<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 33-23062
EUFAULA BANCCORP, INC. (A DELAWARE CORPORATION)
I.R.S. EMPLOYER IDENTIFICATION NUMBER 63-0989868
218-220 BROAD STREET, EUFAULA, ALABAMA 36027
TELEPHONE NUMBER: (334) 687-3581
Securities registered pursuant to Section 12(b) of the Act
None
Securities registered pursuant to Section 12(g) of the Act
Common Stock, par value $1 per share
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No ____
--
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The registrant's total revenues for the fiscal year ended December 31, 1997 were
$9,836,000.
As of March 1, 1998, registrant had outstanding 2,097,916 shares of common
stock, $1 par value per share, which is registrant's only class of common stock.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $22,639,800.
DOCUMENTS INCORPORATED BY REFERENCE
Part III
Portions of the Company's Definitive Proxy Statement for its 1998 Annual Meeting
<PAGE>
PART I.
ITEM 1. BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS
Eufaula BancCorp, Inc. ("Eufaula BancCorp" or the "Company") is a two-bank
holding company incorporated in Delaware in 1988 and headquartered in Eufaula,
Alabama. The Company has two subsidiary banks, Southern Bank of Commerce
("Southern Bank"), located in Eufaula, Alabama, and First American Bank of
Walton County ("American Bank"), located in Santa Rosa Beach, Florida. The
Company does not engage in any substantial business other than the normal
banking services conducted by its two wholly-owned bank subsidiaries, which are
sometimes hereinafter collectively referred to as the "Banks".
SOUTHERN BANK OF COMMERCE (FORMERLY EUFAULA BANK AND TRUST COMPANY)
Southern Bank was incorporated as an Alabama Banking corporation in 1926
for the purpose of conducting a commercial banking business in Eufaula, Alabama.
In 1997, Eufaula Bank and Trust Company changed its name to Southern Bank of
Commerce. The Bank operates a full service commercial banking business in
Barbour County, its primary market area, providing such banking services as
receipt of deposits, personal and commercial loans, real estate mortgages,
personal and commercial checking, and other time deposits and related services.
Southern Bank also operates a full-service branch in Montgomery, Alabama.
Eufaula is the largest city in Barbour County with a population of
approximately 13,000 persons. Barbour County has a population of approximately
26,000 persons. Southern Bank of Commerce and another commercial bank in Eufaula
are approximately the same size and are considered the largest banks in Barbour
County.
AMERICAN BANK
American Bank was incorporated as a Florida corporation in 1987 for the
purpose of conducting a commercial banking business in Walton County, Florida.
On September 1, 1991, the Company acquired American Bank. The Bank operates as a
full service commercial bank providing financial services in its primary market
area of Walton County. Walton County has a population of approximately 33,600
persons.
PROPERTIES
The Company's office and the main banking office of Southern Bank is
located at 218-220 E. Broad Street, Eufaula, Alabama, in a building consisting
of 15,629 square feet owned by Southern Bank. Southern Bank leases a portion of
the real estate upon which the building is situated. Southern Bank also operates
a branch office in Eufaula at 1121 South Eufaula Avenue. The land on which the
branch office is situated is leased. Southern Bank also operates a branch at
1406 I-85 Parkway in Montgomery, Alabama on leased facilities. Southern Bank
currently leases space for its existing branch in Montgomery, Alabama and has
purchased real estate at 4290 Carmichael Road in Montgomery on which branch
banking facilities are now under construction. Upon completion the branch will
be moved to this location. It is expected that the facilities will be available
for occupancy in August 1998.
American Bank operates its main office at the corner of Mack Bayou Road and
U. S. Highway 98, Santa Rosa Beach, Florida in Walton County, in a building
consisting of 7,500 square feet. The American Bank's premises are owned by
American Bank. American Bank also operates branch offices at 16234 U. S. Highway
331 South in Freeport, Florida; at 151 East County Highway 38 in Grayton Beach,
Florida; and at 2851 Highway 77 in Panama City, Florida. The facilities in
Freeport and Grayton Beach are owned by American Bank. The facilities in Panama
City are leased.
1
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EMPLOYEES
At December 31, 1997, Eufaula BancCorp and its subsidiaries employed 75
full-time employees and 6 part-time employees. Eufaula BancCorp considers its
relationship with its employees to be excellent.
The Company provides a nonqualified Employee Stock Purchase Plan, including
employees of the Banks. The primary purpose is to enable employees to
participate in the ownership of the Company. Also, each subsidiary bank has a
noncontributory profit-sharing plan covering all employees subject to certain
minimum age and service requirements.
SUPERVISION AND REGULATION
Bank holding companies and banks are regulated extensively under both
Federal and State law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable law or regulation may have a material effect on the business of the
Company and the Banks.
THE COMPANY
The Company is a bank holding company which is registered with, and subject
to supervision by, 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 a bank holding company, the Company is required to file periodic
reports and such additional information as the Federal Reserve may require
pursuant to the BHC Act. The Federal Reserve may examine the Company and the
Banks .
The BHC Act requires prior Federal Reserve approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than 5% of the voting shares or substantially all
of the assets of any bank, or for a merger or consolidation of a bank holding
company with another bank holding company. With certain exceptions, the BHC Act
prohibits a bank holding company from acquiring direct or indirect ownership or
control of any voting shares of any company which is not a bank or bank holding
company and from engaging directly or indirectly in any activity other than
banking or managing or controlling banks or performing services for its
authorized subsidiaries. A bank holding company may, however, engage in or
acquire an interest in a company that engages in activities which the Federal
Reserve has determined, by regulation or order, to be so closely related to
banking or managing or controlling banks as to be properly incident thereto.
The Company and the Banks are subject to the Federal Reserve Act, Section
23A, as amended by the Banking Affiliates Act of 1982. Section 23A defines
"covered transactions" to include extensions of credit and limits a bank's
covered transactions with any single affiliate to no more than 10% of a bank's
capital and surplus. Covered transactions with all affiliates combined are
limited to no more than 20% of a bank's capital and surplus. All covered and
exempt transactions between a bank and its affiliates must be on terms and
conditions consistent with safe and sound banking practices and a bank and its
subsidiaries are prohibited from purchasing low quality assets from the bank's
affiliates. Finally, Section 23A requires that all of a bank's extensions of
credit to an affiliate be appropriately secured by collateral. The Company and
the Banks are also subject to Federal Reserve Act, Section 23B, which further
limits transactions among affiliates.
2
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The Company's ability to pay dividends depends upon the earnings and
financial condition of the Banks and certain legal requirements. The Board of
Governors of the Federal Reserve System has stated that bank holding companies
should not pay dividends except out of current earnings and unless the
prospective rate of earnings retention by the Company appears consistent with
its capital needs, asset quality and overall financial conditions.
The Banks may pay dividends to the Company provided that the payment is not
prohibited by the Bank's Articles of Incorporation and will not render the Banks
insolvent.
In addition, Southern Bank is subject to supervision and regular
examination by the superintendent of the Alabama State Banking Department (the
"Superintendent"). Under the Alabama Banking Code, a state bank may not declare
or pay a dividend in excess of 90% of the net earnings of such bank until the
surplus of the bank is equal to at least 20% of its capital, and thereafter the
prior written approval of the Superintendent is required if the total of all
dividends declared by the bank in any calendar year exceeds the total of its net
earnings for that year combined with its retained net earnings for the preceding
two years less any required transfers to surplus. No dividends, withdrawals or
transfers may be made from the bank's surplus without prior written approval of
the Superintendent. American Bank is subject to supervision and regulation by
the Florida Department of Banking (the "Florida Department"). Under the Florida
Banking Code, a state bank may, after making certain charge-offs, declare a
dividend in an amount not to exceed its aggregate net profits of the period
combined with its retained net profits of the preceding two years and, with the
approval of the Florida Department, may declare a dividend from retained net
profits which accrued prior to the preceding two years, provided that the bank
carried 20% of its net profits for such preceding period to its surplus fund,
until the same shall at least equal the amount of its common and preferred stock
then issued and outstanding.
THE BANKS
The Banks are state banks organized under the laws of the State of Alabama
(in the case of Southern Bank) and under the laws of the State of Florida (in
the case of American Bank) and their deposits are insured by the FDIC up to the
maximum amount permitted by law. The Banks are subject to regulation,
supervision and regular examination by the FDIC and by the Superintendent in the
case of Southern Bank and by the Florida Department in the case of American
Bank. Federal and state banking laws and regulations regulate, among other
things, the scope of the banking business conducted by the Banks, their loans
and investments, reserves against deposits, payment of interest on certain
deposits, mergers and acquisitions, borrowings, dividends, minimum capital
requirements, and the locations of branch offices and certain facilities.
In September 1994, Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. This legislation, among other things, amended
the BHC Act to permit bank holding companies, subject to certain limitations, to
acquire either control or substantial assets of a bank located in states other
than that banking holding company's home state regardless of state law
prohibitions. This legislation became effective on September 29, 1995. In
addition, this ligislation also amended the Federal Deposit Insurance Act to
permit, beginning on June 1, 1997 (or earlier where state legislatures provided
express authorization), the merger of insured banks with banks in other states.
3
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In August 1989, the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") was enacted. FIRREA contains major regulatory reforms,
stronger capital standards for savings and loans and stronger civil and criminal
enforcement provisions. FIRREA allows the acquisition of healthy and failed
savings and loans by bank holding companies and imposes no interstate barriers
on such bank holding company acquisitions. With certain qualifications, FIRREA
also allows bank holding companies to merge acquired savings and loans into
their existing commercial bank subsidiaries. FIRREA also provides that a
depository institution insured by the FDIC can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1989, in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default.
In December 1991, the President signed the Federal Deposit Insurance
Corporation Act of 1991 ("FDICIA") into law. This act recapitalizes the Bank
Insurance Fund ("BIF"), of which the Banks are members, substantially revises
bank regulations, including capital standards, restricts certain powers of state
banks, gives regulators the authority to limit officer and director compensation
and requires bank holding companies to guarantee the capital compliance of their
banks. In addition, the act grants to the FDIC authority to impose several
assessments on insured depository institutions to repay FDIC borrowings from the
Treasury or BIF members or "for any other purpose the FDIC may deem necessary"
and to assess risk-based insurance premiums upon banks. The FDIC has introduced
a risk-based assessment schedule with assessments to be paid by each BIF member
based on the institution's assessment risk classification, which is determined
based on whether the institution is considered "well capitalized", "adequately
capitalized", or "undercapitalized", as those terms have been defined in
applicable Federal regulations adopted to implement the prompt corrective action
provision of FDICIA, and whether such institution is considered by its
supervising agency to be financially sound or to have supervisory concerns. The
Banks are currently classified as "well-capitalized" under the FDIC risk based
assessment system. There can be no assurance that future regulations required by
this act and adjustments on deposit insurance assessment will not adversely
affect the banking industry or operations of the Company or the Banks.
The various Federal bank regulators, including the Federal Reserve, have
adopted a risk-based capital requirement for assessing bank and bank holding
company capital adequacy. These standards significantly revise the current
definition of capital and establish minimum standards in relation to the
relative credit risk of assets and off-balance sheet exposures. Capital is
classified into two tiers. Tier I capital consists of common shareholders'
equity and perpetual preferred stock (subject to certain limitation) and is
reduced by goodwill and minority interests in the common equity accounts of
consolidated subsidiaries. Tier II capital consists of the allowance for
possible loan loses (subject to certain limitations), and certain subordinated
debt. The risk-based capital guidelines require financial institutions to
maintain specific defined credit risk factors (risk-adjusted assets). The
minimum Tier I and the combined Tier I and Tier II capital to risk-weighted
assets ratios are 4.0% and 8.0%, respectively. The Federal Reserve also has
adopted regulations which supplement the risk-based capital guidelines to
include a minimum leverage ratio of Tier I Capital to total assets of 3.0% to
5.0%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Liquidity and Capital Resources."
4
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The Federal Reserve's risk-based capital guidelines are applied to the
Company and the Banks on a consolidated basis. This will limit the Company's
ability to engage in acquisitions financed by debt. The FDIC has adopted similar
risk-based capital requirements that are applicable to the Banks. The Federal
Reserve, the FDIC, the Superintendent and the Florida Department have imposed
minimum capital (leverage) requirements. The Company's management believes that,
in view of the composition of the Company's assets and its present capital, such
capital rules do not have a material effect on the Company. However, those rules
may affect the future development of the Company's long-term business and
capital plans, and may affect its ability to acquire additional financial
institutions and other companies.
The Community Reinvestment Act of 1977 (the "CRA") and the Regulations of
the FDIC and the Federal Reserve implementing that act are intended to
encourage regulated financial institutions to help meet the credit needs of
their local community or communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of such financial
institutions. Such regulations provide that the appropriate regulatory authority
will assess the records of regulated financial institutions in satisfying their
continuing and affirmative obligations to help meet the credit needs of their
local communities. The results of such examinations are made public and are
taken into consideration upon the filing of any application to establish a
branch, to merge or to acquire the assets or assume the liabilities of a bank.
The bank regulators are seeking public comment on an inter-agency proposal to
strengthen Federal enforcement of the CRA. The interagency proposal would
replace the subjective factors now being used to assess an institution's CRA
performance with three "tests" using objective, performance based standards. The
tests would apply differently to different types of institutions, depending on
their size or specialties. It cannot be predicted whether such proposal will be
adopted, and if adopted, how the regulation will affect the Company or the
Banks.
Other legislative and regulatory proposals regarding changes in banking,
and the regulation of banks, thrifts and other financial institutions are
considered from time to time by the executive branch of the Federal government,
Congress and various state governments. Some of those proposals, if adopted,
could significantly change the regulations of banks and the financial services
industry. It cannot be predicted whether any proposals will be adopted, and, if
adopted, how these will affect the Company or the Banks.
Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
its other borrowings and the interest received by a bank on its loans to
customers and its securities holdings, constitutes the major portion of a bank's
earnings. Thus, the earnings and growth of the Company and the Banks will be
subject to the influence of economic conditions generally, both domestic and
foreign, and also to the monetary and fiscal policies of the United States and
its agencies, particularly the Federal Reserve. The Federal Reserve regulates
the supply of money through various means, including open-market dealings in
United States government securities, the discount rate at which members may
borrow, and reserve requirements on deposits and funds availability regulations.
These instruments are used in varying combinations to influence the overall
growth of bank loans, investments and deposits and also affect interest rates
charged on loans or paid on deposits. The policies of the Federal Reserve have
had a significant effect on the operating results of commercial banks in the
past and will continue to do so in the future. The nature and timing of any
future changes in Federal Reserve policies and their impact on the Company and
the Banks cannot be predicted.
5
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ITEM 2. PROPERTIES
The principal properties of the Company consist of the properties of the
Banks. For a description of the properties of the Banks, See "Item 1 - Business
of the Company and Subsidiary Banks - Properties" included elsewhere in this
Report.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiary banks is a party to, nor is
any of their property the subject of, any material pending legal proceedings,
other than the ordinarily routine proceedings incidental to the business of the
Banks, nor to the knowledge of the management of the Company are any such
proceedings contemplated or threatened against it or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1997.
6
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) In June 1996, the Company's common stock was approved for listing
on the Nasdaq SmallCap Market ("Nasdaq") under the symbol
EUFA.
Prior to the listing, quotations for the common stock were not
reported on any market, and there was no established public
trading market for the common stock.
The following table sets forth: (a) the low and high bid prices
for the common stock as quoted on Nasdaq during the periods since
the common stock was listed; and (b) the amount of quarterly
dividends declared on the common stock during the periods
indicated. On December 12, 1996, the Company undertook a two for
one stock split effected through a stock dividend and on November
15, 1997, the Company undertook a three for two stock split
effected through a stock dividend. The share prices and dividends
paid shown in the table below have been adjusted to reflect such
stock splits. Over-the-counter and quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions.
<TABLE>
<CAPTION>
CASH
CALENDAR PERIOD BID PRICES (A) DIVIDENDS
---------------------------
1997 LOW HIGH DECLARED
--------------- ------------ ------------ -------------
<S> <C> <C> <C>
First quarter $ 9 $ 9-21/64 $ 0.035
Second quarter 9-21/64 10-1/2 0.035
Third quarter 10-1/2 11 0.035
Fourth quarter 11 17-5/8 0.035
<CAPTION>
CASH
CALENDAR PERIOD BID PRICES DIVIDENDS
---------------------------
1996 LOW HIGH DECLARED
--------------- ------------ ------------ -------------
<S> <C> <C> <C>
First quarter $ - $ - $ 0.0325
Second quarter 6-3/16 6-11/16 0.0325
Third quarter 7 7-11/16 0.0325
Fourth quarter 8 9 0.0325
</TABLE>
(b) As of March 1, 1998, there were approximately 270 holders of
record of the Common Stock.
