SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934)
(AMENDMENT NO. N/A )
BUTTON GWINNETT FINANCIAL CORPORATION
(Name of the Issuer)
BUTTON GWINNETT FINANCIAL CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
124-212-101
(CUSIP Number of Class of Securities)
KATHRYN L. KNUDSON, ESQ., POWELL GOLDSTEIN FRAZER & MURPHY LLP
SIXTEENTH FLOOR, 191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303 404/572-6952
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of
Person(s) Filing Statement)
FEBRUARY 20, 1997
(Date tender offer first published, sent or given to security holders)
Calculation of Filing Fee
Transaction Valuation (1) Amount of Filing Fee
$2,100,000 (based on up to 100,000 shares
being repurchased at $21 per share) $420 (1/50th of 1% of $1,325,000)
Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no: N/A Date filed: N/A
Instruction. Ten copies of this statement, including all exhibits,
shall be filed with the Commission.
____________________
1Set forth the amount on which the filing fee is calculated and state
how it was determined.
Item 1. Security and Issuer.
(a) The name of the issuer is Button Gwinnett Financial Corporation.
The address of its principal executive office is 2230 Scenic Highway,
Snellville, Georgia 30278.
(b) The exact title and amount of securities outstanding of the
class of security being sought as of December 31, 1996 are as follows:
1,378,746 shares of Common Stock, $.01 par value. The exact amount of such
securities being sought is up to 100,000 shares, and the consideration being
offered therefor is $21 per share. To the best knowledge of the issuer, none
of its officers, directors or affiliates intends to sell shares to the Company
pursuant to the Offer Letter (defined below).
(c) Information set forth in the Offer Letter (the "Offer Letter"),
filed as Exhibit (a) to this statement, under the heading "No Established
Trading Market" is incorporated by reference herein.
(d) The issuer is filing this statement.
Item 2. Source and Amount of Funds or Other Consideration.
(a) Information set forth in the Offer Letter under the heading
"Financial Information" is incorporated by reference herein.
(b) The consideration to be paid to selling shareholders will not
be borrowed.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
Information set forth in the Offer Letter under the heading "Purpose
of the Offer" is incorporated by reference herein. Apart from the possibility
that the Common Stock might become eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, the issuer
does not have any plans or proposals which relate to or would result in any of
the events described in Item 3(a) through (j).
Item 4. Interest in Securities of the Issuer.
Information set forth in the Offer Letter under the heading "No
Established Trading Market" is incorporated by reference herein.
Item 5. Contracts, Arrangements, Understandings or Relationships With Respect
to the Issuer's Securities.
There are no contracts, arrangements, understandings or relationships
relating, directly or indirectly, to the issuer tender offer, between the
Company or its directors and executive officers and any person with respect to
the Company's Common Stock.
Item 6. Persons Retained, Employed or to be Compensated.
There are no persons being employed by the issuer to make solicitations
or recommendations in connection with the Offer.
Item 7. Financial Information.
(a) Information set forth in the Offer Letter under the heading
"Financial Information," together with the Financial Statements accompanying
the Offer Letter, are incorporated by reference herein.
(b) The issuer does not believe that the pro forma data which is
described in this item is material to a shareholder's decision with respect to
the offer described in the Offer Letter.
Item 8. Additional Information.
The issuer does not believe that there is any additional information
which would be material to a decision by a shareholder whether to sell, tender
or hold the securities being sought by the Offer.
Item 9. Material to be Filed as Exhibits.
(a) Offer Letter, including the enclosures to the Offer Letter:
(1) audited financial statements of the issuer as of and for the years ended
December 31, 1996 and 1995 and (2) the Letter of Transmittal.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
February 20, 1997
(Date)
BUTTON GWINNETT FINANCIAL CORPORATION
By: /s/ Andrew R. Pourchier
(Signature)
Andrew R. Pourchier, Vice President
(Name and Title)
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
(a) Offer Letter, with attachments _____
EXHIBIT (a)
LETTER OF TRANSMITTAL
(To Accompany Certificates for Shares of Button
Gwinnett Financial Corporation)
EXCHANGE AGENT QUESTIONS
The Bank of Gwinnett County Monica L. Grafton
150 South Perry Street (770) 963-6665
Lawrenceville, Georgia 30245 or
Andrew R. Pourchier
(770) 978-3242
Ladies and Gentlemen:
The undersigned, pursuant to the terms of the Offer to Purchase Company
Stock, dated February 20, 1997, from Button Gwinnett Financial Corporation (the
"Company"), hereby surrenders to the Exchange Agent, the share certificates
listed below in BOX A representing shares (the "Shares") of common stock of
the Company. As the registered owner of the Shares, the undersigned hereby
requests that the Exchange Agent deliver to the undersigned the consideration
for the Shares as described in the Offer.
BOX A: SURRENDERED COMMON STOCK CERTIFICATES
(Please print or type)
Name and Address Certificate
of Registered Owner Number(s) Number of Shares
______________
______________
______________
______________
______________
Total Number
of Shares ______________
(If additional space is required, attach a continuation sheet in
substantially the above form.)
Unless other instructions are given to the Exchange Agent, the undersigned
requests that a check be issued in the name and mailed to the address set forth
above in Box A.
SIGN HERE:_____________________ ____________________________
(Signature*) (Signature, if held jointly*)
_____________________ ____________________________
(Date) (Date)
_____________________ ____________________________
(Telephone Number) (Telephone Number)
*Must be signed by registered holder(s), exactly as name(s) appear(s) on
certificates(s) or by person(s) authorized to become registered holder(s), or
other person(s) authorized by documents transmitted herewith. If the Shares
are no longer held by the registered owner, please call the Exchange Agent for
instructions.
February 20, 1997
To Our Stockholders:
Button Gwinnett Financial Corporation (the "Company") offered to repurchase
stock from its shareholders in December 1994 to help fund the Company's Stock
Option Plan and to provide more liquidity to your stock.
The Company is pleased to make this offer again. In addition, if we repurchase
up to 100,000 shares, this would fund the Stock Option Plan with Treasury Stock
in lieu of issuing new shares.
The Company has excess capital which has allowed us to make this offer to our
Shareholders who may wish to redirect some of their investments. The Company
will repurchase your stock for $21.00 per share and you must tender your stock
by noon on March 21, 1997.
The Company and its subsidiary, The Bank of Gwinnett County, appreciate all the
support you have given us through all these years, and you will see by the
enclosed financial information on the Company, that The Bank had another good
year justifying that support.
If you have any questions concerning any of this information, call me at
770-963-6665 or Andrew R. Pourchier at 770-978-3242. If you wish to sell your
stock, call Monica Grafton at 770-963-6665.
Sincerely,
Glenn S. White
President
Button Gwinnett Financial
Corporation
1996 Annual Report
to Shareholders
2230 Scenic Highway
Snellville, Georgia 30278
GENERAL INFORMATION
Button Gwinnett Financial Corporation is a one-bank holding
company, owning 100% of the stock of The Bank of Gwinnett County.
