lots, whether the
builder can obtain financing, whether the transaction produces income in the
interim and the nature of changing economic conditions.
Commercial Loans
Commercial lending is directed principally towards businesses whose
demand for funds falls within the Bank's legal lending limits and are existing
or potential deposit customers of the Bank. This category includes loans made
to individual, partnership or corporate borrowers obtained for a variety of
purposes. Risks associated with these loans can be significant. Risks
include, but are not limited to, fraud, bankruptcy, economic downturn,
deteriorated or non-existing collateral and changes in interest rates.
Additionally, the Bank offers first mortgage loans on commercial real
estate for owner occupied or investment real estate. Almost all conventional
first mortgage loans originated by the Bank have a loan-to-value that does not
exceed 80% with a maximum term of 20 years and call provisions every three to
five years. Such loans carry fixed or adjustable interest rates. Risks
involved with commercial mortgage lending include, but are not limited to,
title defects, fraud, general real estate market deterioration, inaccurate
appraisals, violation of banking protection laws, interest rate fluctuations
and financial deterioration of borrower.
The Bank also makes commercial loans to small businesses with respect
to which the U.S. Small Business Administration ("SBA") guarantees repayment
on varying percentages of the loan amount, subject to certain other
limitations. The Bank may sell the guaranteed portion of these loans to
institutional investors in the secondary markets. The Bank also participates
in other SBA loan programs. Risks associated with these loans include, but
are not limited to, credit risk, e.g., fraud, bankruptcy, economic downturn,
deteriorated or non-existing collateral and changes in interest rates, and
operational risk, e.g., failure of the Bank to adhere to SBA funding and
servicing requirements in order to secure and maintain the SBA guarantees and
servicing rights.
Consumer Loans
The Bank makes consumer loans, consisting primarily of installment
loans to individuals for personal, family and household purposes, including
loans for automobiles and investments, first mortgage residential loans and
home equity lines of credit. Risks associated with these loans include, but
are not limited to, fraud, bankruptcy, deteriorated or non-existing collateral,
general economic downturn, interest rate fluctuations and customer financial
problems.
Investment Activities
After establishing necessary cash reserves and funding loans, the Bank
invests its remaining liquid assets in investments allowed under banking laws
and regulations. The Bank invests primarily in obligations of the United
States or obligations guaranteed as to principal and interest by the United
States, and other taxable securities and in certain obligations of states and
municipalities. The Bank also engages in Federal Funds transactions with its
principal correspondent banks and primarily acts as a net seller of such funds.
The sale of Federal Funds amounts to a short-term loan from the Bank to another
bank. Risks associated with these investments include, but are not limited to,
mismanagement in terms of interest rate, maturity and concentration.
Asset/Liability Management
It is the objective of the Bank to manage its assets and liabilities
to provide a satisfactory, consistent level of profitability within the
framework of established cash, loan, investment, borrowing and capital
policies. Certain officers of the Bank are charged with the responsibility
for developing and monitoring policies and procedures that are designed to
insure acceptable composition of the asset/liability mix. It is the overall
philosophy of management to support asset growth primarily through growth of
core deposits, which include deposits of all categories made by individuals,
partnerships and corporations. Management of the Bank seeks to invest the
largest portion of the Bank's assets in small- to medium-sized business loans
and real estate related loans. The Bank's asset/liability mix is monitored on
a timely basis with a report reflecting interest-sensitive assets and
interest-sensitive liabilities being prepared and presented to the Bank's
Asset/Liability Committee on a monthly basis. The objective of this policy
is to manage interest-sensitive assets and liabilities so as to minimize the
impact of substantial movements and interest rates on the Bank's earnings. See
"Selected Statistical Information - Asset/Liability Management.
Employees
As of December 31, 1996, the Bank had 48 full-time employees and 11
part time employees. The Bank is not a party to any collective bargaining
agreement, and, in the opinion of management, enjoys excellent relations with
its employees. The Company does not have any employees who are not also
employees of the Bank.
SELECTED STATISTICAL INFORMATION OF
BUTTON GWINNETT FINANCIAL CORPORATION
The following statistical information is provided for the Company for
the years ended December 31, 1996 and 1995. The data is presented using daily
average balances. This data should be read in conjunction with the financial
statements incorporated into this Annual Report.