7
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report on Form 10-KSB, including this Item 6, contains forward-
looking statements in addition to historical information. The Company cautions
that there are various important factors that could cause actual results to
differ materially from those indicated in the forward-looking statements;
accordingly, there can be no assurance that such indicated results will be
realized. These factors include legislative and regulatory initiatives regarding
deregulation and restructuring of the banking industry; the extent and timing of
the entry of additional competition in the Company's markets; potential business
strategies, including acquisitions or dispositions of assets or internal
restructuring, that may be pursued by the Company; state and Federal banking
regulations; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather,
natural disasters and other catastrophic events; and other factors discussed
herein. The words "believe", "expect", "anticipate", "project" and similar
expressions signify forward-looking statements. Readers are cautioned not to
place undue reliance on any forward-looking statements made by or on behalf of
the Company. Any such statement speaks only as of the date the statement was
made. The Company undertakes no obligation to update or revise any forward-
looking statements. Additional information with respect to factors that may
cause results to differ materially from those contemplated by such forward-
looking statements will be included in the Company's current and subsequent
filings with the Securities and Exchange Commission.
GENERAL
The Company's principal asset is its ownership of the Banks. Accordingly,
the Company's results of operations are primarily dependent upon the results of
operations of the Banks. The Banks conduct a commercial banking business which
consists of attracting deposits from the general public and applying those funds
to the origination of commercial, consumer and real estate loans (including
commercial loans collateralized by real estate). The Banks' profitability
depends primarily on net interest income, which is the difference between
interest income generated from interest-earning assets (i.e., loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds). Net interest income is affected by
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate paid and earned on these balances. Net
interest income is dependent upon the Banks' interest rate spread, which is the
difference between the average yield earned on its interest-earning assets and
the average rate paid on its interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive
interest rate spread will generate interest income. The interest rate spread is
impacted by interest rates, deposit flows and loan demand. Additionally, and to
a lesser extent, the Banks' profitability is affected by such factors as the
level of noninterest income and expenses, the provision for loan losses and the
effective tax rate. Noninterest income consists primarily of loan and other fees
and income from the sale of investment securities. Noninterest expenses consist
of compensation and benefits, occupancy-related expenses, deposit insurance
premiums paid to the FDIC and other operating expenses.
8
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RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1997 AND 1996
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 interest-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, which is taxable-equivalent net interest income
divided by average earning assets.
The primary component of consolidated earnings is net interest income, or
the difference between interest income on interest-earning assets and interest
paid on interest-bearing liabilities. The net interest margin is net interest
income expressed as a percentage of average interest-earning assets. Interest-
earning assets consist of loans, investment securities and Federal funds sold.
Interest-bearing liabilities consist of deposits and other short-term
borrowings. A portion of interest income is earned on tax-exempt investments,
such as state and municipal bonds. In an effort to state this tax-exempt income
and its resultant yield on a basis comparable to all other taxable investments,
an adjustment is made to analyze this income on a taxable-equivalent basis.
The Company's net interest margin decreased slightly to 5.23% in 1997 as
compared to 5.27% in 1996. The yield on average interest-earning assets
increased 37 basis points or 4.28% to 9.01% in 1997 as compared to 8.64% in
1996. The interest rate paid on average interest-bearing liabilities increased
34 basis points to 4.65% in 1997 as compared to 4.31% in 1996. Net interest
income on a taxable-equivalent basis was $5,203,000 in 1997 as compared to
$4,691,000 in 1996, representing an increase of $512,000 or 10.91%. The increase
resulted from an increase of $680,000 generated on increased volume and a
reduction of $168,000 due primarily to an increase in average rate paid on
interest-bearing liabilities.
Average interest-earning assets increased $10,421,000 to $99,458,000 in
1997 from $89,037,000 in 1996, an increase of 11.70%. Average loans increased
$15,937,000; average investments decreased $4,856,000; and average Federal funds
sold decreased $660,000. The increase in average interest-earning assets was
funded by an increase of $7,534,000, or 8.67%, in average deposits to
$94,390,000 in 1997 from $86,856,000 in 1996. Approximately 19% of the average
deposits were noninterest-bearing deposits in 1997; whereas approximately 21% of
the average deposits were noninterest-bearing deposits 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 is 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.
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The provision for loan losses is a charge to earnings in the current period
to replenish the allowance for loan losses and maintain it at a level management
has determined to be adequate. The provision for loan losses charged to earnings
amounted to $174,000 in 1997 and $81,000 in 1996, representing an increase of
$93,000 or 115% in the provision. The increase in the provision was attributed
to an increase in average loans of $15,937,000 in 1997 as compared to 1996. The
current year's provision for loan losses and the balance in the allowance for
loan losses at December 31, 1997 were based upon management's evaluation of the
loan portfolios and the potential loan risk associated with specific loans and
selected loan categories. Net loan charge-offs amounted to approximately $68,000
in 1997 as compared to net loan charge-offs of approximately $30,000 in 1996.
The allowance for loan losses as a percentage of total loans outstanding
amounted to .97% at December 31, 1997 as compared to 1.26% at December 31, 1996.
The allowance for loan losses as a percentage of total loans outstanding and
other real estate owned amounted to .96% at December 31, 1997 as compared to
1.24% at December 31, 1996. The decrease in this percentage at December 31,
1997, is the result of relatively high loan growth.
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.
Noninterest income increased $134,000 to $1,119,000 in 1997 from $985,000
in 1996 due primarily to an increase of $53,000 in service charges on deposit
accounts generated on an increase in total average deposits of $7,534,000 in
1997 and an increase of $61,000 in origination fees on mortgage loans. Net gains
on sales of investment securities decreased $8,000 and all other noninterest
income increased $28,000.
Noninterest expense increased $ 922,000 to $4,473,000 in 1997 from
$3,551,000 in 1996, representing an increase of $415,000 in salaries and
employee benefits, an increase of $112,000 in equipment and occupancy expense
and an increase in all other noninterest expense of $395,000. The increase in
salaries and employee benefits was attributable to a normal increase in salaries
and related benefits for employees and the addition of 21 employees during the
year. The increase in equipment and occupancy expense was attributable to the
opening of four branches during 1997.
Following is a summary of major items contributing to the increase in other
operating expenses:
<TABLE>
<S> <C>
Increase in advertising and public relations expense
associated with the opening of new branches $ 31,000
Increase in legal and consulting fees associated
with branch expansions and unsuccessful merger
negotiations 98,000
Increase in outside data processing and courier fees 42,000
Professional fees paid for executive searches 35,000
Increase in telephone expense 20,000
Net increase in other operating expenses 169,000
----------
$ 395,000
==========
</TABLE>
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Average total assets increased $12,152,000 or 12.26% to $111,297,000 in
1997 as compared to $99,145,000 in 1996. Average interest-earning assets
increased 11.70% in 1997 over 1996. Loan demand was stronger in 1997 than in
1996 as evidenced by an average loan to deposit ratio of 70% in 1997 as compared
to 58% in 1996. Average loans increased $15,937,000 or 31.69% in 1997 as
compared to 1996 due primarily to the opening of a loan production office in
Montgomery, Alabama, which now operates as a branch of Southern Bank, and the
opening of three new branches for American Bank in Florida. The increase in
average loans was funded by an increase in average deposits of $7,534,000, an
increase in average other borrowings of $3,505,000 and a decrease in average
investments and Federal funds of $5,516,000.
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 Banks to meet those needs. The
Company and the Banks 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 Banks maintain relationships with
correspondent banks, including a 3,000,000 line of credit for the Company, which
would provide funds on short notice, if needed.
The liquidity and capital resources of the Company and the Banks are
monitored on a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities, the
Banks' liquidity ratio at December 31, 1997 was considered satisfactory. At that
date, the Banks' short-term investments were adequate to cover any reasonable
anticipated immediate need for funds. The Company and the Banks were aware of no
events or trends likely to result in a material change in their liquidity.
During 1997, the Company increased its capital by retaining earnings of $715,000
after payment of dividends. It also increased its capital by $253,000,
representing proceeds from the exercise of common stock options and by $168,000,
representing reduction in income taxes payable for exercise of non-qualified
stock options. After recording an increase in capital of $90,000 for unrealized
gains on securities, net of taxes, total capital increased $1,226,000 to
$11,941,000 from $10,715,000 at December 31, 1996.
The Company estimates that approximately $1,115,000 will be required for
capital expenditures in 1998 for the purchase of land and the construction of
facilities for the branch in Montgomery.
In accordance with risk capital guidelines issued by the Federal Reserve,
Eufaula BancCorp is required to maintain a minimum standard of total capital to
weighted risk assets of 8%. Additionally, all member banks must maintain "core"
or "Tier 1" capital of at least 4% of total assets ("leverage ratio"). Member
banks operating at or near the 4% capital level are expected to have well-
diversified risks, including no undue interest rate risk exposure, excellent
control systems, good earnings, high asset quality, and well managed on- and
off-balance sheet activities; and, in general, be considered strong banking
organizations with a composite 1 rating under the CAMEL rating system of banks.
For all but the most highly rated banks meeting the above conditions, the
minimum leverage ratio is to be 4% plus an additional 100 to 200 basis points.
11
<PAGE>
The following table summarizes the regulatory capital levels of the Company
at December 31, 1997.
<TABLE>
<CAPTION>
ACTUAL REQUIRED EXCESS
--------------------------- ----------------------------- ---------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------ ------------ ------------ ------------- -------------- -----------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital $ 10,471 9.20% $ 4,612 4.00% $ 5,859 5.20%
Risk-based capital:
Core capital 10,471 13.11 3,195 4.00 7,276 9.11
Total capital 11,209 14.03 6,391 8.00 4,818 6.03
</TABLE>
Each Bank also met its individual regulatory capital requirements at
December 31, 1997.
YEAR 2000 ISSUE COSTS
Like many companies, the Company relies on computers for the daily conduct
of business and for data processing. There is general concern that on January 1,
2000 computers will be unable to "read" the new year and as a consequence there
could be widespread computer malfunctions. The Company has implemented steps to
address this issue by hiring a technology consultant to advise it on this issue.
Based on estimates by management of the Company, the Company expects to
incur approximately $25,000 to $50,000 to modify its information systems
appropriately to accurately process information in the year 2000 and beyond. The
Company continues to evaluate appropriate courses of corrective action,
including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Management expects that the costs to convert
the Company's information systems to year 2000 compliance will not have a
material impact on the Company's consolidated financial statements. The Company
believes that it and its vendors have satisfactorily addressed the steps deemed
necessary by the Banks' regulators to adapt its data processing systems for the
Year 2000 and beyond.
12
<PAGE>
AVERAGE BALANCES AND NET INCOME ANALYSIS
The following table sets 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. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 34% Federal tax rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------- --------------------------------- ----------------------------------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
---------- --------- ------------ ----------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of
unearned interest $ 66,235 $ 6,683 10.09% $ 50,298 $ 5,065 10.07% $ 47,406 $ 4,913 10.36%
Investment securities:
Taxable 23,400 1,487 6.35 28,218 1,802 6.39 23,734 1,519 6.40
Tax exempt 8,424 708 8.40 8,462 718 8.48 8,599 752 8.75
Federal funds sold 1,399 80 5.72 2,059 105 5.10 1,982 112 5.65
---------- --------- ----------- ---------- ---------- ----------
Total interest-
earning assets 99,458 8,958 9.01 89,037 7,690 8.64 81,721 7,296 8.93
---------- --------- ----------- ---------- ---------- ----------
Noninterest-earning
assets:
Cash 4,712 4,906 5,148
Allowance for loan
losses (690) (637) (610)
Unrealized gain (loss)
on securities available
for sale (203) (247) (130)
Other assets 8,020 6,086 6,010
---------- ----------- ----------
Total noninterest-
earning assets 11,839 10,108 10,418
---------- ----------- ----------
Total assets $ 111,297 $ 99,145 $ 92,139
========== =========== ==========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------- ----------------------------------- -----------------------------------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------------------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
--------- ---------- ----------- --------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest-bearing
liabilities:
Savings and
interest-bearing
demand deposits $ 33,701 $ 1,114 3.31% $ 32,620 $ 1,047 3.21% $ 32,002 $ 1,096 3.42%
Time deposits 42,645 2,388 5.60 36,045 1,903 5.28 30,166 1,625 5.39
Other borrowings 4,377 253 5.78 872 49 5.62 2,105 142 6.75
--------- --------- --------- ---------- ---------- ----------
Total interest-
bearing liabilities 80,723 3,755 4.65 69,537 2,999 4.31 64,273 2,863 4.45
--------- --------- --------- ---------- ---------- ----------
Noninterest-bearing
liabilities and
stockholders' equity:
Demand deposits 18,044 18,191 16,862
Other liabilities 1,202 1,086 1,749
Stockholders' equity 11,328 10,331 9,255
--------- --------- ----------
Total
noninterest-bearing
liabilities and
stockholders' equity 30,574 29,608 27,866
--------- --------- ----------
Total liabilities and
stockholders'
equity $ 111,297 $ 99,145 $ 92,139
========= ========= ==========
Interest rate spread 4.36% 4.33% 4.48%
=========== =========== ============
Net interest income $ 5,203 $ 4,691 $ 4,433
========= ========== ==========
Net interest margin 5.23% 5.27% 5.42%
=========== =========== ============
</TABLE>
14
<PAGE>
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. Federally
tax-exempt interest is presented on a taxable-equivalent basis assuming a 34%
Federal tax rate. The change in interest attributable to rate has been
determined by applying the change in rate between years 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>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1997 VS. 1996 1996 VS. 1995
------------------------------------------ --------------------------------------------------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
INCREASE CHANGES DUE TO INCREASE CHANGES DUE TO
------------------------ --------------------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
------------- --------- ------------- ------------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning assets:
Interest and fees on loans $ 1,618 $ 13 $ 1,605 $ 152 $ (148) $ 300
Interest on securities:
Taxable (315) (7) (308) 283 (4) 287
Tax-exempt (10) (7) (3) (34) (22) (12)
Interest on Federal funds (25) 9 (34) (7) (11) 4
------------- --------- ------------- ------------------ ---------- -----------
Total interest income 1,268 8 1,260 394 (185) 579
------------- --------- ------------- ------------------ ---------- -----------
Expense from interest-bearing
liabilities:
Interest on savings and
interest-
bearing demand deposits 67 32 35 (49) (70) 21
Interest on time deposits 485 137 348 278 (39) 317
Interest on other borrowings 204 7 197 (93) (10) (83)
------------- --------- ------------- ------------------ ---------- -----------
Total interest expense 756 176 580 136 (119) 255
------------- --------- ------------- ------------------ ---------- -----------
Net interest income $ 512 $ (168) $ 680 $ 258 $ (66) $ 324
============= ========= ============= ================== ========== ===========
</TABLE>
NONINTEREST INCOME
Following is a comparison of noninterest income for 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
-------------- ------------
<S> <C> <C>
Service charges on deposit accounts $ 744,000 $ 691,000
Securities transactions, net 20,000 28,000
Origination fees on mortgage loans 172,000 111,000
Other 183,000 155,000
-------------- ------------
$ 1,119,000 $ 985,000
============== ============
</TABLE>
15
<PAGE>
NONINTEREST EXPENSE
Following is a comparison of noninterest expense for 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Salaries and employee benefits $ 2,435,000 $ 2,020,000
Equipment and occupancy expense 600,000 488,000
Amortization of intangibles 79,000 79,000
Legal and professional expense 163,000 94,000
Director fees 98,000 88,000
Data processing expenses 101,000 59,000
Other expenses 997,000 723,000
-------------- --------------
$ 4,473,000 $ 3,551,000
============== ==============
</TABLE>
ASSET/LIABILITY MANAGEMENT
A principal objective of the Company's asset/liability management strategy
is to minimize the exposure to changes in interest rates by matching the
maturity and repricing horizons of interest-earning assets and interest-bearing
liabilities. In order to assure that the objectives of the Company's asset/
liability policy are adhered to in a consistent manner, an Asset/Liability
Management Committee ("the ALCO") has been formed. The ALCO consists of senior
management and any directors as may be appointed by the Board of Directors and
has the authority to direct the Company's acquisition and allocation of funds.
The ALCO meets quarterly. Additional meetings may be held if necessary.