The Bank of Gwinnett County ("The Bank") has three locations
located within the Lawrenceville, Lilburn and Snellville city
limits. The Bank opened for business in April 1988 as a state
chartered bank.
Gwinnett County has been one of the fastest growing counties in
the country and State of Georgia for the last ten years, with the
population growing from some 225,000 to over 470,000.
<TABLE>
FINANCIAL HIGHLIGHTS
BUTTON GWINNETT FINANCIAL CORPORATION
SELECTED FINANCIAL DATA
<CAPTION>
For Year End December 31
Selected Balance Sheet Data 1996 1995
___________________________ ____________________________
(Ending Balance)
<S> <C> <C>
Total Assets $186,568,294 $159,199,966
Total Deposits 165,236,790 140,804,199
Shareholders Equity 20,012,944 16,914,803
Allowance for Loan Losses 2,330,733 1,953,189
(Average Balances)
Average Assets $170,234,000 $148,890,000
Average Shareholders Equity 18,279,858 15,443,000
Selected Income Data
Total Interest Income $ 14,706,313 $ 13,536,217
Total Interest Expense 5,224,796 4,807,424
Provision for Loan Loss 445,000 600,000
Other Expenses 4,115,289 4,312,416
Net Income $ 3,844,804 $ 3,297,321
Per Share Data and
Financial Ratios
<CAPTION>
<S> <C> <C>
Shareholders Equity as a
Percent of Total Assets 10.7% 10.6%
Book Value Per Share $14.52 $12.23
Dividends Per Share $ 0.50 $ 0.35
Net Interest Margin 6.00% 6.34%
Net Income Per Share $ 2.60 $ 2.29
Return on Average Equity 21.03% 21.35%
Return on Average Assets 2.26% 2.21%
Loan Loss Reserve to
Total Loans 1.94% 1.90%
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Liquidity and Capital Resources
Liquidity management involves the matching of the cash
flow requirements of customers who may be either depositors
desiring to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs and
the ability of the Company and the Bank to meet those needs. The
Company and the Bank seek to meet liquidity requirements
primarily through management of short-term investments
(principally Federal Funds Sold) and monthly amortizing loans.
Another source of liquidity is the repayment of maturing single-
payment loans. Also, the Bank maintains relationships with
correspondent banks which could provide funds to them on short
notice, if needed.
The liquidity and capital resources of the Company and the
Bank are monitored on a periodic basis by Federal and state
regulatory authorities. As determined under guidelines
established by those regulatory authorities, the Bank's liquidity
ratios at December 31, 1996 were considered satisfactory. At
that date, the Bank's short-term investments were adequate to
cover any reasonably anticipated immediate need for funds. The
Company and the Bank were not aware of any events or trends
likely to result in a material change in their liquidity. At
December 31, 1996, the capital to asset ratios of the Company and
the Bank were considered adequate based on guidelines established by
the regulatory authorities. During 1996, the Company increased its
capital by retaining net earnings of $3,098,141, which is net income
for the year, less treasury stock and dividends paid. At December 31, 1996,
total capital of the Company amounted to $20,012,944. At December 31, 1996,
there were no outstanding commitments for any major capital expenditures.
Management is not aware of any current recommendations by
the regulatory authorities which, if they were to be implemented,
would have a material effect on the Company's liquidity, capital
resources or operations.
Results of Operations
The Company's results of operations are determined by its
ability to effectively manage interest income and expense, to
minimize loan and investment losses, to generate noninterest
income and to control noninterest expense. Since interest rates
are determined by market forces and economic conditions beyond
the control of the Company, the ability to generate net interest
income is dependent upon the Bank's ability to obtain an adequate
spread between the rate earned on earning assets and the rate
paid on interest-bearing liabilities. Thus, the key performance
measure for net interest income is the interest margin or net
yield, divided by average earning assets.
The primary component of consolidated earnings is net
interest income, or the difference between interest income on
earning assets and interest paid on supporting liabilities. The
net interest margin is net interest income expressed as a
percentage of average earning assets. Earning assets consist of
loans, investment securities, Federal funds sold and interest-
bearing deposits in banks. Supporting liabilities consist of
deposits, of which approximately 25% are noninterest-bearing.
Net interest income was $9,481,517 in 1996 as compared to $8,728,793
in 1995, representing an increase of 8.62%. This increase is attributable
to a higher volume of average earning assets offset by a lower net interest
margin.
Average earning assets increased by $20,388,000 or 14.80% to $158,104,000
in 1996 from $137,716,000 in 1995. This increase is attributable to an
increase in average loans of $9,253,000 and an increase in average investments
of $7,863,000, offset by a decrease in average certificates of deposits in
other banks of $165,000. Average deposits also increased $18,884,000 or 14.38%
to $150,151,000 in 1996 from $131,267,000 in 1995. However, approximately 25%
of the 1996 average deposits were non-interest bearing deposits.
The net interest margin decreased by 5.36% to 6.00% in 1996 as compared to
6.34% in 1995. This decrease is attributable to the decrease in the yield on
average earning assets being more than the decrease in the rate paid on average
interest-bearing liabilities. The yield on average earning assets decreased in
1996 by 5.39% to a current yield of 9.30% from 9.83% in 1995, while the rate of
interest paid on average interest bearing liabilities decreased by only 2.93%
from 4.78% in 1995 to 4.64% in 1996.
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses in evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has determined
to be adequate. The provision for loan losses charged to earnings amounted to
$445,000 in 1996 and $600,000 in 1995. Management chose to reduce its provision
for loan losses during 1996 due to minimal losses during 1996, continued
conservative underwriting on loans, and the stability of a strong economy.
Net charge-offs decreased by $33,410 in 1996 as compared to 1995. Net loan
charge-offs as a percentage of the provision for loan losses amounted to 15%
in 1996 and 17% in 1995. The allowance for loan losses as a percentage of
total loans outstanding at December 31, 1996 and 1995 amounted to 1.94% and
1.90% respectively. The determination of the amounts allocated for loan losses
is based upon management's judgment concerning factors affecting loan quality
and assumptions about the local and national economy. Management considers
the year-end allowances adequate to cover potential losses in the loan
portfolio.
Following is a comparison of noninterest income for 1996 and
1995.
1996 1995
Service Charges on deposit accounts $ 757,084 $ 702,150
Other 279,438 260,847
Gain on sale of assets -0- 316,036
$1,036,522 $1,279,033
Non interest income decreased approximately $243,000 in 1996 as
compared to 1995. This decrease was primarily due to the gain on sale, during
1995, of a tract of land the Bank had purchased as a potential future branch
site.
Following is an analysis of noninterest expense for 1996 and 1995.