Average Balances and Net Income Analysis
The following tables set forth the amount of the Company's interest
income or interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total interest-
earning assets and total interest-bearing liabilities, net interest spread and
net yield on average interest-earning assets.
<TABLE>
<CAPTION>
----------------------- YEARS ENDED DECEMBER 31-----------------------------
------------1996-------------- ---------1995------------------
AVERAGE AVERAGE
INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of unearned income $109,190 $ 12,020 11.01% $ 99,937 $11,397 11.40%
Federal Funds Sold 17,805 939 5.27% 14,368 831 5.78%
Taxable investments 27,021 1,558 5.77% 18,767 1,083 5.77%
Tax-exempt investments 3,973 181 4.56% 4,364 211 4.84%
Interest-bearing deposits in banks 115 8 6.96% 280 14 5.00%
Total interest-earning assets $158,104 $ 14,706 9.30% $137,716 $ 13,536 9.83%
Noninterest-earning assets:
Cash $ 8,312 $ 6,809
Allowance for loan losses (2,077) (1,688)
Other Assets 5,895 6,053
Total noninterest-earning assets $ 12,130 $ 11,174
TOTAL ASSETS $170,234 $ 14,706 $148,890 $ 13,536
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $ 47,549 $ 1,789 3.76% $ 33,349 $ 1,117 3.35%
Savings and time deposits 65,061 3,436 5.28% 67,256 3,690 5.49%
Debt 0 0 -- 11 0 --
Total interest-bearing liabilities $112,610 $ 5,225 4.64% $100,616 $ 4,807 4.78%
Noninterest-bearing liabilities and
stockholders' equity:
Demand deposits $ 37,541 $ 30,662
Other liabilities 1,803 2,169
Stockholders' equity 18,280 15,443
Total noninterest-bearing liabilities
and stockholders' equity $ 57,624 $ 48,274
Total liabilities and
stockholders' equity $170,234 $ 5,225 $148,890 $ 4,807
Interest rate spread 4.66% 5.05%
Net interest income $ 9,481 $ 8,729
Net interest margin 6.00% 6.34%
</TABLE>
(1) Interest income on loans includes $1,353,976 and $1,368,493 of loan
fee income for the years ended December 31, 1996 and 1995, respectively.
Interest income on loans also includes $6,061 and $459 of interest income
recognized on non accrual and renegotiated loans for the years ended December
31, 1996 and 1995, respectively.
Rate and Volume Analysis
The following table reflects the changes in net interest income
resulting from changes in interest rates and from asset and liability volume.
The change in interest attributable to rate has been determined by applying the
change in rate between the two years indicated to average balances outstanding
in the later year. The change in interest due to volume has been determined by
applying the rate from the earlier year to the change in average balances
outstanding between years. Thus, changes that are not solely due to volume
have been consistently attributed to rate.
<TABLE>
<CAPTION>
----------------Years Ended December 31 ----------------
1996 1995
Increase Changes Due To Increase Changes Due to
(Decrease) Rate Volume (Decrease) Rate Volume
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning assets:
Interest and fees
on loans $ 623 $ (432) $1,055 $3,097 $ 801 $2,296
Interest on
taxable investments 475 (1) 476 267 57 210
Interest on
tax-exempt investments (30) (11) (19) 3 14 (11)
Interest on
Federal Funds Sold 108 (91) 199 486 254 232
Interest on deposits
in banks (6) 2 (8) (36) 1 (37)
Total interest income $1,170 $ (533) $1,703 $3,817 $1,127 $2,690
Expense from interest-bearing
liabilities:
Interest on
interest-bearing demand $ 672 $ 196 $ 476 $ 234 $ 140 $ 94
Interest on time and
savings deposits (254) (134) (120) 1,592 826 766
Total interest expense $ 418 $ 62 $ 356 $1,826 $ 966 $ 860
Net interest income $ 752 $ (595) $1,347 $1,991 $ 161 $1,830
</TABLE>
Asset/Liability Management
The following table sets forth the distribution of the repricing of the
Company's earning assets and interest-bearing liabilities as of December 31,
1996, the cumulative interest rate sensitivity gap (i.e., interest rate
sensitive assets less interest rate sensitive liabilities) and the cumulative
interest rate sensitivity gap ratio (i.e., interest rate sensitive assets
divided by interest rate sensitive liabilities). The table also sets forth
the time periods in which earning assets and liabilities will mature or may
reprice in accordance with their contractual terms. However, the table does
not necessarily indicate the impact of general interest rate movements on the
net interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of the Bank's
customers. In addition, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times within such
period and at different rates.