As part of the Company's interest rate risk management policy, the ALCO
examines the extent to which the Company's assets and liabilities are "interest
rate-sensitive" and monitors its interest rate-sensitivity "gap". An asset or
liability is considered to be interest rate-sensitive if it will reprice or
mature within the time period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest rate-sensitive
assets exceeds the amount of interest rate-sensitive liabilities. A gap is
considered negative when the amount of interest rate-sensitive liabilities
exceeds the interest rate-sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
Conversely, during a period of falling interest rates, a negative gap would tend
to result in an increase in net interest income, while a positive gap would tend
to adversely affect net interest income. If the Company's assets and liabilities
were equally flexible and moved concurrently, the impact of any increase or
decrease in interest rates on net interest income would be minimal.
16
<PAGE>
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO also evaluates how the repayment of particular
assets and liabilities is impacted by changes in interest rates. Income
associated with interest-earning assets and costs associated with interest-
bearing liabilities may not be affected uniformly by changes in interest rates.
In addition, the magnitude and duration of changes in interest rates may have a
significant impact on net interest income. For example, although certain assets
and liabilities may have similar maturities or periods of repricing, they may
react in different degrees to changes in market interest rates. Interest rates
on certain types of assets and liabilities fluctuate in advance of changes in
general market interest rates, while interest rates on other types may lag
behind changes in general market rates. In addition, certain assets, such as
adjustable rate mortgage loans, have features (generally referred to as
"interest rate caps") which limit changes in interest rates on a short-term
basis and over the life of the asset. In the event of a change in interest
rates, prepayment and early withdrawal levels also could deviate significantly
from those assumed in calculating the interest rate gap. The ability of many
borrowers to service their debts also may decrease in the event of an interest
rate increase.
The Company's asset/liability management policy provides a permissible
range for the one-year cumulative gap ratio (rate-sensitive assets divided by
rate-sensitive liabilities) of 90 percent to 120 percent. That is, rate-
sensitive assets should range from 90 percent to 120 percent of rate sensitive
liabilities. The policy also provides that the ALCO will allow the cumulative
gap ratio to fluctuate within a range of 20 percent above or below the unity
ratio of 100 percent, thus setting a range of 80 percent to 120 percent. As of
December 31, 1997, the Company's cumulative one-year interest rate sensitivity
gap ratio was 73 percent. This indicates that the Company's interest-bearing
liabilities will reprice during this period at a rate faster than the Company's
interest-earning assets. This ratio is below the target range established by the
ALCO. However, management believes that the type and amount of the Company's
interest rate-sensitive liabilities (a significant portion of which are composed
of money market, NOW and savings accounts whose yields, to a certain extent, are
subject to the discretion of management) may reduce the potential impact that a
rise in interest rates might have on the Company's net income.
In the event that interest rates should rise 100 basis points within the
one-year time period, the Company believes that the reduction in interest income
would not materially impact net interest income or net income. For example, if
interest rates should rise 100 basis points immediately, the reduction in net
interest income resulting from the immediate shock would be approximately
$88,000 or 1.63 percent below the projection under stable rates, for the twelve
months and the reduction in net income would be approximately $58,000. Should
interest rates rise 200 basis points at the rate of 50 basis points per quarter,
the reduction in net interest income for the twelve months would be
approximately $94,000 or 1.73 percent below the projection under stable rates,
and the reduction in net income would be approximately $62,000. In the event
that interest rates rise immediately 200 basis points, which management
considers to be unlikely, the reduction in net interest income resulting from
the immediate shock would be approximately $206,000, or 3.8 percent below the
projection under stable rates, for the twelve months and the reduction in net
income would be approximately $136,000. These simulated computations should not
be relied upon as indicative of actual future results. Further, the
computations do not contemplate certain actions that management may undertake
in response to future changes in interest rates.
The following table sets forth the distribution of the repricing of the
Company's earning assets and interest-bearing liabilities as of December 31,
1997, the interest rate sensitivity gap (i.e., interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest
rate sensitivity liabilities) and the cumulative sensitivity gap ratio. 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 Banks' 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.
17
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
------------------------------------------------------------------------------------------
MATURING OR REPRICING WITHIN
------------------------------------------------------------------------------------------
ZERO TO THREE ONE OVER
THREE MONTHS TO THREE THREE
MONTHS ONE YEAR YEARS YEARS TOTAL
-------------- -------------- ----------- ----------- --------------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Federal funds sold $ 2,450 $ - $ - $ - $ 2,450
Investment securities 747 4,131 1,425 19,153 25,456
Loans 31,652 9,533 14,271 23,148 78,604
-------------- -------------- ----------- ----------- --------------
34,849 13,664 15,696 42,301 106,510
-------------- -------------- ----------- ----------- --------------
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits/(1)/ 19,180 - 12,602 - 31,782
Savings/(1)/ - - 4,931 - 4,931
Certificates less than $100,000 8,330 20,008 3,366 953 32,657
Certificates, $100,000 and over 9,982 6,016 935 - 16,933
Other borrowings 3,100 - - - 3,100
-------------- -------------- ----------- ----------- --------------
40,592 26,024 21,834 953 89,403
-------------- -------------- ----------- ----------- --------------
INTEREST RATE SENSITIVITY GAP $ (5,743) $ (12,360) $ (6,138) $ 41,348 $ 17,107
============== ============== ============ =========== ==============
CUMULATIVE INTEREST RATE SENSITIVITY GAP $ (5,743) $ (18,103) $ (24,241) $ 17,107
============== ============== ============ ===========
INTEREST RATE SENSITIVITY GAP RATIO 0.86 0.53 0.72 44.39
============== ============== ============ ===========
CUMULATIVE INTEREST RATE SENSITIVITY 0.86 0.73 0.73 1.19
GAP RATIO
============== ============== ============ ===========
</TABLE>
/(1)/ The Company has found that NOW checking accounts and savings deposits are
generally not sensitive to changes in interest rates and, therefore, it
has placed such liabilities in the "One to Three Years" category.
18
<PAGE>
MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES
The Company's loan portfolio, as of December 31, 1997, was made up
primarily of short-term fixed rate loans or variable rate loans. The average
contractual life on instalment loans is approximately three years, while
mortgages are generally variable over one to five-year periods. Total loans as
of December 31, 1997 are shown in the following table according to maturity
classifications: (i) one year or less, (ii) after one year through five years,
and (iii) after five years.
<TABLE>
<CAPTION>
DUE IN AFTER ONE AFTER
ONE THROUGH FIVE
YEAR FIVE YEARS YEARS TOTAL
----------- -------------- ---------- ----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and $ 8,324 $ 12,084 $ 401 $ 20,809
agricultural
Real estate - construction 3,253 - - 3,253
Real estate - mortgage 26,807 7,420 5,819 40,046
Consumer instalment 2,792 10,955 735 14,482
Other 9 5 - 14
----------- -------------- ---------- ----------
Total $ 41,185 $ 30,464 $ 6,955 $ 78,604
=========== ============== ========== ==========
</TABLE>
The following table summarizes loans at December 31, 1997 with the due
dates after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
(DOLLARS IN
THOUSANDS)
--------------
<S> <C>
Predetermined interest rates $ 37,419
Floating or adjustable interest rates -
--------------
$ 37,419
==============
</TABLE>
19
<PAGE>
LOAN PORTFOLIO
The amount of loans outstanding at the indicated dates is shown in the
following table according to type of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
----------------------------
<S> <C> <C>
Commercial, financial and agricultural $ 20,809 $ 11,276
Real estate - construction 3,253 2,896
Real estate - mortgage 40,046 27,692
Consumer instalment loans 14,694 10,468
Other 14 41
------------ ------------
78,816 52,373
Unearned discount (213) (205)
Allowance for loan losses (762) (656)
------------ ------------
Loans, net $ 77,841 $ 51,512
============ ============
</TABLE>
NONPERFORMING LOANS
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
---------------------------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 50 $ -
Instalment loans and term loans contractually
past due ninety days or more as to interest
or principal payments and still accruing 14 23
Loans, the term of which have been 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 - -
</TABLE>
In the opinion of management, any loans classified by regulatory
authorities as 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, nor (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.
20
<PAGE>
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 $762,000 at December 31,
1997, representing 0.97% of year-end total loans outstanding compared with
approximately $656,000 at December 31, 1996, which represented 1.26% year end
total loans outstanding.
The allowance for loan losses is reviewed quarterly 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 each outstanding loan with particular emphasis on any problem loans. No
assurance can be given, however, that adverse economic circumstances will not
result in increased losses in the Bank's loan portfolio and require greater
provisions for loan losses in the future.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes the
allowance can be allocated only on an approximate basis. The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------
1997 1996
-------------------------------- ---------------------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
-------------- --------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial, industrial and $ 267 26% $ 230 22%
agricultural
Real estate 114 55 98 58
Consumer 191 19 164 20
Unallocated 190 - 164 -
-------------- -------------- -------------- ---------------
$ 762 100% $ 656 100%
============== ============== ============== ===============
</TABLE>
21
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
----------------------------
<S> <C> <C>
Average amount of loans outstanding $ 66,235 $ 50,298
============ ============
Balance of reserve for possible loan losses at beginning of period 656 605
------------ ------------
Charge-offs:
Commercial, financial and agricultural 29 6
Consumer 52 40
------------ ------------
81 46
------------ ------------
Recoveries:
Commercial, financial and agricultural - 9
Real estate - -
Consumer 13 7
------------ ------------
13 16
------------ ------------
Net charge-offs 68 30
------------ ------------
Additions to reserve charged to operating expenses 174 81
------------ ------------
Balance of reserve for possible loan losses $ 762 $ 656
============ ============
Ratio of net loan charge-offs to average loans 0.10% 0.06%
============ ============
</TABLE>
22
<PAGE>
INVESTMENT PORTFOLIO
The Company manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on net
interest income. See " - Asset/Liability Management." 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
earnings assets. In particular, approximately 52% of the loan portfolio is
comprised of loans which mature or reprice within one year or less. 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, 13% of the investment portfolios matures within one year.
TYPES OF INVESTMENTS
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1997:
U. S. Government and agency securities $ 14,195,851 $ 53,641 $ (61,814) $ 14,187,678
Mortgage-backed securities 1,982,581 8,334 (4,067) 1,986,848
--------------- ------------- ------------- -------------
$ 16,178,432 $ 61,975 $ (65,881) $ 16,174,526
=============== ============= ============= =============
December 31, 1996:
U. S. Government and agency
securities $ 23,516,656 $ 39,018 $ (204,262) $ 23,351,412
Mortgage-backed securities 3,002,140 6,672 (13,860) 2,994,952
Other securities 469,633 18,417 - 488,050
--------------- ------------- ------------- -------------
$ 26,988,429 $ 64,107 $ (218,122) $ 26,834,414
=============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY
DECEMBER 31, 1997:
U. S. Government and agency securities $ 749,576 $ 502 $ (3,380) $ 746,698
State and municipal securities 8,110,317 383,651 - 8,493,968
Mortgage-backed securities 421,848 6,235 (1,415) 426,668
------------- ------------- ------------- -------------
$ 9,281,741 $ 390,388 $ (4,795) $ 9,667,334
============= ============= ============= =============
December 31, 1996:
U. S. Government and agency securities $ 750,000 $ - $ (11,095) $ 738,905
State and municipal securities 8,707,202 436,566 (3,415) 9,140,353
Mortgage-backed securities 604,889 6,133 (5,891) 605,131
------------- ------------- ------------- -------------
$ 10,062,091 $ 442,699 $ (20,401) $ 10,484,389
============= ============= ============= =============
</TABLE>
23
<PAGE>
MATURITIES
The amounts of investment securities in each category as of December 31,
1997 are shown in the following table according to contractual 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>
U.S. TREASURY AND
OTHER U. S. GOVERNMENT STATE AND
AGENCIES AND CORPORATIONS POLITICAL SUBDIVISIONS
YIELD YIELD
AMOUNT (1) AMOUNT (1) (2)
------------ ---------------- ------------ -----------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
MATURITY:
One year or less $ 3,753 6.21% $ 837 8.25%
After one year through five years 8,621 6.47 2,737 7.98
After five years through ten years 4,972 4.20 4,249 8.17
After ten years - - 287 8.83
------------ ----------- ------------ -----------
$ 17,346 5.76% $ 8,110 8.14%
============ =========== ============ ===========
</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 securities of state and political subdivisions are stated on a
taxable equivalent basis using a tax rate of 34%.
24
<PAGE>
DEPOSITS
Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits for the periods indicated are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1997 1996
---------------------------- --------------------------------
AMOUNT RATE AMOUNT RATE
-------------- ----------- -------------- --------------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 18,044 -% $ 18,191 -%
Interest-bearing demand and savings deposits 33,701 3.31 32,620 3.21
Time deposits 42,645 5.60 36,045 5.28
------------ ------------
Total deposits $ 94,390 $ 86,856
============ ============
</TABLE>
The Company has a large, stable base of time deposits, with little or no
dependence on volatile deposits of $100,000 or more. The time deposits are
principally certificates of deposit and individual retirement accounts obtained
from individual customers.
The amounts of time certificates of deposit issued in amounts of $100,000
or more as of December 31, 1997, are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through twelve months and (iii) over twelve months.
<TABLE>
<CAPTION>
DECEMBER
31,
1997
-------------
(DOLLARS IN
THOUSANDS)
-------------
<S> <C>
Three months or less $ 9,982
Over three through twelve months 6,016
Over twelve months 935
-------------
Total $ 16,933
=============
</TABLE>
25
<PAGE>
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following table shows return on assets (net income divided by average
total assets), return on equity (net income divided by average stockholders'
equity), dividend payout ratio (dividends declared per share divided by net
income per share) and stockholders' equity to asset ratio (average stockholders'
equity divided by average total assets) for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Return on assets 0.90 % 1.24%
Return on equity 8.89 11.90
Dividends payout 29.17 21.31
Equity to assets ratio 10.18 10.42
</TABLE>
COMMITMENTS AND LINES OF CREDITS
In the ordinary course of business, the Banks have granted commitments to
extend credit to approved customers. Generally, these commitments to extend
credit have been granted on a temporary basis for seasonal or inventory
requirements and have been approved by each Bank's respective Board of
Directors. The Banks have 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 Banks use the same credit policies for these off-balance sheet commitments
as they do 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. Because many of the
commitment amounts expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.
Following is a summary of the commitments outstanding at December 31, 1997
and 1996.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
------------ ----------
(DOLLARS IN THOUSANDS)
-------------------------
<S> <C> <C>
Loans sold with recourse $ 1,647 $ 1,909
Commitments to extend credit 19,518 7,972
Standby letters of credit 1,353 1,390
---------- ----------
$ 22,518 $ 11,271
========== ==========
</TABLE>
26
<PAGE>
IMPACT OF INFLATION
The consolidated financial statements and related consolidated financial
data presented herein have been prepared in accordance with generally accepted
accounting principles and practices within the banking industry which require
the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and its
subsidiaries are included on pages F-1 through F-32 of this Annual Report on
Form 10-KSB:
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years Ended December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1997 and 1996
Consolidated Statements of Cash Flows - Years Ended December 31, 1997 and
1996
Notes to Consolidated Financial Statements.
ITEM 8. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
During 1997 and 1996, the Company did not change its accountants and there
was no disagreement on any matter of accounting principles or practices for
financial statement disclosure that would have required the filing of a current
report on Form 8-K.
27
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to the
Company's definitive Proxy Statement for its 1998 annual meeting under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A within
120 days after the end of fiscal year covered by this Annual Report ("the
Company's Proxy Statement").
NOTE 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption
"Executive Compensation".
NOTE 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption "Voting
securities and Principal Stockholders".
NOTE 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption "Certain
Relationships and Related Transactions".
28
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-B.
EXHIBIT
NO. DESCRIPTION
- -------- -------------------------------------------------------
3.1 Restated Certificate of Incorporation of the
Registrant as of March 18, 1998.
3.2 Bylaws of the Registrant (amended and restated as of
March 18, 1998).
10.1 Eufaula Bank & Trust Company Employee Stock Purchase
Plan (filed as Exhibit 10.1 to the Registrant's Annual
Report on Form 10-KSB (File Number 33-23062), filed
with the Commission on April 29, 1994 and incorporated
herein by reference.)
10.2 Eufaula Bank & Trust Company Profit-Sharing Retirement
Plan (filed as Exhibit 10.2 to the Registrant's Annual
Report on Form 10-KSB (File Number 33-23062), filed
with the Commission on April 29, 1994 and incorporated
herein by reference.)
10.3 Registrant's Stock Option Agreement (filed as Exhibit
10.3 to the Registrant's Annual Report on Form 10-KSB
(File Number 33-23062), filed with the Commission on
April 29, 1994 and incorporated herein by reference.)