1996 1995
Salaries and employee benefits $2,346,532 2,169,080
Equipment 315,932 280,299
Occupancy expense 195,894 226,839
Other 1,256,931 1,636,198
$4,115,289 $4,312,416
Non interest expense decreased approximately $197,000 in 1996. There
was an increase of $177,000 in salaries and employee benefits as a result of
additional personnel. An increase of $36,000 in equipment expense is related
to expenses incurred for various computer related safeguard devices for the
network. There was also a decrease in occupancy expense of $31,000 which was
the result of additional rental income received in 1996. Other expenses
decreased approximately $379,000 to $1,256,931 for 1996 as compared to
$1,636,198 in 1995. The primary decrease of $360,000 is related to OAKAR
fees that were accrued during 1995 to transfer certain insured deposits from
the SAIF fund to the BIF Fund. There was also a decrease in legal fees of
$75,000 due to a lawsuit that was settled during 1995. Postage and computer
expense increased approximately $51,000 due to an increase in the number of
accounts that are being processed.
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock, $.01 par value ("Common Stock"),
is not traded on an established trading market, and there is only
very limited trading. The following table sets forth high and
low bid information for the Common Stock for each of the quarters
in which trading has occurred since January 1, 1995. The prices
set forth below have been volunteered by shareholders and reflect
only information that has come to management's attention.
<TABLE>
<CAPTION>
Sales Price Dividends
Calendar Period High Low
<S> <C> <C> <C>
1995
First quarter $13.25 $13.25
Second quarter 15.00 12.90 $0.35
Third quarter 14.50 13.25
Fourth quarter 13.50 13.50
1996
First quarter $14.50 $14.50 $0.50
Second quarter 14.50 14.50
Third quarter N/A N/A
Fourth quarter 23.00 20.00
</TABLE>
As of December 31, 1996, there were 489 holders of record of
Common Stock.
The Company paid a dividend of $.50 per share on March 28, 1996.
Currently, the Company's sole source of dividends is the Bank. The Bank is
subject to regulation by the Department of Banking and Finance of Georgia
(the "DBF"). Statutes and regulations enforced by the DBF include parameters
which defined when the Bank may or may not pay dividends. On December 31,
1996, there was approximately $1,933,511 available to be paid as dividends
to the Company by the Bank without prior approval from the DBF.
BUTTON GWINNETT FINANCIAL CORPORATION
AND
THE BANK OF GWINNETT COUNTY
GENERAL INFORMATION
GENERAL OFFICES BOARD OF DIRECTORS
2230 Scenic Highway W. Emmett Clower
Snellville, GA 30278 Emmett Clower Studio
MAILING ADDRESS Jean A. Coppage
Real Estate Investor
P. O. Box 1230
Lawrenceville, GA 30246 Edwin F. Forrest
Central Drywall, Inc.
EXECUTIVE OFFICERS
John D. Stephens David G. Hanna
Chairman of the Board HBR Capital
of Directors
J. Richard Norton, Sr.
Glenn S. White Norton Southeast, Inc.
President and CEO
Andrew R. Pourchier
Andrew R. Pourchier The Bank of Gwinnett County
Vice President, Secretary
and Treasurer John D. Stephens
John D. Stephens, Inc.
BOARD OF DIRECTORS
Judy W. Waters
David R. Bowen Gwinnett County Board of
RMT Development Company Commissioners
Robert A. Bradshaw Warren O. Wheeler
Bradshaw, Pope & Franklin Schreeder, Wheeler & Flint
James F. Brannan, Jr. Glenn S. White
Lawrenceville Auto Parts The Bank of Gwinnett County
James R. Brown Bobby W. Williams
Retired, Lumber Company Perimeter Investment Corp.
Executive
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors
Button Gwinnett Financial Corporation and Subsidiary
Lawrenceville, Georgia
We have audited the accompanying consolidated balance sheets of Button
Gwinnett Financial Corporation and subsidiary as of December 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity and
cash flows for the years ended December 31, 1996, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Button
Gwinnett Financial Corporation and subsidiary as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for the years ended
December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
January 17, 1997
<TABLE>
BUTTON GWINNETT FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<CAPTION>
Assets 12/31/96 12/31/95
<S> <C> <C>
Cash & Due Froms $ 9,823,064 $ 6,582,328
Int.-bearing deposits in banks 0 200,000
Federal funds sold 21,515,000 19,625,000
Securities held-to-maturity
(fair value of $32,047,933 and
$26,009,176) 32,004,283 25,911,560
Loans 119,899,273 102,651,763
Less Loan Loss (2,330,733) (1,953,189)
117,568,540 100,698,574
Premises and equipment 3,620,119 3,848,195
Other Assets 2,037,288 2,334,309
TOTAL ASSETS $186,568,294 $159,199,966
Liabilities and Stockholders' Equity
Deposits
Non-int bearing demand $ 43,877,754 $ 36,850,139
Int. bearing demand 59,655,148 35,691,143
Savings 5,531,514 6,131,845
Time, $100,000 and over 18,447,251 18,263,816
Other time 37,725,123 43,867,176
Total Deposits 165,236,790 140,804,119
Other Liabilities 1,318,560 1,481,044
Total liabilities $166,555,350 $142,285,163
Commitments and contingent liabilities
Stockholders'equity
Preferred stock, par value $.01;
5,000,000 shares authorized;
none issued
Common Stock, par value $.01;
5,000,000 shares authorized;
1,527,639 shares issued;
1,378,746 and 1,382,637 shares
outstanding 15,276 15,276
Capital Surplus 13,354,771 13,354,771
Retained Earnings 8,264,430 5,109,869
Treasury Stock 148,893 and
145,002 shares (1,621,533) (1,565,113)
Total Stockholders' equity 20,012,944 16,914,803
Total liabilities and
stockholders equity $186,568,294 $159,199,966
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Interest income
Loans $12,020,294 $11,396,642 $ 8,299,919
Taxable securities 1,558,034 1,082,895 815,958
Nontaxable securities 181,592 211,158 207,488
Deposits in banks 7,705 14,646 50,391
Federal funds sold 938,688 830,876 344,765
Total interest income 14,706,313 13,536,217 9,718,521
Int. Exp. on Deposits 5,224,796 4,807,424 2,980,811
Net Int. Income 9,481,517 8,728,793 6,737,710
Provision for Loan Loss 445,000 600,000 255,000
Net interest income after
provision for loan
losses 9,036,517 8,128,793 6,482,710
Other Income
Service charges on
deposit accounts 757,084 702,150 650,874
Other 279,438 260,847 243,461
Gain on Sale of Land -- 316,036 --
Total other income 1,036,522 1,279,033 894,335
Other Expenses
Salaries & Benefits 2,346,532 2,169,080 1,845,026
Equipment expenses 315,932 280,299 316,391
Occupancy expenses 195,894 226,839 253,915
Other operating expenses 1,256,931 1,636,198 1,435,662
Total Other Expenses 4,115,289 4,312,416 3,850,994
Income before Taxes 5,957,750 5,095,410 3,526,051
Income tax expense 2,112,946 1,798,089 1,228,845
Net Income $ 3,844,804 $ 3,297,321 $ 2,297,206
Net income per share of
common stock $ 2.60 $ 2.29 $ 1.58
Weighted average shares
outstanding 1,479,421 1,437,668 1,457,835
See Notes to Consolidated Financial Statements
BUTTON GWINNETT FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
Common Stock Treasury Stock
Total
Par Capital Retained Stockholders
Shares Value Surplus Earnings Shares Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 1,525,798 15,258 11,098,485 2,678,125 70,773 (596,022) 13,195,846
Net Income -- -- -- 2,297,206 -- -- 2,297,206
Cash dividends declared
$.30 per share -- -- -- (436,508) -- -- (436,508)
Exercise of stock options 1,741 17 13,545 -- -- -- 13,562
Purchase of treasury stock -- -- -- -- 12,055 (145,356) (145,356)
Transfer to capital surplus -- -- 2,241,617 (2,241,617) -- -- --
Balance, December 31, 1994 1,527,539 15,275 13,353,647 2,297,206 82,828 (741,378) 14,924,750
Net Income -- -- -- 3,297,321 -- -- 3,297,321
Cash dividends declared,
$.35 per share -- -- -- (484,658) -- -- (484,658)
Exercise of stock options 100 1 1,124 -- -- 1,125
Purchase of treasury stock -- -- -- -- 62,174 (823,735) (823,735)
Balance, December 31, 1995 1,527,639 15,276 13,354,771 5,109,869 145,002 (1,565,113) 16,914,803
Net Income -- -- -- 3,844,804 -- -- 3,844,804
Cash dividends declared,
$.50 per share -- -- -- (690,243) -- -- (690,243)
Purchase of treasury stock -- -- -- -- 3,891 (56,420) (56,420)
Balance, December 31, 1996 1,527,639 15,276 13,354,771 8,264,430 148,893 (1,621,533) 20,012,944
See Notes to Consolidated Financial Statements.