The Bank uses this tables as a tool to manage interest rate sensitivity
and risk on certain products. What is not taken into consideration is the
Company's strong capital position of 10% and the aggressive marketing and
officer calling program that maintains 27% of the total deposits in
non-interest bearing accounts, thus maintaining some of the highest returns
on average assets for our peer group, as well as some of the highest net
interest margins.
<TABLE>
<CAPTION>
Within Within Within After
Six One Five Five
Months Year Years Years
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned income $ 76,053 $ 83,322 $116,278 $119,899
Federal Funds sold 21,515 21,515 21,515 21,515
Taxable Investments 2,750 8,216 28,300 28,300
Tax-exempt investments 655 655 2,494 3,704
Interest-bearing deposits in
banks 0 0 0 0
$100,973 $113,708 $168,587 $173,418
Interest Bearing Liabilities:
Interest-bearing deposits $ 59,655 $ 59,655 $ 59,655 $ 59,655
Savings 5,532 5,532 5,532 5,532
Time Deposits 37,474 48,787 56,172 56,172
$102,661 $113,974 $121,359 $121,359
Cumulative Interest Rate
Sensitivity Gap $ (1,688) $ (266) $ 47,228 $ 52,059
Cumulative Interest Rate
Sensitivity Gap Ratio 98% 100% 139% 143%
</TABLE>
The Company actively manages the mix of asset and liability maturities
to control the effects of changes in the general level of interest rates on net
interest income. Except for its effect on the general level of interest rates,
inflation does not have a material impact on the Company due to the rate
variability and short-term maturities of its earning assets. In particular,
approximately 70% of the loan portfolio is comprised of loans which are
variable rate terms or short-term obligations. Mortgage loans, primarily with
five to fifteen year maturities, are also made on a variable rate basis with
rates being adjusted every one to five years. Additionally, 57% of average
other earning assets mature within one year.
INVESTMENT PORTFOLIO
Types of Investments
The carrying value and estimated market value of investment securities
are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Held for Investment:
December 31, 1996
U. S. Government and agency
securities $28,300,312 $ 66,788 $ (74,851) $28,292,249
State and municipal securities 3,703,971 55,716 ( 4,003) 3,755,684
$32,004,283 $122,504 $ (78,854) $32,047,933
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Held for Investment:
December 31, 1995
U. S. Government and agency
securities $21,543,639 $100,693 $ (61,439) $21,582,893
State and municipal securities 4,367,921 71,662 (13,300) 4,426,283
$25,911,560 $172,355 $ (74,739) $26,009,176
</TABLE>
Maturities
The amounts of investment securities in each category as of
December 31, 1996 and 1995 are shown in the following table according to
maturity classifications (1) one year or less, (2) after one year through
five years, (3) after five years through ten years, and (4) after ten years.
<TABLE>
<CAPTION>
---------Year Ended December 31 -----------
1996 1995
U. S. Treasury and Other U. S. Government
Agencies and Corporations
(Dollars in Thousands)
Amount Yield Amount Yield
(1) (1)
<S> <C> <C> <C> <C>
Maturity:
One year or less $ 7,716 5.53% $ 7,180 6.00%
After one year through five years 20,084 5.95% 13,364 5.53%
After five years through ten years 500 6.50% 1,000 6.17%
After ten years -- --
$ 28,300 $21,544
State and Political Subdivisions
(Dollars in Thousands)
Amount Yield Amount Yield
(1) (1) (2)
Maturity:
One year or less $ 655 4.69% $ 685 3.96%
After one year through five years 1,839 4.67% 2,383 4.68%
After five years through ten years 1,210 5.26% 1,300 5.14%
After ten years -- --
$ 3,704 $ 4,368
</TABLE>
(1) Yields were computed using coupon interest, adding discount accretion
or subtracting premium amortization, as appropriate, on a ratable
basis over the life of each security. The weighted average yield for
each maturity range was computed using the acquisition price of each
security in that range.
(2) Yields on municipal securities are not stated on a tax equivalent
basis.
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding at the indicated dates is shown in the
following table according to type of loans and concentration of loans which
exceed 10% of total loans.