10.4 Director stock purchase plan.
10.5 Deferred Compensation Agreement between Eufaula Bank &
Trust Company and Director (Sample Form) effective July
23, 1996 (filed as Exhibit 10.5 to the Registrant's
Annual Report on Form 10-KSB (File Number 33-23062),
filed with the Commission on March 31, 1997 and
incorporated herein by reference.)
21 Subsidiaries of the Registrant. (filed as Exhibit 21 to
the Registrant's Annual Report on Form 10-KSB (File
Number 33-23062), filed with the Commission on April
29, 1994 and incorporated herein by reference.)
24 Power of Attorney relating to this Annual Report on
Form 10-KSB is set forth on the signature pages to this
Annual Report.
27 Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this Report.
29
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Registrant has duly caused this
Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized.
EUFAULA BANCCORP, INC.
Date:____________________ By:______________________________________________
Gregory B. Faison, President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gregory B. Faison as his attorney-in-fact, acting
with full power of substitution for him in his name, place and stead, in any and
all capacities, to sign any amendments to this Form 10-KSB and to file the same,
with exhibits thereto, and any other documents in connection therewith, with the
Securities and Exchange Commission and hereby ratifies and confirms all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Exchange Act, this Form 10-KSB has been
signed by the following persons in the capacities and on the dates indicated.
Date:_________________ _____________________________________________________
Gregory B. Faison, President
Chief Executive Officer and Director
Date:_________________ _____________________________________________________
Janis Biggers, Director
Date:_________________ _____________________________________________________
Michael C. Dixon, Director
Date:_________________ _____________________________________________________
Robert M. Dixon, Director
Date:_________________ _____________________________________________________
Thomas Harris, Director
Date:_________________ _____________________________________________________
James J. Jaxon, Jr., Director
Date:_________________ _____________________________________________________
Frank McRight, Director
30
<PAGE>
EUFAULA BANCCORP, INC.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- ----------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Registrant as
of March 18, 1998.
3.2 Bylaws of the Registrant (amended and restated as of March
18, 1998).
10.1 Eufaula Bank & Trust Company Employee Stock Purchase Plan
(filed as Exhibit 10.1 to the Registrant's Annual Report on
Form 10-KSB (File Number 33-23062), filed with the
Commission on April 29, 1994 and incorporated herein by
reference.)
10.2 Eufaula Bank & Trust Company Profit-Sharing Retirement Plan
(filed as Exhibit 10.2 to the Registrant's Annual Report on
Form 10-KSB (File Number 33-23062), filed with the
Commission on April 29, 1994 and incorporated herein by
reference.)
10.3 Registrant's Stock Option Agreement (filed as Exhibit 10.3
to the Registrant's Annual Report on Form 10-KSB (File
Number 33-23062), filed with the Commission on April 29,
1994 and incorporated herein by reference.)
10.4 Director stock purchase plan.
10.5 Deferred Compensation Agreement between Eufaula Bank & Trust
Company and Director (Sample Form) effective July 23, 1996
(filed as Exhibit 10.5 to the Registrant's Annual Report on
Form 10-KSB (File Number 33-23062), filed with the
Commission on March 31, 1997 and incorporated herein by
reference.)
21 Subsidiaries of the Registrant. (filed as Exhibit 21 to the
Registrant's Annual Report on Form 10-KSB (File Number 33-
23062), filed with the Commission on April 29, 1994 and
incorporated herein by reference.)
24 Power of Attorney relating to this Annual Report on Form 10-
KSB is set forth on the signature pages to this Annual
Report.
27 Financial Data Schedule
31
<PAGE>
EUFAULA BANCCORP, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Consolidated financial statements:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
All schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
________________________________________________________________________________
TO THE BOARD OF DIRECTORS
EUFAULA BANCCORP, INC.
EUFAULA, ALABAMA
We have audited the accompanying consolidated balance sheets of
EUFAULA BANCCORP, INC. AND SUBSIDIARIES as of December 31, 1997 and 1996, and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. 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
Eufaula BancCorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Albany, Georgia
February 4, 1998
F-2
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 6,046,465 $ 7,320,627
Interest-bearing deposits in banks - 750,000
Federal funds sold 2,450,000 1,375,000
Securities available for sale, at fair value 16,174,526 26,834,414
Securities held to maturity, at cost (fair value
$9,667,334 and $10,484,389) 9,281,741 10,062,091
Loans 78,603,624 52,167,811
Less allowance for loan losses 762,236 656,256
------------ ------------
Loans, net 77,841,388 51,511,555
------------ ------------
Premises and equipment, net 3,664,429 2,413,164
Other real estate 804,435 804,435
Other assets 4,678,670 3,744,747
------------ ------------
$120,941,654 $104,816,033
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Noninterest-bearing demand $ 18,305,750 $ 18,783,155
Interest-bearing demand 31,782,198 26,412,239
Savings 4,930,765 5,530,097
Time, $100,000 and over 16,932,656 13,692,689
Other time 32,657,315 25,879,298
------------ ------------
Total deposits 104,608,684 90,297,478
Federal funds purchased - 1,200,000
Securities sold under repurchase agreement - 1,475,000
Other borrowings 3,100,000 -
Other liabilities 1,291,643 1,128,704
------------ ------------
Total liabilities 109,000,327 94,101,182
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10; 50,000 shares
authorized, none issued - -
Common stock, par value $1; 5,000,000 shares authorized,
2,097,916 and 1,353,204 shares issued, respectively 2,097,916 1,353,204
Surplus 107,779 232,587
Retained earnings 9,737,976 9,221,469
Unrealized (losses) on securities available
for sale, net of taxes (2,344) (92,409)
------------ ------------
Total stockholders' equity 11,941,327 10,714,851
------------ ------------
$120,941,654 $104,816,033
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $6,683,278 $5,064,734
Interest on taxable securities 1,464,021 1,776,018
Interest on nontaxable securities 466,530 473,567
Interest on deposits in other banks 22,806 26,085
Interest on Federal funds sold 80,363 105,007
---------- ----------
8,716,998 7,445,411
---------- ----------
INTEREST EXPENSE
Interest on deposits 3,502,234 2,950,361
Interest on other borrowings 252,330 48,915
---------- ----------
3,754,465 2,999,276
---------- ----------
Net interest income 4,962,434 4,446,135
Provision for loan losses 173,668 81,000
---------- ----------
Net interest income after provision for loan losses 4,788,766 4,365,135
---------- ----------
OTHER INCOME
Service charges on deposit accounts 744,254 690,746
Security transactions, net 19,697 27,470
Origination fees on mortgage loans 171,994 110,738
Other 182,666 155,558
---------- ----------
1,118,611 984,512
---------- ----------
OTHER EXPENSES
Salaries and employee benefits 2,435,131 2,019,949
Equipment and occupancy expense 600,493 488,156
Amortization of intangibles 78,745 78,745
Legal and professional expense 162,549 93,714
Data processing expenses 101,064 58,859
Directors fees 97,983 88,250
Other operating expense 997,085 723,407
---------- ----------
4,473,050 3,551,080
---------- ----------
Income before income taxes 1,434,327 1,798,567
APPLICABLE INCOME TAXES 426,935 569,478
---------- ----------
Net income $1,007,392 $1,229,089
========== ==========
NET INCOME PER COMMON SHARE
Basic $ 0.48 $ 0.61
========== ==========
Diluted $ 0.45 $ 0.56
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Gains
(Losses) on
Securities
Available
Common Stock Capital Retained for Sale,
---------------------
Shares Par Value Surplus Earnings Net of Total
--------- ----------- ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1995 676,602 $ 676,602 $ 909,289 $ 8,263,021 $ 98,972 $ 9,947,784
Net income - - - 1,229,089 - 1,229,089
Cash dividend declared,
$.13 per - - - (270,641) - (270,641)
Net change in unrealized
(losses) on securities
available-for-sale,
net of tax - - - - (191,381) (191,183)
Two-for-one common
stock split 676,602 676,602 (676,602) - - -
--------- ----------- ----------- ------------ --------------- -----------
BALANCE, DECEMBER 31,
1996 1,353,204 1,253,204 232,587 9,221,469 (92,409) 10,714,851
Net income - - - 1,007,392 - 1,007,392
Cash dividend declared,
$.14 per - - - (291,584) - (291,584)
Net change in unrealized
(losses) on securities
available-for-sale,
net of tax - - - - 90,065 90,065
Three-for-two common
stock split 699,301 699,301 (699,301) - - -
Proceeds from exercise
of stock 45,411 45,411 207,455 - - 252,866
Purchase of fractional
shares - - (85) - - (85)
Reduction in income
taxes payable resulting
from exercise of
stock options - - 167,822 - - 167,822
Transfer to surplus - - 199,301 (199,301) - -
--------- ----------- ----------- ------------ --------------- -----------
Balance, December 31, 1997 2,097,916 $ 2,097,916 $ (91,522) $ 9,937,277 $ (2,344) $11,941,327
========= =========== =========== ============ =============== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,007,392 $ 1,229,089
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 235,465 184,564
Amortization 78,745 78,745
Provision for loan losses 173,668 81,000
Provision for deferred taxes (25,438) (913)
Net realized gains on securities available (19,697) (27,470)
(Increase) decrease in interest receive 146,513 (44,025)
Increase (decrease) in interest payable 155,509 (5,939)
Increase (decrease) in taxes payable 9,257 (58,413)
Other prepaids, deferrals and accrual (960,132) (620,612)
------------ ------------
Total adjustments (206,110) (413,063)
------------ ------------
Net cash provided by operating 801,282 816,026
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in interest-bearing deposits in banks 750,000 (500,000)
Increase in Federal funds sold (1,075,000) (575,000)
Purchases of securities available for sale (5,820,234) (13,110,890)
Proceeds from sales of securities available for sale 6,798,070 6,809,250
Proceeds from maturities of securities available for sale 9,851,858 3,245,913
Purchases of securities held to maturity - (997,428)
Proceeds from maturities of securities held to maturity 780,350 822,506
Increase in loans, net (26,503,501) (4,547,404)
Proceeds from sale of assets 10,000 -
Purchase of premises and equipment (1,496,730) (530,313)
------------ ------------
Net cash used in investing activities (16,705,187) (9,383,366)
------------ ------------
</TABLE>
F-6
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits $ 14,243,546 $ 6,750,906
Proceeds from the exercise of stock option 252,866 -
Increase (decrease) in securities sold under
repurchase agreements (1,475,000) 1,475,000
Increase (decrease) in Federal funds purchased (1,200,000) 650,000
Advances from Federal Home Loan Bank 3,100,000 -
Dividends paid (291,584) (202,981)
Purchase of fractional shares (85) -
------------ -----------
Net cash provided by financing activities 14,629,743 8,672,925
------------ -----------
Net increase (decrease) in cash and due from bank (1,274,162) 105,585
Cash and due from banks at beginning of year 7,320,627 7,215,042
------------ ------------
Cash and due from banks at end of year $ 6,046,465 $ 7,320,627
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 3,599,055 $ 3,005,215
Income taxes $ 443,116 $ 628,804
NONCASH TRANSACTIONS
Unrealized (losses) on securities available for sale $ (150,109) $ (318,966)
Transfer from loans to other real estate $ - $ 804,432
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
F-7
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Eufaula BancCorp, Inc. (the Company) is a bank holding company whose
business is presently conducted by its wholly-owned subsidiaries,
Southern Bank of Commerce (formerly Eufaula Bank and Trust Company) in
Eufaula, Alabama and First American Bank of Walton County (First
American Bank) in Santa Rosa Beach, Florida. The Banks provide a full
range of banking services to individual and corporate customers in
Eufaula and Montgomery, Alabama and in northwest Florida. The Banks
are subject to the regulations of certain Federal and state agencies
and are periodically examined by certain regulatory authorities.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. 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.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 at
amortized cost. All other debt 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. Marketable equity
securities are carried at fair value with net unrealized gains and
losses included in stockholders' equity.
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.
Loan origination fees and certain direct costs of most loans are
recognized at the time the loan is recorded. Because net origination
loan fees and costs are not material, the results of operations are
not materially different than the results which would be obtained by
accounting for loan fees and costs in accordance with generally
accepted accounting principles.
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.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
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, using 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.
INTANGIBLE ASSETS
Cost in excess of net assets acquired resulting from a bank
acquisition accounted for as a purchase transaction is being amortized
over twenty-five (25) years on a straight-line basis.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried
at the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair value
at the time of transfer to other real estate owned is charged to the
allowance for loan losses. Subsequent gains or losses on sale and any
subsequent adjustment to the value are recorded as other expenses.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROFIT-SHARING PLAN
Profit-sharing plan costs are funded as accrued and are based on a
percentage of individual employee's salary, not to exceed the amount
that can be deducted for Federal income tax purposes.
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 on
the temporary differences between the bases of assets and liabilities
as measured by tax laws and their bases as reported in the financial
statements. 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.
The Company and its subsidiaries file a consolidated income tax
return. Each entity provides for income taxes based on its
contribution to income taxes (benefits) of the consolidated group.
EARNINGS PER COMMON SHARE
Basic earnings per share are calculated on the basis of the weighted
average number of common shares outstanding. Diluted earnings per
share are computed by dividing net income by the sum of the weighted
average number of common shares outstanding and potential common
shares. Earnings per common share for the prior periods have been
restated to reflect the adoption of FASB 128. All per share data for
prior years have been adjusted to reflect the three-for-two stock
split effected in the form of a 50% stock dividend to shareholders of
record as of November 15, 1997.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CURRENT ACCOUNTING DEVELOPMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". ("SFAS No. 125"). This Statement
provides standards for distinguishing transfers of financial assets
that are sales from those that are secured borrowings, and provides
guidance on the recognition and measurement of asset servicing
contracts and on debt extinguishments. As issued, SFAS No. 125 is
effective for transactions occurring after December 31, 1996. However,
as a result of an amendment to SFAS No. 125 by the FASB in December
1996, certain provisions of SFAS No. 125 are deferred for an
additional year. Adoption of the new accounting standard is not
expected to have a material impact on the Company's financial
statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share".
This statement simplifies the standards for computing earnings per
share previously set forth in APB Opinion No. 15, "Earnings per
Share", and makes them comparable to international Earnings per Share
("EPS") standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. Basic EPS
excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of
the entity. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15. This statement is effective for
financial statements issued for periods ending after December 15,
1997. The adoption of this statement did not have a material impact on
the Company's financial statements.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CURRENT ACCOUNTING DEVELOPMENTS (CONTINUED)
In June 1997, the FASB issued SFAS No 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and
display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. This statement requires that all items that are required
to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement does not require a specific format for that financial
statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that
financial statement. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance or other
comprehensive income by their nature in a financial statement and
display the accumulated balance or other comprehensive income
separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. This
statement is effective for fiscal years beginning after December 15,
1997. The adoption of this statement is not expected to have a
material impact on the Company's financial statements.
In June 1997, The FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement
requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The statement requires that a business
enterprise report a measure of segment profit or loss, certain
specific revenue and expense items and segment assets. It requires
reconciliations of total segment revenues, total segment profit or
loss, total segment assets and other amounts disclosed for segments to
corresponding amounts in the enterprise's general-purpose financial
statements. It requires that the enterprise report information about
the revenues derived from the enterprise's products or services, about
the countries in which the enterprise earns revenues and hold assets
and about major customers. This Statement is effective for financial
Statements for periods beginning after December 15, 1997. The adoption
of this statement is not expected to have a material impact on the
Company's financial statements.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1997:
U.S. Government and agency
securities $ 14,195,851 $ 53,641 $ (61,814) $ 14,187,678
Mortgage-backed securities 1,982,581 8,334 (4,067) 1,986,848
------------- ------------- -------------- --------------
$ 16,178,432 $ 61,975 $ (65,881) $ 16,174,526
============= ============ ============== ==============
December 31, 1996:
U.S. Government and agency
securities $ 23,516,656 $ 39,018 $ (204,262) $ 23,351,412
Mortgage-backed securities 3,002,140 6,672 (13,860) 2,994,952
Other securities 469,633 18,417 - 488,050
------------- ------------- -------------- --------------
$ 26,988,429 $ 64,107 $ (218,122) $ 26,834,414
============= ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY
DECEMBER 31, 1997:
U.S. Government and agency
securities $ 749,576 $ 502 $ (3,380) $ 746,698
State and municipal securities 8,110,317 383,651 - 8,493,968
Mortgage-backed securities 421,848 6,235 (1,415) 426,668
------------- ------------- -------------- --------------
$ 9,281,741 $ 390,388 $ (4,795) $ 9,667,334
============= ============= ============== ==============
December 31, 1996:
U.S. Government and agency
securities $ 750,000 $ - $ (11,095) $ 738,905
State and municipal securities 8,707,202 436,566 (3,415) 9,140,353
Mortgage-backed securities 604,889 6,133 (5,891) 605,131
------------- ------------- -------------- --------------
$ 10,062,091 $ 442,699 $ (20,401) $ 10,484,389
============= ============= ============== ==============
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 2. SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31,
1997 by contractual maturity are shown below. Maturities may differ
from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid without
penalty. Therefore, these securities are not included in the maturity
categories in the following maturity summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE SECURITIES HELD TO MATURITY
--------------------------------- --------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Due in one year or less $ 3,512,404 $ 3,503,595 $ 1,087,104 $ 1,093,172
Due from one year to five years 5,659,953 5,712,425 3,236,884 3,328,435
Due from five to ten years 5,023,494 4,971,658 4,249,306 4,505,816
Due after ten years - - 286,599 313,243
Mortgage-backed securities 1,982,581 1,986,848 421,848 426,668
--------------- --------------- -------------- ---------------
$ 16,178,432 $ 16,174,526 $ 9,281,741 $ 9,667,334
=============== =============== ============== ===============
</TABLE>
Securities with a carrying value of $11,787,849 and $15,681,776 at
December 31, 1997 and 1996, respectively, were pledged to secure
public deposits and for other purposes.