BUTTON GWINNETT FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income 3,844,804 3,297,321 2,297,206
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 281,987 281,187 331,443
OAKAR Deposit assessment expense accrual (260,000) 260,000 --
Provision for loan losses 445,000 600,000 225,000
Deferred income taxes (229,337) 55,625 (65,365)
Gain on sale of land -- (316,036) --
Gain on sale of other real estate (40,347) -- --
Increase in interest receivable (112,697) (147,804) (323,072)
Increase in interest payable 77,402 490,372 88,811
Other operating activities (92,293) 78,954 72,773
Net Cash provided by operating activities 3,914,529 4,478,369 2,656,796
<CAPTION>
INVESTING ACTIVITIES
<S> <C> <C> <C>
Purchases of securities held-to-maturity (16,500,000) (9,165,000) (11,850,000)
Proceeds from maturities of securities
(held-to-maturity) 10,407,277 6,915,054 3,161,744
Net (increase) decrease in Federal funds sold (1,890,000) (16,680,000) 9,905,000
Net decrease in interest-bearing deposits in banks 200,000 100,000 1,989,000
Net increase in loans (17,605,807) (15,534,563) (12,728,559)
Proceeds from sale of land 721,452 -- --
Proceeds from sale of other real estate 361,188 -- --
Purchase of premises and equipment (53,911) (63,048) (108,894)
Net Cash used in investing activities (24,359,801) (34,427,557) (9,631,709)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits 24,432,671 29,752,674 11,169,868
Purchase of treasury stock (56,420) (823,735) (145,356)
Proceeds from exercise of stock options -- 1,125 13,562
Dividends paid (690,243) (484,658) (436,508)
Net Cash provided by financing activities 23,686,008 28,445,406 10,601,566
Net increase (decrease) in cash and
due from banks 3,240,736 (1,503,782) 3,626,653
Cash and due from banks at beginning of year 6,582,328 8,086,110 4,459,457
Cash and due from banks at end of year 9,823,064 6,582,328 8,086,110
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest 5,147,394 4,317,052 2,892,000
Income taxes 2,291,000 1,935,643 1,339,685
NONCASH TRANSACTION
Principal balances of loans transferred to
other real estate 290,841 30,000 223,451
</TABLE>
See Notes to Consolidated Financial Statements.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Button Gwinnett Financial Corporation (the Company) is a bank holding
company whose business is conducted by its wholly-owned subsidiary,
The Bank of Gwinnett County, ( the Bank). The Bank is a commercial
bank located in Lawrenceville, Gwinnett County, Georgia with branches
located in Snellville and Lilburn, Georgia. The Bank provides a full
range of banking services in its primary market area of Gwinnett
County and the surrounding counties.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions and
accounts are eliminated in consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash on hand, cash items in process of collection and amounts due from
banks are included in cash and cash equivalents.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
Securities
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent and ability to
hold to maturity are classified as held-to-maturity and reported ar
amortized cost. All other securities are classified as available-for-
sale and carried at fair value with net unrealized gains and losses
included in stockholders' equity net of tax.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
Loans
Loans are carried at their principal amounts outstanding less unearned
income and the allowance for loan losses. Interest income on loans is
credited to income based on the principal amount outstanding.
Nonrefundable loan fees and certain direct t loan origination costs are
deferred with the net amount recognized into income over the life of
the loans as a yield adjustment.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan
portfolio. Management's determination of the adequacy of the allowance
is based on an evaluation of the portfolio, past loan loss experience,
current economic conditions, volume, growth, composition of the loan
portfolio, and other risks inherent in the portfolio. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on their
judgment about information available to them at the time of their
examinations.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. Interest income is subsequently recognized only to
the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the
terms of the loan agreement. Individually identified impaired loans are
measured based on the present value of payments expected to be
received, suing the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices or,
for loans that are solely dependent on the collateral for repayment,
measurement may be based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair
value, a valuation allowance is established as a component of the
allowance for loan losses. Changes to the valuation allowance are
recorded as a component of the provision for loan losses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets.
Income Taxes
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for the
applicable year. Deferred tax assets and liabilities are recognized
for the temporary differences between the bases of assets and liabilities
as measured by tax laws and their bases as reported in the financial
statements. Deferred tax expense or benefit is then recognized for
the change in deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards, and tax credits will be realized. A valuation
allowance is recorded for which it is more likely than not realization
will not occur.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes based on its contribution to income taxes (benefits) of the
consolidated group.
Earnings Per Common Share
Earnings per common share are computed by dividing net income by the
weighed average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents that are anti-
dilutive are excluded from weighted average shares outstanding.
NOTE 2. SECURITIES
The amortized cost and fair value of securities as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Held-to-maturity
December 31, 1996:
<S> <C> <C> <C> <C>
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
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
The amortized cost and fair value of securities as of December 31, 1996
by contractual maturity are shown below:
<CAPTION>
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 8,370,706 $ 8,377,369
Due from one year to five years 22,413,206 22,420,208
Due from five to ten years 1,220,371 1,250,356
$ 32,004,283 $ 32,047,933
</TABLE>
Securities with a carrying value of $1,650,000 and $ 2,000,233 at
December 31, 1996 and 1995, respectively, were pledged to secure public
deposits and for other purposes.