December 31
1996 1995
(Dollars in Thousands)
Commercial and business $ 28,102 $ 27,356
Business loans secured by real estate 42,297 30,814
Real estate - construction 37,199 29,989
Real estate - mortgage 7,997 8,838
Consumer and other installment loans 4,651 5,989
$120,246 $102,986
Deferred fees (347) (334)
Reserve for loan losses (2,331) (1,953)
Loans, net $117,568 $100,699
Maturities and Sensitivity to Changes in Interest Rates
Total loans as of December 31, 1996 and 1995 are shown in the following
table according to maturity classifications (1) one year or less, (2) after one
year through five years, and (3) after five years.
December 31
1996 1995
(Dollars in Thousands)
Maturity:
One year or less $ 72,764 $ 64,574
After one year through five years 42,749 34,204
After five years 4,733 4,208
$120,246 $102,986
The following table summarizes loans at December 31, 1996 with due
dates after one year which (1) have predetermined interest rates and (2) have
floating or adjustable interest rates.
1 - 5 Over 5
Years Years Total
(Dollars in Thousands)
Predetermined interest rates $ 32,889 $ 3,626 $ 36,515
Floating or adjustable rates 9,860 1,107 10,967
$ 42,749 $ 4,733 $ 47,482
Nonperforming Loans
The following table presents, at December 31, 1996 and 1995, the
aggregate of nonperforming loans for the categories indicated.
December 31
1996 1995
(Dollars in Thousands)
Loans accounted for on a nonaccrual basis $ 38 $ 95
Installment loans and term loans -- 138
contractually past due ninety days or
more as to interest or principal payments
and still accruing
Loans, the terms of which have been 84 --
renegotiated to provide a reduction or
deferral of interest or principal because
of deterioration in the financial position
of the borrower
Loans now current about which there are -- --
serious doubts as to the ability of the
borrower to comply with present loan
repayment terms
Interest income that would have been recorded on 10 11
nonaccrual and restructured loans under
original terms
Interest income that was recorded on a nonaccrual 6 1
and restructured loans
The accrual of interest income on loans is discontinued when the loans
become over 90 days past due. Interest previously accrued but not collected is
charged against current period interest income when such loans are placed on
nonaccrual status. Interest accruals are recorded on such loans only when they
are brought fully current with respect to interest and principal and when, in
the judgment of management, the loans are estimated to be fully collectible as
to both principal and interest.
In the opinion of management, any loans classified by regulatory
authorities as doubtful, substandard or special mention that have not been
disclosed above do not (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity or capital resources, or (ii) represent material credits
about which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms. Any loans classified by regulatory authorities as loss have
been charged off.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 and, as amended, No. 118, "Accounting by Creditors
for Impairment of a Loan". The statement prescribes that impaired loans be
measured on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. The statement had no material effect on the financial
statements of the Company as of December 31, 1996.
Commitments and Lines of Credit
In the ordinary course of business, the Bank has granted commitments
to extend credit to approved customers. The Bank has also granted commitments
to approved customers for standby letters of credit. These commitments are
recorded in the financial statements when funds are disbursed or the financial
instruments become payable. The Bank uses the same credit and collateral
policies for these off balance sheet commitments as it does for financial
instruments that are recorded in the consolidated financial statements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
The following is a summary of the commitments outstanding at
December 31, 1996 and 1995.
December 31
1996 1995
(Dollars in Thousands)
Commitments to extend credit $ 46,186 $ 32,781
Standby letters of credit 2,201 1,540
$ 48,387 $ 34,321
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are past loan experience, composition of the loan portfolio, evaluation of
possible future losses, current economic conditions and other relevant factors.
The Company's allowance for loan losses was approximately $2,330,733 at
December 31, 1996, representing 1.94% of year end total loans outstanding,
compared with 1,953,189 at December 31, 1995, which represented 1.90% of year
end total loans outstanding. The allowance for loan losses is reviewed
continuously based on management's evaluation of current risk characteristics
of the loan portfolio, as well as the impact of prevailing and expected
economic business conditions. Management considers the allowance for loan
losses adequate to cover possible loan losses on the loans outstanding.
Management has not allocated the Company's allowance for loan losses
to specific categories of loans. Based on management's best estimate,
approximately 40% of the allowance should be allocated to real estate loans,
45% to commercial, financial and agricultural loans and 15% to
consumer/installment loans as of December 31, 1996.