Gross realized gains and gross realized losses on sales of securities
were:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Gross realized gains on sales of securities $ 29,555 $ 34,729
Gross losses on sales of securities (9,858) (7,259)
------------- -------------
Net realized gains on sales of securities available for sale $ 19,697 $ 27,470
============= =============
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Commercial, financial and agricultural $ 20,809,399 $ 11,276,143
Real estate - construction 3,253,356 2,896,148
Real estate - mortgage 40,046,125 27,691,446
Consumer 14,694,075 10,468,374
Other 13,498 41,068
--------------- ---------------
78,816,453 52,373,179
Unearned income (212,829) (205,368)
Allowance for loan losses (762,236) (656,256)
--------------- ---------------
Loans, net $ 77,841,388 $ 51,511,555
=============== ===============
</TABLE>
Changes in the allowance for loan losses for the years ended December
31 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 656,256 $ 605,163
Provision charged to operations 173,668 81,000
Loans charged off (82,046) (45,786)
Recoveries of loans previously charged off 14,358 15,879
-------------- --------------
BALANCE, END OF YEAR $ 762,236 $ 656,256
============== ==============
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company has granted loans to certain directors, executive
officers, and related entities of the Company and the Banks. The
interest rates on these loans were substantially the same as 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 years ended December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------------- -----------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 2,630,728 $ 2,642,949
Advances 3,649,877 3,435,657
Repayments (2,397,799) (3,447,878)
---------------- -----------------
BALANCE, END OF YEAR $ 3,882,806 $ 2,630,728
================ =================
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Land and buildings $ 3,027,225 $ 2,265,503
Equipment 1,676,093 1,159,753
Construction in progress 336,089 205,207
---------------- ----------------
5,039,407 3,630,463
Accumulated depreciation (1,374,978) (1,217,299)
---------------- ----------------
$ 3,664,429 $ 2,413,164
================ ================
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996
was $235,465 and $184,564, respectively.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 5. EMPLOYEE BENEFIT PLANS
The subsidiary banks have noncontributory profit-sharing plans
covering all employees, subject to certain minimum age and service
requirements. The contribution for the years ended December 31, 1997
and 1996 was $68,000 and $72,383, respectively.
The Company provides a nonqualified Employee Stock Purchase Plan,
including employees of both subsidiary banks. The primary purpose is
to enable the employees to participate in the ownership of the
Company. An employee who has been employed on a full time basis for
one year or more is eligible for the Plan. Employees can contribute
from five to seven percent of their compensation, depending on years
of service. The banks contribute an amount equal to 50% of the
employee's contribution. Contributions are used to purchase shares of
Eufaula BancCorp, Inc. common stock. The contribution for the years
ended December 31, 1997 and 1996 was $13,732 and $14,813,
respectively.
The Company has a nonqualified Stock Purchase Plan for directors. The
primary purpose is to enable the directors to participate in the
ownership of the Company. All directors are eligible for the Plan. A
director can contribute in increments of $50 not to exceed $200 per
month. The Banks contribute an amount equal to 50 percent of the
director's contribution. Contributions to the Plan are used to
purchase shares of Eufaula BancCorp, Inc. common stock. The
contributions for the years ended December 31, 1997 and 1996 were
$19,300 and $16,800, respectively.
NOTE 6. DEFERRED COMPENSATION PLAN
During 1996, Southern Bank of Commerce modified its indexed deferred
compensation plan for certain executive officers and directors. The
Plan is designed to provide supplemental retirement benefits and
supersedes the existing deferred compensation plan. As a result of
the modification, transactions resulted in an expense of $16,517 for
1997 and a net decrease in expense of $32,636 in 1996.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 7. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Advances from Federal Home Loan Bank with interest at a $ 2,500,000 $ -
fixed rate of 6.58% due on March 14, 1999.
Advances from Federal Home Loan Bank with interest at 600,000 -
adjustable rates (currently at 6.50% at December 31,
1997) due on September 23, 1998.
--------------- ---------------
$ 3,100,000 $ -
=============== ===============
</TABLE>
The advances from the Federal Home Loan Bank are collateralized by the
pledging of first mortgage loans on one to four family residences.
NOTE 8. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Current $ 284,551 $ 570,391
Benefit from exercise of stock options 167,822 -
Deferred (25,438) (913)
--------------- ---------------
Provision for income taxes $ 426,935 $ 569,478
=============== ===============
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 8. INCOME TAXES (CONTINUED)
The Company's provision for income taxes 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>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1997 1996
---------------------------------- ----------------------------
AMOUNT PERCENT Amount Percent
--------------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
Tax provision at statutory rate $ 487,670 34 % $ 611,513 34 %
Tax-exempt interest (136,615) (10) (147,057) (8)
Amortization 26,773 2 26,773 1
State income taxes 45,748 3 51,454 3
Other items, net 3,359 1 26,795 2
--------------- -------------- -------------- ---------
Provision for income taxes $ 426,935 30 % $ 569,478 32 %
=============== ============== ============== =========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1997 1996
--------------- ---------------
DEFERRED TAX ASSETS:
<S> <C> <C>
Loan loss reserves $ 101,886 $ 55,031
Deferred compensation 93,989 76,576
Accounting for other real estate 1,582 1,582
Unrealized losses on securities available for sale 1,563 61,607
Stock options 5,574 17,095
--------------- ---------------
204,594 211,891
--------------- ---------------
DEFERRED TAX LIABILITIES:
Depreciation and amortization 110,116 83,969
Accretion 5,164 4,002
--------------- ---------------
115,280 87,971
--------------- ---------------
NET DEFERRED TAX ASSETS $ 89,314 $ 123,920
=============== ===============
</TABLE>
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 9. STOCK OPTIONS
Prior to 1995, the Company entered into or assumed liability for
various nonqualified stock option agreements with key employees.
During 1995, the Company adopted the 1994 Stock Option Plan whereby
the Company may grant options to certain key employees to purchase up
to 600,000 shares of the Company's $1 par value common stock at an
option price of $4 per share. During 1996, the Plan was amended to
include the directors of the Company. As of December 31, 1997,
options that had been granted to five key employees to purchase a
total of 297,000 shares of common stock were outstanding.
A summary of information relating to the stock option plans at
December 31, 1997 and 1996 and changes during the years ended on those
dates is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1997 1996
---------------------------------- -------------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
--------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Under option, beginning of year 402,000 $ 3.83 402,000 $ 3.83
Granted 75,000 9.27 - -
Exercise (68,117) 3.27 - -
Forfeited (111,883) 4.00 - -
--------------- --------------
Under option, end of year 297,000 5.27 402,000 3.83
=============== ==============
Exercisable at end of year 84,000 114,000
=============== ==============
Available for grant at end of year 165,000 240,000
=============== ==============
Weighted average fair value per
option
of options granted during the year $3.38 $ -
=============== ==============
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 9. STOCK OPTIONS (CONTINUED)
Additional information about options outstanding at December 31, 1997
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------- --------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE IN YEARS PRICE OUTSTANDING PRICE
--------------- ------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 2.54 12,000 0.5 $ 2.54 12,000 $ 2.54
4.00 120,000 5.0 4.00 45,000 4.00
4.00 90,000 7.0 4.00 27,000 4.00
9.00 45,000 10.0 9.00 - -
9.67 30,000 10.0 9.67 - -
------------- -------------
297,000 6.69 5.27 84,000 3.79
============= =============
</TABLE>
NOTE 10. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator) and
the weighted average shares outstanding (the denominator) used in
determining basic and diluted earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
INCOME SHARES PER SHARE
--------------- ----------------- --------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
NET INCOME $ 1,007,392 2,082,715 $ 0.48
==============
EFFECT OF DILUTIVE SECURITIES
STOCK OPTIONS - 158,464
--------------- -----------------
DILUTIVE EARNINGS PER SHARE
NET INCOME $ 1,007,392 2,241,179 $ 0.45
=============== ================= ==============
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 10. EARNINGS PER COMMON SHARE (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
INCOME SHARES PER SHARE
--------------- ----------------- --------------
<S> <C> <C> <C>
Basic earnings per share
Net income $ 1,229,089 2,029,806 $ 0.61
==============
Effect of dilutive securities
Stock options - 181,714
--------------- -----------------
Dilutive earnings per share
Net income $ 1,229,089 2,211,520 $ 0.56
=============== ================= ==============
</TABLE>
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-
balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Company's
commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Commitments to extend credit $ 19,518,373 $ 7,971,877
Loans sold with recourse 1,646,904 1,908,879
Standby letters of credit 1,352,889 1,390,239
----------------- -----------------
$ 22,518,166 $ 11,270,995
================= =================
</TABLE>
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future
cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in
extending loans to customers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit,
is based on management's credit evaluation of the customer.
Collateral held varies but may include real estate and improvements,
crops, marketable securities, accounts receivable, inventory,
equipment, and personal property.
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 in instances 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.
Southern Bank of Commerce leases a small tract of land from the family
of the former Chairman of the Board. The lease provides for a monthly
rental of $2,154. It was recomputed in 1996 and will be recomputed
again in 2001 based on the change in the Consumer Price Index. The
lease is accounted for as an operating lease and the total rental
expense included in the consolidated statements of income for each of
the years ended December 31, 1997 and 1996 was $25,848.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 12. CONCENTRATIONS OF CREDIT
The Company's subsidiaries make agricultural, agribusiness,
commercial, residential and consumer loans to customers primarily in
the market areas described in Note 1. A substantial portion of the
Company's customers' abilities to honor their contracts is dependent
on the business economy in the above areas.
Fifty-five percent (55%) of the Company's loan portfolio is
concentrated in real estate loans, of which 4% consists of
construction loans. A substantial portion of these loans are secured
by real estate in the Company's primary market area. In addition, a
substantial portion of the other real estate owned is located in those
same markets. Accordingly, the ultimate collectibility of the loan
portfolio and the recovery of the carrying amount of other real estate
owned are susceptible to changes in market conditions in the Company's
primary market area. The other significant concentrations of credit
by type of loan are set forth in Note 3.
NOTE 13. REGULATORY MATTERS
The Company is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 1997, approximately $1,233,722 of retained earnings were
available for dividend declaration without regulatory approval.
The Company and the Banks 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 Banks 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
Banks capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1997, the Company and the Banks meet all capital adequacy
requirements to which it is subject.
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 13. REGULATORY MATTERS (CONTINUED)
As of December 31, 1997, the most recent notification from the FDIC
categorized the Banks as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Banks must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following
table. There are no conditions or events since that notification that
management believes have changed the Banks' category.
The Company and Banks' actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
----------------------------- --------------------------- -----------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------------- ---------- --------------- --------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
TOTAL CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 11,208,977 14.03% $ 6,390,898 8.00% $ 7,988,623 10.00%
SOUTHERN BANK OF
COMMERCE $ 7,848,969 13.91% $ 4,513,819 8.00% $ 5,642,274 10.00%
FIRST AMERICAN BANK $ 2,985,802 12.76% $ 1,871,420 8.00% $ 2,339,274 10.00%
TIER I CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 10,471,419 13.11% $ 3,195,449 4.00% $ 4,793,174 6.00%
SOUTHERN BANK OF
COMMERCE $ 7,289,534 12.92% $ 2,256,910 4.00% $ 3,385,364 6.00%
FIRST AMERICAN BANK $ 2,807,679 12.00% $ 935,710 4.00% $ 1,403,565 6.00%
TIER I CAPITAL
(TO AVERAGE ASSETS):
CONSOLIDATED $ 10,471,419 9.20% $ 4,611,564 4.00% $ 5,764,455 5.00%
SOUTHERN BANK OF
COMMERCE $ 7,289,534 8.73% $ 3,339,680 4.00% $ 4,174,600 5.00%
FIRST AMERICAN BANK $ 2,807,679 8.44% $ 1,330,680 4.00% $ 1,663,350 5.00%
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 13. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------------------------- --------------------------- -----------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ --------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
TOTAL CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 9,887,372 16.60% $ 4,765,970 8.00% $ 5,957,462 10.00%
SOUTHERN BANK OF
COMMERCE $ 7,276,250 17.64% $ 3,299,268 8.00% $ 4,124,086 10.00%
FIRST AMERICAN BANK $ 2,453,122 13.40% $ 1,464,864 8.00% $ 1,831,080 10.00%
TIER I CAPITAL
(TO RISK WEIGHTED ASSETS):
CONSOLIDATED $ 9,258,607 15.54% $ 2,382,985 4.00% $ 3,574,477 6.00%
SOUTHERN BANK OF
COMMERCE $ 6,806,624 16.50% $ 1,649,634 4.00% $ 2,474,451 6.00%
FIRST AMERICAN BANK $ 2,293,983 12.53% $ 732,432 4.00% $ 1,098,648 6.00%
TIER I CAPITAL
(TO AVERAGE ASSETS):
CONSOLIDATED $ 9,258,607 9.42% $ 3,995,359 4.00% $ 4,994,199 5.00%
SOUTHERN BANK OF
COMMERCE $ 6,806,624 9.21% $ 2,956,320 4.00% $ 3,695,400 5.00%
FIRST AMERICAN BANK $ 2,293,983 8.32% $ 1,102,560 4.00% $ 1,378,200 5.00%
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 14. 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
based 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, 1997
and 1996. 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.
AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES:
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable
fair value approximate fair values.
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.
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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.
OTHER BORROWINGS:
The carrying amounts of Federal funds purchased and securities sold
under agreements to repurchase approximate their fair value.
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, 1997 DECEMBER 31, 1996
---------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------------- --------------- --------------- --------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
interest-bearing deposits with
banks and Federal funds sold $ 8,496,465 $ 8,496,465 $ 9,445,627 $ 9,445,627
Securities available for sale 16,174,526 16,174,526 26,834,414 26,834,414
Securities held to maturity 9,281,741 9,667,334 10,062,091 10,484,389
Loans 77,841,388 78,280,325 52,167,811 52,085,279
Financial liabilities:
Deposits 104,608,684 105,192,522 90,495,197 89,059,793
Securities sold under
repurchase agreements - - 1,475,000 1,475,000
Other borrowings 3,100,000 3,100,000 1,200,000 1,200,000
</TABLE>
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of income and cash flows of Eufaula BancCorp, Inc. as of
and for the years ended December 31, 1997 and 1996:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
Cash $ 114,799 $ 197,719
Investment in subsidiaries 10,092,538 9,060,478
Other assets 1,823,937 1,571,618
--------------- ---------------
Total assets $ 12,031,274 $ 10,829,815
=============== ===============
LIABILITIES, other $ 89,947 $ 114,964
--------------- ---------------
SHAREHOLDERS' EQUITY 11,941,327 10,714,851
--------------- ---------------
Total liabilities and shareholders' equity $ 12,031,274 $ 10,829,815
=============== ===============
</TABLE>
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
INCOME, dividends from subsidiaries $ 690,000 $ 452,700
-------------- --------------
EXPENSE
Amortization 78,745 78,745
Other expense 465,998 253,182
-------------- --------------
Total expense 544,743 331,927
-------------- --------------
Income before income tax benefits and equity
in undistributed income of subsidiaries 145,257 120,773
INCOME TAX BENEFITS 170,141 90,115
-------------- --------------
Income before equity in undistributed
income of subsidiaries 315,398 210,888
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 691,994 1,018,201
-------------- --------------
Net income $ 1,007,392 $ 1,229,089
============== ==============
</TABLE>
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,007,392 $ 1,229,089
-------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 78,745 78,745
Undistributed income of subsidiaries (691,994) (1,018,201)
Increase (decrease) in taxes payable (166,763) 76,574
Provision for deferred taxes 11,521 -
Other prepaids, deferrals and (33,018) -
accruals, net
-------------- ---------------
Total adjustments (801,509) (862,882)
-------------- ---------------
Net cash provided by operating activities 205,883 366,207
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Contribution of capital to subsidiary bank (250,000) -
-------------- ---------------
Net cash used in investing activities (250,000) -
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 252,866 -
Purchase of fractional shares (85) -
Dividends paid (291,584) (202,981)
-------------- ---------------
Net cash used in financing activities (38,803) (202,981)
-------------- ---------------
Net increase (decrease) in cash (82,920) 163,226
Cash at beginning of year 197,719 34,493
-------------- ---------------
Cash at end of year $ 114,799 $ 197,719
============== ===============
</TABLE>
F-32
<PAGE>
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
EUFAULA BANCCORP, INC.