There were no sales of securities in 1996, 1995 or 1994.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
December 31
1996 1995
<S> <C> <C>
Commercial and financial $ 28,102,000 $ 27,356,000
Business loans secured by real estate 42,297,000 30,814,000
Real estate - construction 37,199,000 29,989,000
Real estate - mortgage 7,997,000 8,838,000
Consumer installment and other 4,651,036 5,989,143
$ 120,246,036 $ 102,986,143
Deferred fees (346,763) (334,380)
Allowance for loan losses (2,330,733) (1,953,189)
Loans, net $ 117,568,540 $ 100,698,574
Changes in the allowance for loan losses are as follows:
Balance, beginning of year $ 1,953,189 $ 1,464,057 $ 1,248,539
Provision for loan losses 445,000 600,000 255,000
Loans charged off (85,160) (121,424) (67,449)
Recoveries of loans previously charged off 17,704 10,556 27,967
Balance, end of year $ 2,330,733 $ 1,953,189 $ 1,464,057
</TABLE>
The total recorded investment in impaired loans was $121,760 and $94,874
at December 31, 1996 and 1995, respectively. There were no impaired
loans that had related allowances for loan losses determined in
accordance with Statement of Financial Accounting Standard No. 114
("Accounting by Creditors for Impairment of a Loan") at
December 31, 1996 and 1995. The average recorded investment in impaired
loans for 1996 and 1995 was $ 64,881 and $ 120,974, respectively.
Interest income recognized on impaired loans for cash payments received
was not material for the years ended December 31, 1996 and 1995.
The Company has granted loans to certain directors, executive officers,
and related entities of the Company and the Bank. The interest rates on
these loans were Substantially the same as the rates prevailing at the
time of the transaction and repayment terms are customary for the type
of loan involved. Changes in related party loans for the year ended
December 31, 1996 are as follows:
Balance, beginning of year $ 3,464,967
Advances 2,750,003
Repayments (1,104,394)
Balance, end of year $ 5,110,576
NOTE 4. PREMISES AND EQUIPMENT
Land $ 1,241,377 $ 1,241,377
Buildings 2,715,658 2,715,658
Equipment 1,359,371 1,318,584
5,316,406 5,275,619
Accumulated depreciation (1,696,287) (1,427,424)
$ 3,620,119 $ 3,848,195
NOTE 5. EMPLOYEE BENEFIT PLANS
The Company has a contributory 401 (k) retirement plan covering
substantially all employees. Contributions to the plan charged to
expense for the years ended December 31, 1996, 1995 and 1994 amounted
to $ 41,164, $33,712 and $29,779, respectively.
The Company has deferred compensation agreements with three of its key
employees which provide benefit payable at age sixty-five or if the
employee becomes totally disabled. Deferred compensation expense
recognized for the years ended December 31, 1996, 1995, and 1994 was
$ 2,795, $ 8,691 and $ 12,046 respectively.
NOTE 6. EMPLOYEE STOCK OPTION PLAN
The Company has an Employee Stock Option Plan with 18,000 common stock
options available to grant to key employees. Option prices are
determined by the Company's Stock Option Plan Committee, but cannot be
less than 100% of the fair value of the Company's common stock on the
date of the grant. The options expire in ten years from date of grant.
Other pertinent information related to the options is as follows:
<TABLE>
<CAPTION>
December 31
1996 1995 1994
Weighted- Weighted- Weighted-
average average average
Exercise Exercise Exercise
Number Price Number Price Number Price
<S> <C> <C> <C> <C> <C> <C>
Under option, beginning of year 184,331 $ 10.35 155,225 $ 9.48 132,275 $ 8.84
Granted 2,000 21.00 29,206 15.00 28,500 12.00
Exercised -- -- (100) 11.25 (1,741) 7.79
Terminated -- -- -- -- (3,809) 8.84
Under Option, end of year 186,331 10.47 184,331 10.35 155,225 9.48
Exercisable, end of year 149,587 9.65 121,381 8.99 98,056 8.52
<CAPTION>
Under Option, End of Year
Weighted-
Weighted- average
average Remaining
Range of Exercise Contractual
Number Prices Price Life in Years
<S> <C> <C> <C>
97,525 $ 6.93 - 9.18 $ 8.21 4
80,806 11.25 - 15.00 12.76 8
2,000 21.00 21.00 10
186,331
97,525 $ 6.93 - 9.18 $ 8.21 4
56,062 11.25 - 15.00 12.34 5
149,587
</TABLE>
The Company also has outstanding options to purchase 34,828 shares of
stock to one key officer. These options were granted in connection with
the information of the Bank. These options are exercisable at book value
on the most recent quarterly report of condition of the Company before
the exercise date ( $14.52 at December 31, 1996). These options expire
April 19, 1998.
As permitted by SFAS No. 123 ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for stock-based
employee compensation awards in accordance with APB Opinion NO. 25,
("Accounting for Stock Issued to Employees"). The Company recognized no
compensation cost for stock-based employee compensation awards for the
year ended December 31, 1996. If the Company had recognized compensation
cost in accordance with SFAS No. 123, net income and earnings per share
would have been reduced as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
Earnings Earnings
Net Income Per Share Net Income Per Share
<S> <C> <C> <C> <C>
As reported $3,844,804 $ 2.60 $ 2,397,321 $ 2.29
Stock-based compensation, net of
related tax effect (21,989) (0.02) (12,232) --
As adjusted $3,822,815 $ 2.58 $ 3,285,089 $ 2.29
</TABLE>
The fair value of the options granted during the year was based upon
the discounted value of future cash flows of the options using the
following assumptions:
Risk-free interest rate 6.50%
Expected life of the options 7 years
Expected dividends (as a percent of the
fair value of the stock) 2.38%
NOTE 7. INCOME TAXES
The components of income tax expense are as follows:
December 31
1996 1995 1994
Current $ 2,342,283 $ 1,853,714 $ 1,294,210
Deferred (229,337) (55,625) (65,365)
Income Tax Expense $ 2,112,946 $ 1,798,089 $ 1,228,845
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $ 2,025,635 34 % $1,732,439 34 % $1,198,857 34 %
Tax-exempt interest (61,741) (1) (69,100) (1) (70,546) (2)
State income taxes 122,296 2 115,035 2 76,721 2
Other items, net 26,756 - 19,715 - 23,813 1
Provision for income taxes $ 2,112,946 35 % $1,798,089 35 % $1,228,845 35 %
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<S> <C> <C>
Deferred tax assets, loan loss reserves $ 723,173 $ 580,688
Deferred tax liabilities:
Depreciation 83,347 53,807
Deferred gain on sale of land -- 119,272
Other 13,338 11,458
97,685 184,537
Net deferred tax assets $ 625,488 $ 396,151
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above and
is required which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
The Company originates primarily commercial, residential and consumers
loans to customers in Gwinnett County and surrounding counties. The
ability of the majority of the Company's customers to honor their
contractual loan obligations is dependent on the economy in these areas.
Seventy-three percent (73%) of the Company's loan portfolio is
concentrated in loans secured by real estate, of which a substantial
portion is secured by real estate in the Company's primary market area.