The following table presents an analysis of the Company's loan loss
experience for the year ended December 31, 1996.
December 31
1996 1995
(Dollars in Thousands)
Average amount of loans outstanding $ 109,190 $ 99,937
Balance of reserve for possible loan losses
at beginning of period $ 1,953 $ 1,464
Charge-offs:
Commercial, financial and agricultural $ (49) $ (76)
Real estate (20) (28)
Consumer (16) (17)
Recoveries:
Commercial, financial and agricultural 7 0
Real estate 4 3
Consumer 7 7
Net charge-offs $ (67) $ (111)
Additions to reserve charged to
operating expenses $ 445 $ 600
Balance of reserve for
possible loan losses $ 2,331 $ 1,953
Ratio of net loan charge-offs
to average loans 0.06% .11%
DEPOSITS
Average amount of deposits and average rate paid thereon, classified as
to noninterest-bearing demand deposits, interest-bearing demand deposits,
savings deposits and time deposits, for the years ended December 31, 1996 and
1995 is presented below.
<TABLE>
<CAPTION>
December 31
1996 1995
Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 37,541 ---% $ 30,662 ---%
Interest-bearing demand deposits 47,549 3.76% 33,349 3.35%
Savings 5,991 2.40% 6,430 2.68%
Time deposits 59,070 5.57% 60,826 5.78%
Total deposits $150,151 $131,267
</TABLE>
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1996 and 1995, are shown below by
category, which is based on time remaining until maturity of (1) three months
or less, (2) over three through six months (3) over six through twelve months
and (4) over twelve months.
December 31
1996 1995
Amount Amount
(Dollars in Thousands)
Three months or less $ 7,181 $ 7,267
Over three through six months 3,754 5,140
Over six through twelve months 3,716 2,556
Over twelve months 3,796 3,300
Total $ 18,447 $18,263
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following rate of return information for the years ended
December 31, 1996 and 1995 is presented below.
December 31
1996 1995
Return on assets (1) 2.26% 2.21%
Return on equity (2) 21.03% 21.35%
Dividend payout ratio (3) 19.23% 15.28%
Equity to assets ratio (4) 10.74% 10.37%
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
(4) Average Equity divided by average total assets.
SUPERVISION AND REGULATION
The following discussion sets forth the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to the Company.
General
The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). As such, the Company
and its non-bank subsidiaries are subject to the supervision, examination, and
reporting requirements of the BHC Act and the regulations of the Federal
Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (a) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5% of the voting shares of the bank; (b) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (c) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of
which may be substantially to lessen competition or to tend to create a
monopoly in any section of the country, or that in any other manner would be
in restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is
also required to consider the financial and managerial resources and future
prospects of the bank holding companies and banks concerned and the
convenience and needs of the community to be served. Consideration of
financial resources generally focuses on capital adequacy, which is discussed
below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that the Company, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether.
In February 1996, the Georgia Legislature adopted the "Georgia
Interstate Branching Act" effective June 1, 1997. The Georgia Interstate
Branching Act will permit Georgia-based banks and bank holding companies owning
or acquiring banks outside of Georgia and all non-Georgia banks and bank
holding companies owning or acquiring banks in Georgia to merge any lawfully
acquired bank into an interstate branch network. The Georgia Interstate
Branching Act also allows banks to establish de novo branches on a limited
basis beginning July 1, 1996. Beginning July 1, 1998, the number of de novo
branches which may be established will no longer be limited.
The BHC Act generally prohibits the Company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting discount
securities brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities all have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The
BHC Act does not place territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
The bank subsidiary of the Company is a member of the Federal Deposit
Insurance Corporation (the "FDIC"), and as such, its deposits are insured by
the FDIC to the maximum extent provided by law. Such subsidiary is also
subject to numerous state and federal statutes and regulations that affect
its business, activities, and operations, and it is supervised and examined
by one or more state or federal bank regulatory agencies.
The FDIC and the Georgia Department of Banking and Finance
(the "Georgia Department") regularly examine the operations of the Bank and is
given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. The FDIC and the
Georgia Department also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
Payment of Dividends
The Company is a legal entity separate and distinct from its banking
and other subsidiaries. The principal sources of cash flow of the Company,
including cash flow to pay dividends to its shareholders, are dividends by the
Bank. There are statutory and regulatory limitations on the payment of
dividends by the Bank to the Company as well as by the Company to its
shareholders.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At December 31, 1996, under dividend restrictions imposed under federal
and state laws, the Bank, without obtaining governmental approvals, could
declare aggregate dividends to the Company of approximately $1,933,000.