(AS OF MARCH 18, 1998)
The original Certificate of Incorporation of Eufaula BancCorp, Inc. was
filed with the Secretary of State of Delaware on May 27, 1988. This Restated
Certificate of Incorporation was duly adopted by the Board of Directors on March
18, 1998 in accordance with Section 245 of the General Corporation Law of
Delaware and it only restates and integrates and does not further amend the
provisions of the corporation's Certificate of Incorporation as heretofore
amended. There is no discrepancy between the provisions of previous amendments
and the provisions of this restated Certificate.
1. Name. The name of the corporation is "Eufaula BancCorp, Inc."
----
2. Registered Office and Agent. The initial registered office of the
---------------------------
Corporation in the State of Delaware shall be 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle, and the initial registered agent of the
Corporation at such address shall be The Corporation Trust Company.
3. Purpose and Powers. The purpose of the Corporation is to engage in
------------------
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware. Without limiting in any manner the scope
and generality of the foregoing, the Corporation shall have the following
purposes and powers:
(a) To acquire, purchase, own, receive, hold, sell, assign, exchange,
transfer, pledge, mortgage, or otherwise deal in and with any and all
securities, stocks, notes, treasury stocks, bonds, debentures, evidences of
indebtedness, or warrants or rights to subscribe to any of the foregoing, issued
or created by any one or more banks, banking corporations, bank holding
companies, trust companies, corporations, firms, associations or other entities,
public or private, whether formed under the laws of the United States of America
or of any state, commonwealth, territory, dependency or possession thereof, or
issued or created by the United States of America or any state or commonwealth
thereof, or by any agency, subdivision, territory, dependency, possession or
municipality of any of the foregoing.
<PAGE>
(b) To possess and exercise all rights, powers and privileges
resulting from the ownership, either directly or indirectly, including the right
to execute consents and vote thereon of any security, stock, note, treasury
stock, bond, debenture, evidence of indebtedness or warrants or rights to
subscribe to any of the foregoing;
(c) To acquire, purchase, own, improve, operate, maintain, hold and
carry on any bank related activities to the extent permitted by state and
federal law, including, without limiting the generality of the foregoing,
investment in securities, supervision and management of such securities,
development and management of real or personal property, financial counseling
and consulting, investment counseling and consulting, data processing and
computer services, and management services;
(d) To buy, sell, own, hold or otherwise deal in stocks, bonds, or
any other type of securities to the extent permitted by federal and state law;
(e) To purchase or otherwise acquire, own, hold, mortgage, pledge,
sell, lease, use, market, improve, promote and otherwise handle, and generally
deal in and dispose of real estate and personal property of every kind and
character;
(f) To cause to be organized under the laws of the United States of
America or of any state, or of any political subdivision or municipality
thereof, one or more corporations, firms, organizations, associations, banks,
bank holding companies, banking corporations, trust companies or any other
entity formed for the purpose of carrying on any lawful activity or business,
and to promote, participate in, operate, dissolve, wind up, liquidate, merge or
consolidate any of the foregoing;
(g) To make loans and give other forms of credit, with or without
security, and to negotiate and make contracts and agreements in connection
therewith;
(h) To borrow money for any business, object or purpose of the
corporation from time to time, without limit as to amount; to issue any kind of
indebtedness, whether or not in connection with borrowing money, including
evidences of indebtedness convertible into stock of the corporation, to secure
the payment of any evidence of indebtedness by the creation of any interest in
any of the property or rights of the corporation, whether at that time owned or
thereafter acquired;
(i) To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware; and
(j) To do any and all things necessary and proper for the
accomplishment of the aforesaid purposes of the corporation.
4. Common and Preferred Stock.
--------------------------
(a) The total number of shares that the Corporation shall have
authority to issue is five million fifty thousand (5,050,000) shares of which
five million (5,000,000) shares are to be common stock of the par value of One
Dollar ($1.00) per share, and fifty thousand (50,000) shares are to be preferred
stock of the par value of ten cents ($.10) per share.
2
<PAGE>
(b) The preferred stock may be issued in such one or more series as
shall from time to time be created and authorized to be issued by the Board of
Directors as hereinafter provided. The Board of Directors is expressly
authorized to fix and state, by resolution or resolutions from time to time
adopted, to the extent not fixed by the provisions hereinafter set forth, the
designations, voting powers, if any, preferences and relative, participating,
optional and other special rights of the shares of preferred stock, and the
qualifications, limitations and restrictions thereof, to include, without
limiting the generality of the foregoing, any of the following:
(1) the number of shares of any series;
(2) the name and any serial designations;
(3) the annual dividend rate or rates and the dividend payment
dates;
(4) whether such dividends are to be cumulative or
noncumulative, preferred, subordinate or equal to dividends declared and paid
upon other series or upon any other shares of stock of the corporation, and the
participating or other special rights, if any of such dividends;
(5) the redemption provisions, if any, with respect to any
series;
(6) the amount or amounts of preferential or other payment to
which any series of preferred stock is entitled over any other series of
preferred stock or over the common stock on voluntary or involuntary
liquidation, dissolution or winding-up, subject to the provisions set forth in
paragraph (g) of this section 4;
(7) any sinking fund or other retirement provisions and the
extent to which the charges therefor are to have priority over the payment of
dividends on or the making of sinking fund or other like retirement provisions
for shares of any other series of preferred stock or for shares of the common
stock;
(8) any conversion, exchange, purchase or other privileges to
acquire shares of any series of preferred stock or of the common stock;
(9) the voting rights, if any, of any series, subject to the
provisions hereinafter set forth.
(c) Each share of any series of preferred stock shall have the same
relative rights and be identical in all respects with all the other shares of
the same series.
(d) Prior to the issuance of any shares of preferred stock, a
certificate setting forth a copy of the resolution of resolutions with respect
to such series adopted by the Board of Directors of the corporation pursuant to
the foregoing authority vested in said board shall be made, filed and
3
<PAGE>
recorded in accordance with the then applicable requirements, if any, of the
laws of the State of Delaware. If no certificate is required, such certificate
shall be signed and acknowledged on behalf of the corporation by its chairman of
the board, president or a vice president and its corporate seal shall be affixed
thereto and attested by its secretary or an assistant secretary. Such
certificate shall be filed and kept on file at the principal office of the
corporation in the State of Delaware and in such other place or places as the
Board of Directors shall designate.
(e) Shares of any series of preferred stock which shall be issued and
thereafter acquired by the corporation through redemption, purchase, conversion
or otherwise, may, as may be provided by resolution or resolutions of the Board
of Directors and upon compliance with applicable law, be returned to the status
of authorized but unissued preferred stock, undesignated as to series, or to the
status of authorized but unissued preferred stock of the same series.
(f) At all elections of directors of the corporation and in respect
of all other matters as to which the vote of consent of stockholders of the
corporation shall be required to be taken, the holders of the common stock shall
be entitled to one (1) vote for each share held by them. The holders of each
series of the preferred stock shall have such voting rights as may be fixed by
resolution or by resolutions of the Board of Directors providing for the
issuance of such series; provided, however, that the holders of each series of
the preferred stock shall not have more than one (1) vote for each share held by
them at all elections of directors of the corporation and in respect to all
other matters as to which the vote or consent of stockholders of the corporation
shall be required to be taken.
(g) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the assets of the Corporation
available for distribution to the stockholders (whether from capital or surplus)
shall be distributed among those of the respective series of the outstanding
preferred stock, if any, as may be entitled to any preferential amounts and
among the respective holders thereof in accordance with the preferences,
relative, participating and other special rights and limitations and
restrictions, if any, fixed for each such series and the holders thereof by
resolution or resolutions of the board of directors providing for the issue of
each such series of the preferred stock; and after payment in full of the
amounts payable in respect of the preferred stock, if any, the holders of any
series of the outstanding preferred stock who are not entitled to preferential
treatment pursuant to resolutions of the board of directors providing for the
issue thereof and the holders of the outstanding common stock shall be entitled
(to the exclusion of the holders of any series of the outstanding preferred
stock entitled to preferential treatment pursuant to resolutions of the board of
directors providing for the issue thereof) to share ratably in all the remaining
assets of the Corporation available for distribution to its stockholders. A
consolidation, merger or reorganization of the Corporation with or into one or
more other corporations, or a sale, lease or other transfer of all or
substantially all of the assets of the Corporation that does not result in the
termination of the enterprise and distribution of the assets of the Corporation
of the stockholders, shall not be deemed to constitute a liquidation,
dissolution or winding-up of the Corporation within the meaning of this
paragraph, notwithstanding the fact that the Corporation may cease to exist and
may surrender its certificate of incorporation.
4
<PAGE>
5. Voting Rights.
-------------
(a) Common Stock. At all elections of directors of the Corporation
------------
and in respect of all other matters as to which the vote or consent of
shareholders of the Corporation shall be required to be taken, the holders of
the common stock shall be entitled to one (1) vote for each share held by them.
(b) Preferred Stock. The holders of each series of the preferred
---------------
stock of the Corporation shall have such voting rights as may be fixed by
resolution of the Board of Directors providing for the issuance of such series;
provided, however, that the holders of each series of the preferred stock of the
Corporation shall not have more than one (1) vote for each share held by them at
all elections of directors of the Corporation and in respect of all other
matters as to which the vote or consent of shareholders of the Corporation shall
be required to be taken; provided, further, that except as set forth in the
resolution of the Board of Directors providing for its issuance or as otherwise
required by law, the holders of the preferred stock, or any series thereof,
shall not vote separately as a class but shall vote on all matters as a single
class with the holders of the common stock of the Corporation and any other
class of capital stock of the Corporation voting with the common stock.
6. Incorporator. The name and mailing address of the incorporator is as
------------
follows:
Name Address
---- -------
Gregory B. Faison Post Office Drawer 360
Eufaula, Alabama 36027
7. Duration. The corporation shall have perpetual duration.
--------
8. No Preemptive Rights. No holder of any share of shares of any class
--------------------
of stock of the corporation shall have any preemptive or preferential right to
subscribe for any shares of stock of any class of the corporation now or
hereafter authorized or for any securities convertible into or carrying any
optional rights to purchase or subscribe for any shares of stock of any class of
the corporation now or hereafter authorized; provided, however, that no
provision of this Certificate of Incorporation shall be deemed to deny to the
Board of Directors the right, in its discretion, to grant to the holders of
shares of any class of stock at the time outstanding the right to purchase or
subscribe for shares of stock of any class or any other securities of the
corporation now or hereafter authorized at such prices and upon such other terms
and conditions as the Board of Directors, in its discretion, may fix.
5
<PAGE>
9. Board of Directors.
------------------
(a) Number, Classes and Terms. The business and affairs of the
-------------------------
corporation shall be managed by or under the direction of a Board of Directors
consisting of not less than three (3) nor more than fifteen (15) persons. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the entire Board of
Directors. The directors shall be divided into three classes, as nearly equal in
number as possible, with the term of office of the first class of directors to
expire at the third annual meeting of stockholders of the corporation, the term
of office of the second class of directors to expire at the second annual
meeting of stockholders of the corporation, and the term of office of the third
class of directors to expire at the first annual meeting of stockholders of the
corporation. At each annual meeting of stockholders of the corporation following
such initial classification and election, directors elected to succeed those
directors whose terms expire at such annual meeting shall be elected for a term
of office to expire at the third succeeding annual meeting of stockholders of
the corporation after their election.
(b) Initial Directors. The names and mailing addresses of the persons
-----------------
who are to serve as directors until the annual meeting of stockholders as
hereinabove described, or until their successors are elected and qualify, and
the class to which each shall belong, are as follows:
Names Addresses
----- ---------
First Class
-----------
Ben F. Bowden Route 2, Box 113
Eufaula, Alabama 36027
L. Y. Dean, III Post Office Drawer 360
Eufaula, Alabama 36027
Michael C. Dixon Post Office Box 619
Eufaula, Alabama 36027
Second Class
------------
Robert M. Dixon Post Office Box 619
Eufaula, Alabama 36027
Gregory B. Faison Post Office Drawer 360
Eufaula, Alabama 36027
James J. Jaxon, Jr. Post Office Drawer 618
Eufaula, Alabama 36027
6
<PAGE>
Third Class
-----------
W. D. Moorer
Post Office Box 319
Eufaula, Alabama 36027
James D. Murphy, Jr. Post Office Box 800
Eufaula, Alabama 36027
(c) Newly Created Directorships and Vacancies. Subject to the rights
-----------------------------------------
of the holders of any series of preferred stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification removal from office or other cause shall be filled
by a majority vote of the directors then in office, and directors so chosen
shall hold office until the annual meeting of stockholders of the corporation at
which the term of the class of directors to which they have been elected
expires. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(d) Continuance in Office. Notwithstanding anything to the
---------------------
contrary herein, any director whose term of office has expired shall continue to
hold office until his successor shall be elected and qualified.
(e) Removal. Subject to the rights of the holders of any series of
-------
preferred stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders or at least seventy percent (70%) of the
voting power of all of the shares of the Corporation entitled to vote for the
election of directors.
(f) Nomination of Directors by Stockholders. In addition to the right
---------------------------------------
of the Board of Directors of the Corporation to make nominations for the
election of directors, nominations for the election of directors may be made by
any stockholder entitled to vote for the election of directors if that
stockholder complies with all of the following provisions of this paragraph:
(1) Advance notice of the proposed nomination shall be received
by the secretary of the Corporation not less than fourteen (14) days nor more
than fifty (50) days prior to any meeting of the stockholders called for the
election of directors.
(2) Each notice so required shall set forth (i) the name, age,
citizenship, business address and residence address of each nominee proposed;
(ii) the principal occupation or employment of each nominee for the five years
preceding such meeting; (iii) the number of shares of stock of the Corporation
which are owned directly or indirectly, by each such nominee; and (iv) all such
other information with respect to each such nominee as would be required to be
disclosed
7
<PAGE>
in a proxy statement soliciting votes with respect to the election of
directors which complies with the Securities Exchange Act of 1934 and the rules
and regulations thereunder.
(3) A nomination made by a stockholder may only be made in a
meeting of the stockholders of the Corporation called for the election of
directors at which such stockholder is present in person or by proxy, and can
only be made by a stockholder who has theretofore complied with the notice
provisions of this paragraph.
(4) The chairman of the stockholder's meeting may determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedures, which determination if so made shall be conclusive and
binding upon the stockholders, and if he should so determine, he shall so
declare to the meeting and such nomination shall be disregarded.
(g) Powers of Directors. In furtherance and not in limitation of the
-------------------
powers conferred by statute, the Board of Directors is expressly authorized:
(1) To make, alter or repeal the by-laws of the corporation.
(2) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the corporation.
(3) To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
(4) By a majority of the whole board, to designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. Any such committee, to the extent provided in the resolution or in
the by-laws of the corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; provided, however, the by-laws may provide that in
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
(h) Ballot. The election of directors need not be by written ballot
------
unless the bylaws so provide.
(i) Amendment, Repeal, Etc. Notwithstanding any other provisions of
----------------------
this Certificate of Incorporation or the bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified by law,
this Certificate of Incorporation or the bylaws of the Corporation), the
affirmative vote of the holders of at least seventy percent (70%) of the voting
8
<PAGE>
power of all of the shares of the Corporation entitled to vote for the election
of directors at the time of such action shall be required to amend or repeal, or
to adopt any provision inconsistent with, this Article 9.