Accordingly, the ultimate collectibility of the loan portfolio is
susceptible to changes in market conditions in the Company's primary
market area.
The Company, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 25%
of statutory capital, or approximately $ 3,000,000.
NOTE 9. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At
December 31, 1996, approximately $1,933,000 of retained earnings were
available for dividend declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory -
and possibly additional discretionary - actions by regulators that,
if undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The company and Bank capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios
of total and Tier 1 capital to risk-weighted assets and of Tier 1
capital to average assets. Management believes, as of December 31, 1996,
the Company and the Bank meet all capital adequacy requirements to which
it is subject.
As of December 31, 1996 and 1995, notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank
must maintain minimum total rick-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the following table. There are no
conditions or events since that notification that management believes
have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios as of
December 31, 1996 are presented in the following table.
</TABLE>
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> (Dollars in Thousands)
Total Capital (to Risk Weighted Assets): <C> <C> <C> <C> <C> <C>
Consolidated $ 21,702 16.13% $ 10,764 8% $ 13,454 10%
Bank $ 20,957 15.58% $ 10,764 8% $ 13,454 10%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $ 20,013 14.88% $ 5,380 4% $ 8,070 6%
Bank $ 19,628 14.32% $ 5,380 4% $ 8,070 6%
Tier 1 Capital (to Average Assets):
Consolidated $ 20,013 11.13% $ 7,192 4% $ 8,991 5%
Bank $ 19,268 10.72% $ 7,192 4% $ 8,991 5%
</TABLE>
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
base on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1996
and 1995. such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
Cash, Due From Banks, and Federal Funds Sold:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
Held-To-Maturity Securities:
Fair values for securities are based on quoted market prices.
Loans:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated
using discounted cash flow methods, using interest rates currently
being offered on certificates.
Accrued Interest:
The carrying amounts of accrued interest approximate their fair
values.
Off-Balance-Sheet Instruments:
Fair values of the Company's off-balance-sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been assigned.
The estimated fair values of the Company's financial instruments were
as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks, interest bearing
deposits in banks, and Federal funds sold $ 31,338,064 $ 31,118,064 $ 26,407,328 $ 26,407,328
Securities held-to-maturity 32,004,283 32,047,933 25,911,560 26,009,176
Loans 117,568,540 119,000,000 100,698,574 102,600,000
Accrued interest receivable 1,175,645 1,175,645 1,062,948 1,062,948
Financial liabilities:
Deposits 165,236,790 165,764,416 140,804,119 141,073,127
Accrued interest payable 1,082,640 1,082,640 1,005,238 1,005,238
</TABLE>
NOTE 11. SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of total
revenue are as follows:
<TABLE>
<CAPTION>
December 31
1996 1995 1994
<S> <C> <C> <C>
Data processing $ 142,789 $ 128,165 $ 118,081
FDIC insurance premiums 2,000 173,462 227,628
Other real estate expenses 1,047 11,145 180,275
OAKAR deposit assessment expense 71,917 260,000 --
</TABLE>
NOTE 12. PARENT COMPANY FINANCIAL INFORMATION
The following information presented the condensed balance sheets
as of December 31, 1996 and 1995 and the condensed statements of
income and cash flows for the years ended December 31, 1996, 1995
and 1994 of Button Gwinnett Financial Corporation.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
1996 1995
<S> <C> <C>
Assets
Cash $ 746,727 $ 815,149
Investment in subsidiary 19,267,556 16,100,533
Total assets $ 20,014,283 $ 16,915,682
Liabilities, other $ 1,339 $ 879
Stockholders' equity 20,012,944 16,914,803
Total liabilities and stockholders' equity $ 20,014,283 $ 16,915,682
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Income
Dividends from subsidiary $ 700,000 $1,150,000 $ 436,508
Interest 29,213 29,973 31,516
729,213 1,179,973 468,024
Expenses 51,432 13,002 40,729
Income before equity in undistributed
income of subsidiary 677,781 1,166,971 427,295
Equity in undistributed income of subsidiary 3,167,023 2,130,350 1,869,911
Net income $3,844,804 $3,297,321 $2,297,206
CONDENSED STATEMENTS OF CASH FLOW
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,844,804 $ 3,297,321 $ 2,297,206
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed income of subsidiary (3,167,023) (2,130,350) (1,869,911)
Other operating activities 460 (2,077) (3,347)
Net cash provided by operating activities 678,241 1,164,894 423,948
FINANCING ACTIVITIES
Purchase of treasury stock (56,420) (823,735) (145,356)
Proceeds from exercise of stock options -- 1,125 13,562
Dividends paid (690,243) (484,658) (436,508)
Net cash used in financing activities (746,663) (1,307,268) (568,302)
Net decrease in cash (68,422) (142,374) (144,354)
Cash at beginning of year 815,149 957,523 1,101,877
Cash at end of year $ 746,727 $ 815,149 $ 957,523
</TABLE>
BUTTON GWINNETT FINANCIAL CORPORATION
150 South Perry Street
Lawrenceville, Georgia 30245
OFFER TO PURCHASE COMPANY STOCK
February 20, 1997
Introduction
Button Gwinnett Financial Corporation (the "Company") is offering to
purchase up to 100,000 shares (the "Shares") of its outstanding common stock
(the "Common Stock"), $.01 par value, for $21 per share cash, upon the terms
and conditions described in this Offer To Purchase Company Stock (the "Offer").
The Company's sole subsidiary is The Bank of Gwinnett County (the
"Bank"). The principal executive offices of the Company and the Bank are
located at 150 South Perry Street, Lawrenceville, Georgia 30245.
Purpose of the Offer
Management of the Company intends to use the Shares purchased by the
Company to help fund the exercise of stock options held by employees of the
Company and the Bank. The Offer is also being made by the Company in response
to comments received from shareholders from time to time indicating that they
would be interested in selling their shares of Common Stock. The Common Stock
is highly illiquid. There is no active trading market, nor is one expected to
develop in the foreseeable future. The Offer is designed to offset the lack of
liquidity by offering to repurchase the Shares at a price which is fair to
shareholders and fair to the Company.
The terms of the Offer were unanimously approved by the directors of the
Company who attended the meeting when it was considered. (One of the fifteen
directors was absent, and two directors are also employees of the Company.)
The Company believes that the Offer is fair to those shareholders who would
like to sell their shares for a number of reasons, including the following:
(a) whether a shareholder accepts the Offer is completely voluntary, (b) the
price offered is comparable to that paid for the Common Stock in recent trades
although there have not been very many trades, (c) the price offered is 1.45
times the Company's book value per share of $14.52 at December 31, 1996 and
8.05 times its trailing twelve-month earnings per share of $2.61 at December
31, 1996; and (d) 22 other Georgia financial institutions with assets of less
than $500 million whose stock is listed on Nasdaq or traded on an exchange
trade at multiples to book value which range from 1.11 to 2.31 with an average
of 1.55 and at multiples to trailing twelve-month earnings which range from
6.2 to 22.0 with an average of 12.9.