The payment of dividends by the Company and the Bank may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
Capital Adequacy
The Company and the Bank are required to comply with the capital
adequacy standards established by the Federal Reserve and the appropriate
federal banking regulator in the case of Bank. There are two basic measures
of capital adequacy for bank holding companies that have been promulgated by
the Federal Reserve: a risk-based measure and a leverage measure. All
applicable capital standards must be satisfied for a bank holding company to
be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
banks and bank holding companies, to account for off-balance-sheet exposure,
and to minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital
Ratio") of total capital ("Total Capital") to risk-weighted assets (including
certain off-balance-sheet items, such as standby letters of credit) is 8%. At
least half of Total Capital must comprise common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At December 31, 1996,
the Company's consolidated Total Risk-Based Capital Ratio and its Tier 1
Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted
assets) were 16.13% and 14.88%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3% for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3%, plus an additional cushion of 100 to 200 basis points.
The Company's Leverage Ratio at December 31, 1996 was 11.13%. The guidelines
also provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
The Bank is subject to risk-based and leverage capital requirements
adopted by the FDIC, which are substantially similar to those adopted by the
Federal Reserve for bank holding companies.
The Bank was in compliance with applicable minimum capital requirements
as of December 31, 1996. The Company has not been advised by any federal
banking agency of any specific minimum capital ratio requirement applicable
to it or its subsidiary depository institution.
Failure to meet capital guidelines could subject a bank to a variety
of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements.
See "-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, recently adopted final regulations, which will become mandatory on
January 1, 1998, requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. The bank regulatory agencies have
concurrently proposed a methodology for evaluating interest rate risk which
would require banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures. The market risk rules
will apply to any bank or bank holding company whose trading activity equals
10% or more of its total assets, or whose trading activity equals $1 billion
or more.
Support of Subsidiary Institutions
Under Federal Reserve policy, the Company is expected to act as a
source of financial strength for, and to commit resources to support, each of
its banking subsidiaries. This support may be required at times when, absent
such Federal Reserve policy, the Company may not be inclined to provide it.
In addition, any capital loans by a bank holding company to any of its banking
subsidiaries are subordinate in right of payment to deposits and to certain
other indebtedness of such banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by,
or reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (a) the default of a commonly controlled FDIC-insured
depository institution or (b) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of
default." "Default" is defined generally as the appointment of a conservator
or receiver, and "in danger of default" is defined generally as the existence
of certain conditions indicating that a default is likely to occur in the
absence of regulatory assistance. The FDIC's claim for damages is superior
to claims of shareholders of the insured depository institution or its holding
company, but is subordinate to claims of depositors, secured creditors, and
holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution. The subsidiary depository
institutions of the Company are subject to these cross-guarantee provisions.
As a result, any loss suffered by the FDIC in respect of these subsidiaries
would likely result in assertion of the cross-guarantee provisions, the
assessment of such estimated losses against the depository institution's
banking affiliates, and a potential loss of the Company's investment in such
other subsidiary depository institutions.
Prompt Corrective Action
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions
in the three undercapitalized categories, the severity of which will depend
upon the capital category in which the institution is placed. Generally,
subject to a narrow exception, FDICIA requires the banking regulator to appoint
a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
The capital levels established for each of the categories are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Tier 1 Risk-Based Tier 1 Risk-
Capital Category Capital Capital Based Capital Other
Well Capitalized 5% or more 10% or more 6% or more Not subject
to a capital
directive
Adequately 4% or more 8% or more 4% or more --
Capitalized
Undercapitalized less than 4% less than 8% less than 4% --
Significantly less than 3% less than 6% less than 3% --
Undercapitalized
Critically 2% of less
Undercapitalized tangible equity -- -- --
</TABLE>
For purposes of the regulation, the term "tangible equity" includes
core capital elements counted as Tier 1 Capital for purposes of the risk-based
capital standards, plus the amount of outstanding cumulative perpetual
preferred stock (including related surplus), minus all intangible assets with
certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations. The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking agency is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
At December 31, 1996, the Bank had the requisite capital levels to
qualify as well capitalized.