10. Stockholders Meetings Required. Any action required or permitted to
------------------------------
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of the stockholders of the Corporation and may
not be effected by any consent in writing by such stockholders. Special meetings
of stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors, upon not less than ten (10) nor more than fifty (50) days written
notice. Notwithstanding any other provisions of this Certificate of
Incorporation or the bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the bylaws of the Corporation), the affirmative vote of the
holders of at least seventy percent (70%) of the voting power of all of the
shares of the Corporation entitled to vote for the election of directors at the
time of such action shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article 10.
11. Meetings. Meetings of stockholders may be held within or without the
--------
State of Delaware, as the bylaws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the bylaws of the Corporation.
12. Personal Liability. A director shall not be personally liable to the
------------------
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that nothing contained in this
Certificate of Incorporation shall eliminate or limit the liability of a
director (1) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) under section
174 of title 8 of the Delaware Code, or (4) for any transaction from which the
director derived an improper personal benefit.
13. Indemnification. The Corporation shall indemnify its officers,
----------------
directors, employees, and agents to the extent permitted by the General
Corporation Law of Delaware.
14. Creditor's Arrangements. Whenever a compromise or arrangement is
-----------------------
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-
9
<PAGE>
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequences of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation as the case may be, and also on this
Corporation.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of Delaware, hereby certifies that the foregoing
Restated Certificate of Incorporation is the Restated Certificate of
Incorporation of the Corporation as of the date hereof and executes and
acknowledges this instrument in accordance with Section 103(b)(2) of the General
Corporation Law.
DATE March 18, 1998.
EUFAULA BANCCORP, INC.
By: ________________________________
Greg B. Faison
President and Chief Executive Officer
ATTEST:
By:_______________________________
Gloria Hagler
Secretary
10
<PAGE>
EXHIBIT 3.2
EUFAULA BANCCORP, INC.
BYLAWS
(Amended and Restated as of March 18, 1998)
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. OFFICES 1
Section 1. Registered office
Section 2. Other Offices
ARTICLE II. SHAREHOLDERS' MEETINGS 1
Section 1. Meetings, where Held
Section 2. Annual Meeting
Section 3. Special Meetings
Section 4. Notice of meetings
Section 5. Waiver of Notice
Section 6. Quorum, Voting and Proxy
ARTICLE III. DIRECTORS 2
Section 1. Powers
Section 2. Number, Election and Tenure
Section 3. Newly Created Directors or vacancies
Section 4. Meetings
Section 5. Notice and Waiver; Quorum
Section 6. No Meeting Necessary, When
Section 7. Voting
Section 8. Dividends
Section 9. Committees
Section 10. Officers, Salaries and Bonds
Section 11. Compensation of Directors
ARTICLE IV. OFFICERS 5
Section 1. Selection
Section 2. Removal, Vacancies
Section 3. Chairman of the Board
Section 4. President
Section 5. Vice President
Section 6. Secretary
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 7. Treasurer
ARTICLE V. CONTRACTS, ETC. 7
Section 1. Contracts, Deeds and Loans
Section 2. Proxies
ARTICLE VI. CHECKS AND DRAFTS 7
ARTICLE VII. STOCK 7
Section 1. Certificates of Stock
Section 2. Stock Records
Section 3. Transfer of Stock
Section 4. Dividend Record Date
Section 5. Lost Certificates
Section 6. Replacement of Mutilated
Certificates
ARTICLE VIII. INDEMNIFICATION OF OFFICERS, DIRECTORS, 8
EMPLOYEES AND AGENTS
ARTICLE IX. REIMBURSEMENT BY CORPORATE EMPLOYEES 8
ARTICLE X. AMENDMENT 9
</TABLE>
ii
<PAGE>
BYLAWS
(Amended and Restated as of March 18, 1998)
OF
EUFAULA BANCCORP, INC.
ARTICLE I. OFFICES
------------------
Section 1. Registered Office. The registered office of the corporation
- --------- -----------------
shall be in the City of Wilmington, Court of New Castle, State of Delaware.
Section 2. Other Offices. The principal place of business is Eufaula,
- --------- -------------
Alabama. Other offices and places of business may be established at any time by
the Board of Directors at any place or places where the Board may from time to
time determine or the business of the Corporation may require, whether within or
without the State of Delaware.
ARTICLE II. SHAREHOLDERS' MEETINGS
----------------------------------
Section 1. Meetings, Where Held. All meetings of the shareholders of the
- --------- --------------------
corporation, whether an annual meeting or a special meeting, shall be held in
the City of Eufaula, State of Alabama, or at any place in the United States,
within or without the State of Delaware, as determined by the Board of Directors
and as shall be stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
Section 2. Annual Meeting. The annual meeting of the shareholders of the
- --------- --------------
corporation shall be held on the third Wednesday in May of each year; provided,
that if said day shall fall upon a legal holiday, then such annual meeting shall
be held on the next day thereafter ensuing which is not a legal holiday.
Section 3. Special Meetings. A special meeting of the shareholders, for any
- --------- ----------------
purpose or purposes whatsoever, may be called at any time only by a majority of
the Board of Directors. Such a call for a special meeting must state the
purpose of the meeting.
Section 4. Notice of Meetings. Unless waived, written notice of each annual
- --------- ------------------
meeting and of each special meeting of the shareholders shall be given to each
shareholder of record entitled to vote, either personally or by first class mail
(postage prepaid) addressed to such shareholder at his last known address, not
less than 10 days nor more than 50 days prior to said meeting. Such written
notice shall specify the place, day and hour of the meeting; and in the case of
a special meeting, it shall specify also the purpose or purposes for which the
meeting is called.
<PAGE>
Section 5. Waiver of Notice. Notice of any annual or special meeting may be
- --------- ----------------
waived by any shareholder, either before or after the meeting; and the
attendance of a shareholder at a meeting, either in person or by proxy, shall of
itself constitute waiver of notice and waiver of any and all objections to the
place or time of the meeting, or to the manner in which it has been called or
convened, except when a shareholder attends solely for the purpose of stating,
at the beginning of the meeting, an objection or objections to the transaction
of business at such meeting.
Section 6. Quorum, Voting and Proxy. Shareholders representing a majority
- --------- ------------------------
of the common stock issued and outstanding shall constitute a quorum at a
shareholders' meeting. Any shareholder may be represented and vote at any
shareholders' meeting by written proxy filed with the Secretary of the
corporation on or before the date of such meeting; provided, however, that no
proxy shall be valid for more than 11 months after the date thereof unless
otherwise specified in such proxy. Each common shareholder shall be entitled to
one vote for each share of common stock owned. When a quorum is present at any
meeting, the vote of the holders of a majority of the common stock present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the Certificate of Incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
ARTICLE III. DIRECTORS
----------------------
Section 1. Powers. The business of the corporation shall be managed by its
- --------- ------
Board of Directors. The Board of Directors shall have authority to manage the
affairs and exercise the powers, privileges and franchises of the corporation as
they may deem expedient for the interests of the corporation, subject to the
terms of the Certificate of Incorporation, these bylaws, any valid Shareholders'
Agreement, and such policies and directions as may be prescribed from time to
time by the shareholders.
Section 2. Number, Election and Tenure. The number of directors of the
- --------- ---------------------------
corporation, the manner of their election and their terms of office shall be
determined as provided in the Certificate of Incorporation. In such elections,
the persons having a plurality of votes shall be elected. Nominations for the
election of directors may be made by the Board of Directors or by any
stockholder entitled to vote for the election of directors, and nominations for
the election of directors made by stockholders shall be made in the manner and
with the effect provided in the Certificate of Incorporation. Notice of
nominations which are proposed by the Board of Directors shall be given or
caused to be given by the Chairman of the Board on behalf of the Board of
Directors.
Section 3. Newly Created Directors or Vacancies. Subject to the rights of
- --------- ------------------------------------
the holders of any series of preferred stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or in any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office, and directors so chosen
shall hold office until the
2
<PAGE>
annual meeting of stockholders of the Corporation at which the term of the class
of directors to which they have been elected expires. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director. If there are no directors in office, then an election of
directors may be held as provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
Section 4. Meetings. The annual meeting of the Board of Directors shall be
- --------- --------
held without notice immediately following the annual meeting of the
shareholders, on the same date and at the same place as said annual meeting of
the shareholders. The Board by resolution may provide for regular meetings,
which may be held without notice as and when scheduled in such resolution.
Special meetings of the Board may be called at any time by the President or by
the President or Secretary on the written request of two directors. Directors or
committees of Directors may participate in meetings by means of conference
telephone or similar communications equipment if all persons participating in
the meeting can hear all other persons participating in the meeting.
Section 5. Notice and Waiver; Quorum. Notice of any special meeting of the
- --------- -------------------------
Board of Directors shall be given to each director personally or by mail,
telegram, facsimile or cablegram addressed to him at his last known address, at
least one day prior to the meeting. Such notice may be waived, either before or
after the meeting, and the attendance of a director at any special meeting shall
of itself constitute a waiver of notice of such meeting and of any and all
objections to the place or time of such meeting, or to the manner in which it
has been called or convened, except where a director states, at the beginning of
the meeting, any such objection or objections to the transaction of business. A
majority of the Board of Directors shall constitute a quorum at any Directors'
meeting.
Section 6. No Meeting Necessary, When. Any action required by law or
- --------- --------------------------
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if written consent, setting
forth the action so taken, shall be signed by all the members of the board or
committee. Such consent shall have the same force and effect as a unanimous vote
of the Board of Directors or committee and shall be filed with the Secretary and
recorded in the minute book of the corporation, or filed with the minutes or
proceedings of the committee.
Section 7. Voting. At all meetings of the Board of Directors each director
- --------- ------
shall have one vote and, except as otherwise provided herein, by law, or by the
Certificate of Incorporation, all questions shall be determined by a majority
vote of the directors present.
Section 8. Dividends. The Board of Directors may declare dividends payable
- --------- ---------
in cash or other property out of the unreserved and unrestricted net earnings of
the current fiscal year, computed to
3
<PAGE>
the date of declaration of the dividend, or the preceding fiscal year, or out of
the unreserved and unrestricted earned surplus of the corporation, as they may
deem expedient.
Section 9. Committees.
- --------- ----------
(a) The Board of Directors may by resolution adopted by a majority of
the entire Board, designate an Executive Committee of three or more directors.
Each member of the Executive Committee shall hold office until the first meeting
of the Board of Directors after the annual meeting of shareholders next
following his election and until his successor member of the Executive Committee
is elected, or until his death, resignation or removal, or until he shall cease
to be a director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all the authority of the Board
of Directors; provided, however, that the Executive Committee shall not have the
power to amend or repeal any resolution of the Board of Directors that by its
terms shall not be subject to amendment or repeal by the Executive Committee,
and the Executive Committee shall not have the authority of the Board of
Directors in reference to (1) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the Delaware General
Corporation Law to be submitted to stockholders or (2) adopting, amending or
repealing any bylaw of the Corporation.
(c) The Executive Committee shall meet from time to time on call of
the President or of any two or more members of the Executive Committee. Meetings
of the Executive Committee may be held at such place or places, within or
without the State of Delaware, as the Executive Committee shall determine or as
may be specified or fixed in the respective notices or waivers of such meetings.
The Executive Committee may fix its own rules of procedure, including provision
for notice of its meetings. It shall keep a record of its proceedings and shall
report these proceedings to the Board of Directors at the meeting thereof held
next after they have been taken, and all such proceedings shall be subject to
revision or alteration by the Board of Directors except to the extent that
action shall have been taken pursuant to or in reliance upon such proceedings
prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its
members.
(e) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee.
(f) The Board of Directors, by resolution adopted by a majority of
the entire Board, may designate one or more additional Committees, each
committee to consist of three or more of the directors of the corporation, which
shall have such name or names and shall have and
4
<PAGE>
may exercise such powers of the Board of Directors, except the power denied to
the Executive Committee, as may be determined from time to time by the Board of
Directors.
(g) The Board of Directors shall have power at any time to remove any
member of any committee, with or without cause, and to fill vacancies in and to
dissolve any such committee.
Section 10. Officers, Salaries and Bonds. The Board of Directors shall elect
- ---------- ----------------------------
all officers of the corporation and fix their compensation. The fact that any
officer is a director shall not preclude him from receiving a salary or from
voting upon the resolution providing the same. The Board of Directors may or may
not, in their discretion, require bonds from either or all of the officers and
employees of the corporation for the faithful performance of their duties and
good conduct while in office.
Section 11. Compensation of Directors. The directors may be paid their
- ---------- -------------------------
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in other capacity and receiving compensation therefore.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV. OFFICERS
--------------------
Section 1. Selection. The Board of Directors at each annual meeting shall
- --------- ---------
elect or appoint a President (who shall be a director), a Secretary and a
Treasurer, each to serve for the ensuing year and until a successor is elected
and qualified, or until his earlier resignation, removal from office, or death.
The Board of Directors, at such meeting, may or may not, in the discretion of
the Board, elect a Chairman of the Board and/or one or more Vice Presidents and,
also may elect or appoint one or more Assistant Vice Presidents and/or one or
more Assistant Secretaries and/or one or more Assistant Treasurers. When more
than one Vice President is elected, they may, in the discretion of the Board, be
designated Executive Vice President, First Vice President, Second Vice
President, etc., according to seniority or rank, and any person may hold two or
more offices except that the President shall not also serve as the Secretary.
Section 2. Removal, Vacancies. Any officers of the corporation may be removed
- --------- ------------------
from office at any time by the Board of Directors, with or without cause. Any
vacancy occurring in any office of the corporation may be filled by the Board of
Directors.
Section 3. Chairman of the Board. The Chairman of the Board of Directors,
- --------- ---------------------
when and if elected, shall whenever present, preside at all meetings of the
Board of Directors and at all meetings of the shareholders. The Chairman of the
Board of Directors shall have all the powers of the President in the event of
his absence or inability to act, or in the event of a vacancy in the office of
the President. The Chairman of the Board of Directors shall confer with the
President on matters of general policy affecting the business of the corporation
and shall have, in his discretion, power and authority to
5
<PAGE>
generally supervise all the affairs of the corporation and the acts and conduct
of all the officers of the corporation and shall have such other duties as may
be conferred upon the Chairman of the Board by the Board of Directors.
Section 4. President. The President shall be the chief executive officer of
- --------- ---------
the Corporation. If there be no Chairman of the Board elected, or in his
absence, the President shall preside at all meetings of the Board of Directors
and at all meetings of the shareholders. The immediate supervision of the
affairs of the corporation shall be vested in the President. It shall be his
duty to attend constantly to the business of the corporation and maintain strict
supervision over all of its affairs and interests. He shall keep the Board of
Directors fully advised of the affairs and condition of the corporation, and
shall manage and operate the business of the corporation pursuant to such
policies as may be prescribed from time to time by the Board of Directors. The
President shall, subject to approval of the Board, hire and fix the compensation
of all employees and agents of the corporation other than officers, and any
person thus hired shall be removable at his pleasure.
Section 5. Vice President. Any Vice President of the corporation may be
- --------- --------------
designated by the Board of Directors to act for and in the place of the
President in the event of sickness, disability or absence of said President or
the failure of said President to act for any reason, and when so designated,
such Vice President shall exercise all powers of the President in accordance
with such designation. The Vice Presidents shall have such duties as may be
required of, or assigned to, them by the Board of Directors or the President.
Section 6. Secretary. It shall be the duty of the Secretary to keep a
- --------- ---------
record of the proceedings of all meetings of the shareholders and Board of
Directors; to keep the stock records of the corporation; to notify the
shareholders and directors of meetings as provided by these bylaws; and to
perform such other duties as may be prescribed by the President or Board of
Directors. Any Assistant Secretary, if elected, shall perform the duties of the
Secretary during the absence or disability of the Secretary and shall perform
such other duties as may be prescribed by the President, Secretary or Board of
Directors.
Section 7. Treasurer. The Treasurer shall keep, or cause to be kept, the
- --------- ---------
financial books and records of the corporation, and shall faithfully account for
its funds. He shall make such reports as may be necessary to keep the President
and Board of Directors fully informed at all times as to the financial condition
of the corporation, and shall perform such other duties as may be prescribed by
the President or Board of Directors. Any Assistant Treasurer, if elected, shall
perform the duties of the Treasurer during the absence or disability of the
Treasurer, and shall perform such other duties as may be prescribed by the
President, Treasurer or Board of Directors.
ARTICLE V. CONTRACTS, ETC.