Management believes that the purchase of Company common stock at $21
per Share is a good investment for the Company. If shareholders decide to sell
all or a substantial portion of their Shares to the Company, the Company will
be able to reduce its excess capital which would enhance shareholder value for
the remaining shareholders. To the extent that the number of the Company's
shareholders is reduced, the Company will be able to reduce administrative
expenses, and if the number of the Company's shareholders is reduced to less
than 300, the Company will be able to terminate its Securities Exchange
Commission reporting obligations, further reducing expenses.
No Established Trading Market
The Common Stock is not traded on an established trading market, and
there is only very limited trading in the Common Stock. The following table
sets forth high and low sales prices for the Common Stock for each of the
quarters in which trading has occurred since January 1, 1995. Since
January 1, 1995, the Company and its directors and executive officers (the
"insiders") have purchased an aggregate of 122,039 shares at prices ranging
from $12.90 to $23.00 per share. The following table also sets forth the
average prices paid by the Company and its insiders in each of the quarterly
periods indicated. The prices set forth below in the first two columns have
been volunteered by shareholders and reflect only information that has come
to management's attention.
All Sales Prices
Available to Management Average Price Paid by
Calendar Period High Low Company and Insiders
1995
First quarter $13.25 $13.25 $13.25
Second quarter 15.00 12.90 12.90
Third quarter 14.50 13.25 14.07
Fourth quarter 13.50 13.50 13.50
1995 Average $13.43
1996
First quarter $14.50 $14.50 $14.50
Second quarter 14.50 14.50 14.50
Third quarter -- -- --
Fourth quarter 23.00 20.00 22.94
1996 Average $17.31
Since November 15, 1996, neither the Company, nor any director or
executive officer of the Company has purchased or sold any Common Stock.
At December 31, 1996, there were 1,378,746 shares of Common Stock
issued and outstanding which were held of record by 489 shareholders.
Dividends
The Company paid dividends of $.35 per share on April 1, 1995 and $.50
per share on March 28, 1996. Currently, the Company's sole source of dividends
is the Bank. Banking regulations limit the amount of dividends which may be
paid by the Bank to the Company without prior approval from the Bank's
regulators. At December 31, 1996, approximately $1,933,511 could be paid as
dividends to the Company by the Bank without approval. The Company's dividend
policy is to pay between 20% to 30% of prior year earnings to shareholders as
dividends, and it expects to pay a dividend in 1997 commensurate with, or
slightly higher than, the dividend it paid in 1995. Management does not
expect the Company's purchase of Shares pursuant to the Offer to have any
effect on the payment of dividends by the Company.
Financial Information
Accompanying this Offer are the Company's audited financial statements
as of and for the years ended December 31, 1996 and 1995. The Company's book
value per share as of December 31, 1996 was $14.52.
If all of the Shares are sold by shareholders to the Company, the
Company will pay the Selling Shareholders an aggregate of $2,100,000. The
Company will fund this payment from cash on hand and dividends payable by the
Bank. The Shares purchased by the Company will be held as treasury shares.
The Company estimates that its expenses in connection with the Offer
will aggregate approximately $10,000, consisting of the following estimated
amounts: $7,500 in legal fees, $1,500 in copying and postage costs, $420 in
filing fees and $580 in miscellaneous expenses.
Business of the Company
The Company serves as the holding company for the Bank, a full-service
commercial bank with offices in Lawrenceville, Lilburn and Snellville, Gwinnett
County, Georgia. From time to time the Company receives indications of
interest from potential acquirors of the Company. Similarly, from time to
time the Company considers the possibility of acquiring other financial
institutions. Currently, there are no agreements or understandings relating
to the sale of the Company or to acquisitions by the Company. The Offer will
not result in any change in the business of the Company.
How to Accept This Offer; Expiration Date
To accept the Company's Offer, shareholders should return the enclosed
Letter of Transmittal together with the stock certificate(s) evidencing the
Shares they wish to sell to The Bank of Gwinnett County, as Exchange Agent,
on or before noon EST on Friday, March 21, 1997.
The Company reserves the right to extend the period during which this
Offer remains open one or more times. Written notice of any extension will be
sent to all shareholders.
Purchase Priorities
To the extent that shareholders of the Company responding to this Offer
wish to sell more shares to the Company than the 100,000 Shares the Company is
offering to purchase, the Company will purchase the Shares tendered in the
following order:
(1) Shares held by Selling Shareholders who own of record
fewer than 100 Shares will be purchased first.
(2) The balance of the Shares will be purchased from the
remaining Selling Shareholders on a pro rata basis.
Payment For Shares; Return or Reissuance of Stock Certificates
Subject to the Purchase Priorities described above, the Company will
purchase all of the Shares properly tendered to it following the expiration of
this Offer. The Company will mail its check in payment for the Shares accepted
for purchase by it to Selling Shareholders within seven business days following
the expiration date of this Offer. Similarly, the Company will mail stock
certificates for the Shares not accepted for purchase by it to Selling
Shareholders within seven business days following the expiration date of this
Offer.
Withdrawal of Shares
A Selling Shareholder will be permitted to withdraw the Shares he or
she tenders for sale to the Company (1) at any time while this Offer remains
open (currently until noon EST on March 21, 1997), and (2) after April 1, 1997,
if the Shares tendered by the Selling Shareholder have not been purchased by
the Company.
Federal Income Tax Consequences of the Offer
The receipt of cash by shareholders who sell some or all of their
Shares to the Company will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local
or other tax laws. In general, shareholders who sell some or all of their
Shares should recognize gain or loss equal to the difference between the basis
in the Shares they sell and the amount of cash received by them. The gain or
loss will be a capital gain or loss if the Shares were held as a capital asset
and will be a long-term capital gain or loss if the Shares were held for over
one year. While the Revenue Reconciliation Act of 1993 increased the top
marginal federal income tax rate applicable to individuals, capital gains
continue to be taxed at a maximum rate of 28% for federal income tax purposes.
Generally, a distribution by a corporation which results in an increase
in the proportionate ownership interests of some shareholders in the
corporation and the receipt of cash by other shareholders will not be
considered to be a distribution subject to the rules regarding dividends for
federal income tax purposes, so long as the distribution is incident to an
isolated redemption or repurchase of the corporation's stock. An isolated
redemption is a redemption that is not part of a periodic plan where some
shareholders receive cash and other shareholders' interests in the corporation
are increased. The Company believes that the Offer should constitute an
isolated redemption. Accordingly, so long as the Offer does constitute an
isolated redemption, there will be no federal income tax consequences to
shareholders who do not sell any of their Shares pursuant to the Offer.
These federal income tax consequences are based upon current laws and
regulations and are for general information only. Each shareholder is urged
to consult his or her own tax advisor to determine the particular tax
consequences to him or her of the Offer (including the applicability and effect
of federal, state, local and other tax laws). The foregoing discussion may not
be applicable with respect to shares received pursuant to the exercise of
employee stock options or otherwise as compensation or with respect to
shareholders who are subject to special tax treatment under the Internal
Revenue Code of 1986, as amended, such as life insurance companies, tax-exempt
organizations and financial institutions, and may not apply to a particular
shareholder in light of his or her individual circumstances.