FDIC Insurance Assessments
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system
for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The new system, which went into effect on January 1, 1994,
assigns an institution to one of three capital categories: (a) well
capitalized; (b) adequately capitalized; and (c) undercapitalized. These
three categories are substantially similar to the prompt corrective action
categories described above, with the "undercapitalized" category including
institutions that are undercapitalized, significantly undercapitalized, and
critically undercapitalized for prompt corrective action purposes. An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which an institution
is assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, as well as the prior transitional system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates for members of both the Bank Insurance Fund ("BIF") and the
Savings Association Insurance Fund ("SAIF") for the first half of 1995, as
they had during 1994, ranged from 23 basis points (0.23% of deposits) for an
institution in the highest category (i.e., "well capitalized" and "healthy")
to 31 basis points (0.31% of deposits) for an institution in the lowest
category (i.e., "undercapitalized" and "substantial supervisory concern").
These rates were established for both funds to achieve a designated ratio of
reserves to insured deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning 1996, the deposit insurance premiums for 92% of all BIF members in
the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates
had adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at
a reserve ratio of 1.25%. This proposal contemplated elimination of the
disparity between the assessment rates on BIF and SAIF deposits following
recapitalization of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds
Act of 1996 (the "Funds Act") was enacted by Congress as part of the omnibus
budget legislation and signed into law on September 30, 1996. As directed by
the Funds Act, the FDIC implemented a special one-time assessment of
approximately 65.7 basis points (0.657%) on a depository institution's
SAIF-insured deposits held as of March 31, 1995 (or approximately 52.6 basis
points on SAIF deposits acquired by banks in certain qualifying transactions).
In addition, the FDIC proposed a revision in the SAIF assessment rate
schedule that effected, as of October 1, 1996 (a) a widening in the assessment
rate spread among institutions in the different capital and risk assessment
categories, (b) an overall reduction of the assessment rate range assessable
on SAIF deposits of from 0 to 27 basis points, and (c) a special interim
assessment rate range for the last quarter of 1996 of from 18 to 27 basis
points on institutions subject to FICO assessments. Effective January 1, 1997,
FICO assessments will be imposed on both BIF- and SAIF-insured deposits in
annual amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF- insured institutions
will share the FICO interest costs at equal rates currently estimated 2.43
basis points. The Company anticipates that the net effect of the decrease in
the premium assessment rate on SAIF deposits will result in a reduction in its
total deposit insurance premium assessments for the years 1997 through 1999,
assuming no further changes in announced premium assessment rates. The Funds
Act further provides that BIF and SAIF are to be merged, creating the "Deposit
Insurance Fund," on January 1, 1999, provided that bank and savings association
charters are combined by that date.
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition imposed by
the FDIC.
Proposed Legislation and Regulatory Action
New regulations and statutes are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed regulation or statute will be adopted or the
extent to which the business of the Company may be affected by such regulation
or statute.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's main office is currently located at 2230 Scenic Highway,
Snellville, Georgia 30278.
The Bank currently has three banking offices which it owns without
encumbrance. They are as follows:
Main Office
150 S. Perry Street
Lawrenceville, Georgia 30245
Lilburn Office
4700 U.S. Highway 29
Lilburn, Georgia 30247
Snellville Office
2230 Scenic Highway
Snellville, Georgia 30278
The Bank also has one additional property, which is located at 234
Luckie Street, Lawrenceville, Georgia 30245 and is currently leased to RE/MAX
Gwinnett, Inc.
Other than normal real estate and commercial lending activities of the
Bank, the Company generally does not invest in real estate, interests in real
estate, real estate mortgages, or securities of or interests in persons
primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending proceedings to which the Company or the
Bank is a party or to which any of their properties are subject other than
routine litigation incidental to the Bank's business; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending
or contemplated, in which any director, officer or affiliate or any principal
security holder of the Company, or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1996 to a
vote of shareholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Market for Registrant's
Common Equity and Related Stockholder Matters" in the 1996 Annual Report to
Shareholders, is incorporated herein by reference. The Company did not have
any sales of unregistered securities during 1996, 1995 and 1994.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The information set forth under the caption "Management's Discussion
and Analysis of Results of Operations and Financial Condition" in the 1996
Annual Report to Shareholders, is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The consolidated balance sheets of the Company as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows and notes to the consolidated financial statements for
each of the three years in the period ended December 31, 1996, and the report
issued thereon by the Company's independent public accountants which are set
forth in the 1996 Annual Report to Shareholders, are incorporated herein by
reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information set forth under the caption "Election of Directors"
in the Proxy Statement utilized in connection with the Company's 1997 Annual
Shareholders Meeting is incorporated herein by reference.
ITEM 10.EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation"
in the Proxy Statement utilized in connection with the Company's 1997 Annual
Shareholders Meeting is incorporated herein by reference.
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Principal Shareholders
and Management" in the Proxy Statement utilized in connection with the
Company's 1997 Annual Shareholders Meeting is incorporated herein by
reference.
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in
the Proxy Statement utilized in connection with the Company's 1997 Annual
Shareholders Meeting is incorporated herein by reference.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Exhibit
3.1 (1) Articles of Incorporation.
3.2 (1) Bylaws.
4.1 (1) Instruments Defining the Rights of Security
Holders. (See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2
hereto.)
10.1 (1) (*) Button Gwinnett Financial Corporation 1993 Stock
Incentive Plan.
10.2 (1) (*) Button Gwinnett Financial Corporation Non-
Qualified Stock Option Award (granted under the
Button Gwinnett Financial Corporation 1993 Stock
Incentive Plan).
10.3 (1) (*) Form of Button Gwinnett Financial Corporation
Incentive Stock Award (granted under the Button
Gwinnett Financial Corporation 1993 Stock
Incentive Plan).
10.4 (2) (*) Employment Agreement, dated as of September 9, 1994,
between Glenn S. White and The Bank of Gwinnett County
and Button Gwinnett Financial Corporation.
10.5 (2) (*) Employment Agreement, dated as of September 9, 1994,
between Andrew R. Pourchier and The Bank of Gwinnett
County and Button Gwinnett Financial Corporation.
13.1 (3) Annual Report as of and for the year ended December 31,
1996 furnished to shareholders for which certain
specified pages are specifically incorporated herein by
reference.
21.1 (1) Subsidiary of Button Gwinnett Financial Corporation
24.1 Power of Attorney (appears on the signature pages to
this Report on Form 10-KSB).
27.1 Financial Data Schedule (for SEC use only)
____________________
1) Incorporated herein by reference to Exhibit of the same number
in the Company's Form 10-KSB for the year ended
December 31, 1993.
(2) Incorporated herein by reference to Exhibit of the same number
in the Company's Form 10-KSB for the year ended
December 31, 1994.
(3) Incorporated herein by reference to Exhibit (a) in the Company's
Schedule 13-E-4, dated February 20, 1997 (Commission File No.
005-45683).
(*) Indicates a management contract or a compensatory plan or
arrangement.
(b) Reports on Form 8-K filed in the fourth quarter of 1996: None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BUTTON GWINNETT FINANCIAL CORPORATION
By:_____________________________________
Glenn S. White
President
Date: March 28, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
on the signature page to this Report constitutes and appoints Glenn S. White or
Andrew R. Pourchier, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead,
in any and all capacities, to sign any and all amendments to this Report, and
to file the same, with all exhibits hereto, and other documents in connection
herewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Director March 28, 1997
David R. Bowen
/s/ Director March 28, 1997
Robert A. Bradshaw
/s/ Director March 28, 1997
James F. Brannan, Jr.
/s/ Director March 28, 1997
James R. Brown
/s/ Director March 28, 1997
W. Emmett Clower
/s/ Director March 28, 1997
Jean A. Coppage
/s/ Director March 28, 1997
Edwin F. Forrest
/s/ Director March 28, 1997
David G. Hanna
/s/ Director March 28, 1997
J. Richard Norton, Sr.
/s/ Vice President/ March 28, 1997
Andrew R. Pourchier Secretary/Treasurer
Director (Principal
Financial and Accounting
Officer)
/s/ Chairman of the Board/
John D. Stephens Director March 28, 1997
/s/ Director March 28, 1997
Judy A. Waters
/s/ Director March 28, 1997
Warren O. Wheeler
President/Director March 28, 1997
/s/ (Principal Executive
Glenn S. White Officer
/s/ Director March 28, 1997
Bobby W. Williams
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