Management of the Company
The table below sets forth, as of December 31, 1996, information
regarding the Common Stock beneficially owned (a) by each of the Company's
directors and (b) by all directors and executive officers as a group. At the
present time, each person who beneficially owns more than 5% of the Common
Stock is also a director of the Company. The Offer will not result in any
change in the management of the Company. All of the Company's directors and
executive officers are U.S. citizens.
Name and Address Number of Vested
of Beneficial Owner Shares Options Percentage3/
David R. Bowen 59,095 0 4.3%
4795 W. Price Road
Buford, GA 30518
Robert A. Bradshaw 10,700 0 .8%
105 Merchants Drive
Norcross, GA 30093
James F. Brannan, Jr. 46,925 0 3.4%
251 Hanarry Drive
Lawrenceville, GA 30245
James R. Brown 30,000 0 2.2%
1357 Brown Ridge Lane
Lawrenceville, GA 30243
W. Emmett Clower 5,274 0 .4%
2389 Scenic Highway
Snellville, GA 30278
Jean A. Coppage 19,329 0 1.4%
3904 Ashford Lake Court
Atlanta, GA 30318
Edwin F. Forrest 1,250 0 .1%
2360 Bethelview Road
Cumming, GA 30130
David G. Hanna 38,310 0 2.8%
1810 Marlborough Drive
Atlanta, GA 30350
J. Richard Norton, Sr. 5,100 0 .4%
1926 Oak Road
Snellville, GA 30278
Andrew R. Pourchier 2,730 37,885 2.9%
688 Ford Avenue
Lawrenceville, GA 30244
John D. Stephens 498,267 0 36.1%
1899 Parker Court
Stone Mountain, GA 30087
Judy A. Waters 0 0 .0%
4251 Antelope Lane
Lithonia, GA 30058
Warren O. Wheeler 23,929 0 1.7%
127 Peachtree St., N.E.
Atlanta, GA 30303-1845
Glenn S. White 4,353 95,904 6.8%
1101 Summer Ridge Lane
Lawrenceville, GA 30244
Bobby W. Williams 1,000 0 .1%
1122 Rockbridge Road
Stone Mountain, GA 30087
All Directors and
Executive Officers as
a group (15 persons) 746,262 133,789 58.2%
____________________
3/ Based upon 1,378,746 shares outstanding as of December 31, 1996
except for Mr. Pourchier and Mr. White. Their respective percentages assume
that the shares they have the right to acquire as of March 1, 1997 pursuant to
their respective options had been acquired and were outstanding at
December 31, 1996.
David R. Bowen has been President of RMT Development Company, a
residential real estate development company since June 1990.
Robert A. Bradshaw is a partner in Bradshaw, Pope & Franklin, CPAs,
which is engaged in the practice of accounting in the metropolitan Atlanta,
Georgia area. Mr. Bradshaw has practiced accounting since 1968.
James F. Brannan, Jr. is the President of Lawrenceville Auto Parts
which has been in the business of automobile parts sales in Lawrenceville,
Georgia for 40 years.
James R. Brown, now retired, was President of Brown Wholesale Lumber
from 1951 to 1980. Brown Lumber is engaged in lumber and building supplies
sales in Lawrenceville, Georgia.
W. Emmett Clower has operated Emmett Clower Studio in Snellville,
Georgia since 1972. Mr. Clower is active in several business and community
service organizations in the metropolitan Atlanta area, including serving as
Mayor of Snellville since 1973.
Jean A. Coppage is a business woman with investments in Gwinnett County
and is involved in various community and charitable organizations.
Edwin F. Forrest has been President of Central Drywall, Inc. in
Alpharetta, Georgia, a company engaged in wallboard installation, since 1980.
David G. Hanna is the President of HBR Capital, an investment company
which specializes in consumer financial services. Prior to forming HBR Capital
in 1992, Mr. Hanna was employed by Nationwide Credit, Inc. as President of the
Government Services Division.
J. Richard Norton, Sr. is President of Norton Southeast, Inc. which is
involved in the sale of portable storage buildings. Prior to forming Norton
Southeast in 1994, Mr. Norton was President of Norton Auto Parts, Inc. in
Snellville, Georgia (since 1965), and Secretary of Tony's Auto Parts in
Loganville, Georgia (since 1987). Both of these entities are engaged in the
retail sale of automobile replacement parts.
Andrew R. Pourchier is Executive Vice President of the Bank, and Vice
President, Secretary and Treasurer of the Company. From the organization of
the Bank until May 1992, Mr. Pourchier was the Executive Vice President of the
Bank, and from May 1992 until September 1993, he was President of Button
Gwinnett National Bank, the sole subsidiary of Button Gwinnett Bancorp, Inc.
Mr. Pourchier has been in the banking business in Gwinnett County for 20 years.
John D. Stephens is Chief Executive Officer and Owner of John D.
Stephens, Inc. in Stone Mountain, Georgia which has engaged in pipeline
construction since 1966. Mr. Stephens is the Chairman of the Board of the
Company and the Bank.
Judy A. Waters serves on the Gwinnett County Board of Commissioners
and the Gwinnett County Soil Conservation Board. She is also active in the
Snellville community.
Warren O. Wheeler has been a partner in the law firm of Schreeder,
Wheeler & Flint in Atlanta, Georgia since 1974.
Glenn S. White is the President of the Company and the President and
CEO of the Bank. He has been in banking in Gwinnett County for over 20 years.
Mr. White is active in many civic activities and was the past Chairman of the
Gwinnett Chamber of Commerce during 1993. He is President of the Council for
Quality Growth and a member of the Board of Regents of the University System
of Georgia.
Bobby W. Williams is the Owner and President of Perimeter Investment
Corp. which has engaged in real estate building and development (including
shopping centers and residential subdivisions) primarily in Gwinnett County,
Georgia since 1971.
Miscellaneous
There are no persons being employed by the Company to make
solicitations or recommendations in connection with this Offer. To the best
knowledge of the Company, none of its officers, directors or affiliates
intends to sell shares to the Company pursuant to this Offer.
The Offer is subject to the condition (which may be waived by the
Company) that no proceeding shall have been instituted to restrain this Offer
or the provisions hereof.
The Offer is not subject to approval by shareholders. A representative
to act on behalf of unaffiliated shareholders to negotiate the terms of the
Offer has not been retained by the Company's non-employee directors. The
Company did not receive any opinion, report or appraisal from an outside party
which is materially related to the Offer. Shareholders do not have statutory
rights of appraisal with respect to the Offer.
Questions
If you have any questions concerning the terms of this Offer or about
the business of the Company, please do not hesitate to call Monica L. Grafton
at 770/963-6665 or Andrew R. Pourchier at 770/978-3242.
Enclosures
Financial Statements
Letter of Transmittal
Return Envelope