--------------------------
Section 1. Contracts, Deeds and Loans. All contracts, deeds, mortgages,
- --------- --------------------------
pledges, promissory notes, transfers and other written instruments binding upon
the corporation shall be executed on behalf of the corporation by the President
or by such other officers or agents as the Board of
6
<PAGE>
Directors may designate from time to time. Any such instrument required to be
given under the seal of the corporation may be attested by the Secretary or
Assistant Secretary of the corporation.
Section 2. Proxies. The President shall have full power and authority, on
- --------- -------
behalf of the corporation, to attend and to act and to vote at any meetings of
the shareholders, bondholders or other security holders of any corporation,
trust or association in which this corporation may hold securities, and at any
such meeting shall possess and may exercise any and all of the rights and powers
incident to the ownership of such securities and which as owner thereof the
corporation might have possessed and exercised if present, including the power
and authority to delegate such power and authority to a proxy selected by him.
The Board of Directors may, by resolution, from time to time, confer like powers
upon any other person or persons.
ARTICLE VI. CHECKS AND DRAFTS
-----------------------------
Checks and drafts of the corporation shall be signed by such officer or officers
or such other employees or persons as the Board of Directors may from time to
time designate.
ARTICLE VII. STOCK
------------------
Section 1. Certificates of Stock. Certificates of stock in the corporation
- --------- ---------------------
shall be issued with the seal of the corporation affixed, and shall be signed by
the President or a Vice President, and by the Secretary or Assistant Secretary.
Section 2. Stock Records. A stock register shall be kept by the Secretary
- --------- -------------
which shall accurately record the issuance of each certificate of stock, the
date of such issuance, the name and post office address of the person, firm, or
corporation to whom issued, and the transfer of any shares represented thereby.
Section 3. Transfer of Stock. The stock of the corporation shall be
- --------- -----------------
transferred only by surrender of the certificate and transfer on the books of
the corporation.
Section 4. Dividend Record Date. Shareholders eligible to receive dividends
- --------- --------------------
declared by the Board of Directors shall be those of record on the books of the
corporation at the close of the 15th day prior to the date fixed for the payment
of such dividend, unless the Board by resolution shall fix some other date for
determining such eligibility.
Section 5. Lost Certificates. Where a person to whom a certificate of stock
- --------- -----------------
has been issued alleges it to have been lost, destroyed or wrongfully taken, and
if the corporation is not on notice that such certificate has been acquired by a
bona fide purchaser, a new certificate may be issued upon such owner's
compliance with the following conditions, to-wit: (a) He shall file with the
Secretary of the corporation his request for the issuance of a new certificate,
with an affidavit setting forth the time, place and circumstances of the loss;
(b) He shall also file with the Secretary his unconditional obligation in
writing (or, at the corporation's option, a bond with good and sufficient
security),
7
<PAGE>
acceptable to the corporation, to indemnify and save harmless the corporation
from any and all damage, liability and expense of every nature whatsoever
resulting from the corporation's issuing a new certificate in place of the one
alleged to have been lost; and (c) He shall comply with such other reasonable
requirements as the Chairman of the Board, the President or the Board of
Directors shall deem appropriate under the circumstances.
Section 6. Replacement of Mutilated Certificates. A new certificate may be
- --------- -------------------------------------
issued in lieu of any certificate previously issued that may be defaced or
mutilated upon surrender for cancellation of a part of the old certificate
sufficient in the opinion of the Secretary to duly identify the defaced or
mutilated certificate and to protect the corporation against loss or liability.
Where sufficient identification is lacking, a new certificate may be issued upon
compliance with the conditions set forth in Section 5 of this Article.
ARTICLE VIII. INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
--------------------------------------
To the extent permitted by the General Corporation Law of Delaware, the
corporation shall fully indemnify and otherwise protect its officers, directors,
employees and agents.
ARTICLE IX. REIMBURSEMENT BY CORPORATE EMPLOYEES
------------------------------------------------
Any payments made to an employee of the corporation in the form of a salary or
bonus payable which shall be disallowed, in whole or in part, as a deductible
expense to the corporation for federal or state income tax purposes by the
Internal Revenue Service, or by the state revenue department or collector of
revenue, shall be reimbursed by such employee to the corporation to the full
extent of such disallowance within six (6) months after the date on which the
corporation pays the deficiency with respect to such disallowance. It shall be
the duty of the Board of Directors of the corporation to enforce payment to the
corporation by any such employee for the amount disallowed. The corporation
shall not be required to legally defend any proposed disallowance by the
Internal Revenue Service or by the state revenue department or collector of
revenue, and the amount required to be reimbursed by such employee shall be the
amount, as finally determined by Agreement or otherwise, which is actually
disallowed as a deduction. In lieu of payments to the corporation by any such
employee, the Board of Directors may, in the discretion of the Board, withhold
amounts from such employee's future compensation payments until the amount owed
to the corporation has been fully recovered.
8
<PAGE>
ARTICLE X. AMENDMENT
--------------------
All bylaws of this corporation may be altered, amended or added to by a majority
of the stock present and voting therefor at a shareholders' meeting or, subject
to such limitations as the shareholders may from time to time prescribe, by a
majority vote of all of the directors then holding office at any meeting of the
Board of Directors.
9
<PAGE>
EXHIBIT 10.4
EUFAULA BANCCORP, INC.
DIRECTOR STOCK PURCHASE PLAN
WHEREAS, EUFAULA BANCCORP, INC. (the Company) desires to enable the Company
and its participating subsidiaries to provide to their respective Directors a
convenient means of purchasing for long term investment, and not for short-term
speculative gain, Common Stock of the Company and thereby promote interest in
the Company's continuing success, growth, and development;
NOW, THEREFORE, the Company hereby adopts the Director Stock Purchase Plan
for the benefit of the Directors of the Company and its respective subsidiaries.
The Eufaula BancCorp, Inc. Director Stock Purchase Plan shall be in the
following form with such appropriate variations, amendments, deletions and
insertions as may from time to time be adopted by the Board of Directors of the
Company consistent with the preamble hereof:
ARTICLE I.
DEFINITIONS
- -----------
A. "Cash Account": The separate account which is required to be
------------
established and maintained with respect to each Participant for the purpose of
recording Participant contributions, Participating Company contributions and
dividends paid to the Agent under the Plan.
B. "Common Stock of the Company": The shares of voting common stock of
---------------------------
the par value of $1.00 per share of the Company, and any shares which may be
issued and exchanged for or upon a change of such shares whether in subdivision
or in combination thereof and whether as a part of a classification or
reclassification thereof, or otherwise.
<PAGE>
C. "Company": Eufaula BancCorp, Inc.
-------
D. "Contribution Date": The fifteenth day of each month upon which
-----------------
Participant contributions and Participating Company contributions to the Plan
shall be made.
E. "Effective Date of the Plan": DATE June 13, 1995.
--------------------------
F. "Director": Any person who currently serves or in the future shall be
--------
elected to serve as a member of the Board of Directors of one or more
Participating Companies which compensates such members in fees or other cash
remuneration for serving in such capacity. Persons who serve in a multiple
capacity as a member of the Boards of Directors of one or more Participating
Companies shall be allowed to participate in the Plan in only one such capacity,
and, if such multiple capacity involves service upon the Board of Directors of
the Company and another Participating Company or Participating Companies, such
single participation shall be limited to participation at the Company level.
G. Participating Company": The Company and each subsidiary of the Company
---------------------
which compensates its Directors in fees or other cash remuneration for serving
in such capacity and adopts and elects to participate in the Plan.
H. "Offering Period": The last fifteen days of each calendar quarter
---------------
during which Directors may elect to participate in the automatic transfer
contribution procedure of the Plan for the ensuing calendar quarter shall be the
Offering Period for the ensuing calendar quarter.
I. "Participant": A Director who shall have become a Participant in the
-----------
Plan by submitting to the Agent through his Participating Company an Automatic
Transfer Contribution Form and whose participation in the Plan shall not have
been terminated.
2
<PAGE>
J. "Automatic Transfer Contribution Form": The form which a Participant
------------------------------------
must forward to the Agent through his Participating Company so as to participate
in the Automatic Transfer Contribution procedure of the Plan. This form shall
contain in addition to other pertinent information, the Participant's
appointment of the agent to provide for the acquisition of Common Stock of the
Company for his benefit under the Plan and a description, including the account
number, of the demand deposit account maintained by the Participant with a
Participating Company from which the Participant desires his Participant
contribution to the Agent of the Plan to be made by automatic transfer.
K. "Plan Year": The period commencing on January 1/st/ of each year and
---------
ending on December 31/st/ of each year.
L. "Stock Share Account": The separate account which is required to be
-------------------
established and maintained with respect to each Participant for the purpose of
recording Common Stock of the Company purchased for and allocated to the
Participant under the Plan.
M. "Agent": Synovus Trust Company, as the original Agent of the Plan, and
-----
any duly appointed successor Agent.
ARTICLE II.
PARTICIPATION
-------------
A Director may become a Participant in the Plan during an Offering Period
by submitting an Automatic Transfer Contribution Form to the Agent through his
Participating Company.
ARTICLE III.
PARTICIPANT CONTRIBUTIONS
-------------------------
Participants may contribute to the Plan only through automatic transfers.
3
<PAGE>
In connection with the Participant automatic transfer contribution
procedure, Participant contributions to the Agent of the Plan shall be made on a
monthly basis in multiples of fifty dollars ($50.00) per month with a maximum
monthly contribution of two hundred Dollars ($200.00).
Automatic transfer contributions shall be made only on Contribution Dates.
The Agent, and the Participating Company with whom the demand deposit account to
be charged with the automatic transfer is established, shall have sole and
absolute discretion in the determination of the Contribution Date upon which the
automatic transfer contributions of Participants in the Plan shall be made.
Only on Contribution Dates will the Agent use the Participant and
corresponding Participating Company contributions it receives under the Plan to
provide for acquisition of Common Stock of the Company.
Automatic transfer contributions may be authorized only during an Offering
Period and only by submitting an Automatic Transfer Contribution Form to the
Agent through a Participating Company. A Participant may change the
participation level of his automatic transfer contribution by submitting a new
Automatic Transfer Contribution Form to the Agent through his Participating
Company at least ten (10) days prior to a Contribution Date. Automatic Transfer
Contributions may be terminated pursuant to Article XIII hereof.
ARTICLE IV.
PARTICIPATING COMPANY CONTRIBUTIONS
-----------------------------------
Each Participating Company shall make contributions to the Cash Accounts of
its Directors who are Participants in the Plan.
4
<PAGE>
In connection with the Participant automatic transfer contribution
procedure, Participating Company contributions to the Agent of the Plan for each
of its Directors who are Participants in the Plan shall be made on a monthly
basis on the Contribution Date the automatic transfer contribution for such
Participant is made. Participating Company contributions shall be equal to fifty
percent (50%) of the amount of each participant's automatic transfer
contribution.
Participating Company contribution made by each Participating Company to
the Cash Accounts of its Director who are Participants in the Plan shall be
treated as compensation income. Such amount will be reflected on the Form 1099
furnished to Directors annually by their respective Participating Companies.
ARTICLE V.
ADMINISTRATION OF PLAN
----------------------
The Plan shall be administered by the Company. The Company may, from time
to time, adopt rules and regulations not inconsistent with the Plan for carrying
out the Plan or for providing for any and all matters not specifically covered
herein.
The functions and duties of the Company, in general, are as follows:
(a) To make provision for payment of contributions to the Agent.
(b) To establish rules for the administration, and make interpretations of the
Plan, which rules and interpretations will apply to all Participants
similarly situated.
(c) To develop forms used in connection with the Plan.
(d) To maintain certain records, including, but not limited to, those with
respect to contributions made, stock distributed to Participants, and
dividends paid to the Agent.
5
<PAGE>
(e) To file with the appropriate governmental agencies any and all reports and
notifications required of the Plan and to provide all Participants and
beneficiaries with any and all reports and notifications to which they are
by law entitled.
(f) To engage a certified public accountant to perform at its discretion,
audits of the Plan.
(g) To give prompt notification to the Agent of the effectiveness and the
initiation of proceedings which would result in the termination of and the
termination of effectiveness of the registration, exemption or
qualification of the Plan under federal and applicable state securities
laws.
(h) To receive from and, upon its approval thereof, to promptly forward to the
Agent the written requests of Participants for the issuance of stock
certificates for all or part of the full number of shares of Common Stock
of the Company in such Participants' Stock Share Accounts.
(i) To give prompt notification to the Agent of the termination of the
participation of any Participant in the Plan for any reason whatsoever.
(j) To perform any and all other functions reasonably necessary to administer
the Plan.
The Participating Companies shall indemnify each employee of the Company
and any other Participating Company involved in the administration of the Plan
against all costs, expenses and liabilities, including attorney's fees, incurred
in connection with any action, suit or proceeding instituted against him
alleging any act or omission or commission performed by him while acting in good
faith in discharging his duties with respect to the Plan. This indemnification
is limited to the extent such costs and expenses are not covered under insurance
as may be now or hereafter provided by a Participating Company.
ARTICLE VI.
AGENT
-----
There shall be one (1) original Agent. The original agent shall be Synovus
Trust Company.
6
<PAGE>
The Agent shall receive all contributions made by the Participating
Companies and Participants in cash only. All contributions so received,
(hereinafter referred to as the "Fund"), shall be held, managed, and
administered pursuant to the terms of the Plan. No part of the Fund shall be
used for or diverted to purposes other than for the exclusive benefit of the
Participants and former Participants in the Plan.
Any Agent may be removed by the Company at any time. Any Agent may resign
at any time upon thirty (30) days notice in writing to the Company. Upon renewal
or resignation of an Agent, the Company shall appoint a successor Agent who
shall have the same powers and duties as those conferred upon the original Agent
hereunder. Upon acceptance of such appointment by the successor Agent, the
predecessor Agent shall assign, transfer, and pay over to such successor Agent
the funds and properties then constituting the Fund and any and all records it
might have with regard to the Fund and the administration of the Fund.
Any corporation into which any corporate agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which any corporate agent may be a party, or any corporation to
which all or substantially all of the business of any corporate agent may be
transferred, shall be the successor of such agent without the filing of any
instrument or performance of any further act.
The Agent shall have the following powers and authority in the
administration and investment of the Fund:
(a) To cause to be purchased for the benefit of the Participants in the
Plan unrestricted shares of Common Stock of the Company in its name as Agent of
the Plan, to retain the same and to cause the same to be disposed of pursuant to
the terms of the Plan.
7
<PAGE>
(b) To cause any Common Stock of the Company held as part of the Fund to
be registered in the Agent's own name or in the name of one or more nominees,
but the books and records of the Agent shall at all times show that all such
investments are part of the Fund.
(c) To keep such portion of the Fund in cash or cash balances as the
Agent, from time to time, may in its sole discretion deem to be in the best
interests of the Participants in the Plan without liability for interest
thereon.
(d) To make, execute, acknowledge and deliver any and all documents of
transfer and conveyance and any and all other instruments as may be necessary or
appropriate to carry out the powers herein granted.
(e) To do all such acts, take all such proceedings, and exercise all such
rights and privileges, although not specifically mentioned herein, as the Agent
may deem necessary or desirable to administer the Fund, and to carry out and
satisfy the purposes and intent of the Plan.
The Agent shall be paid compensation by the Company or any other
Participating Company for its service as Agent under the Plan.
The Company agrees to indemnify and hold harmless the Agent, each of the
employees of the Agent and any subagents appointed by the Agent against any and
all losses, claims, damages, liabilities and expenses, including without
limitation reasonable costs of investigation and counsel fees and disbursements
which may be imposed upon the Agent, its employees or its subagents or incurred
by it or them in connection with its or their acceptance of its or their
appointment as Agent or subagent hereunder or the performance of its or their
duties hereunder, including without limitation any litigation arising from the
Plan or involving the subject matter hereof.
8
<PAGE>
The Agent shall keep accurate and detailed accounts of all receipts,
disbursements, and other transactions hereunder. All accounts, books, and
records, relating to such transactions shall be open to inspection and audit at
all reasonable times by any person designated by the Company.
On or before the fifteenth (15/th/) day following the close of each quarter
or upon such other reporting schedules and for such other reporting periods as
the Company and the Agent shall agree, the Agent shall file with the Company a
written report setting forth all receipts, disbursements, and other transactions
effected during such preceding month or reporting period, and setting forth the
current status of the Fund.
ARTICLE VII.
STOCK PURCHASE
--------------
The Agent shall cause the funds in the Participants' Cash Accounts to be
used to purchase unrestricted shares of Common Stock of the Company for the
benefit of the Participants in the Plan.
Neither the Agent, the Company, and Participating Company retained by the
Agent shall have any responsibility as to the value of the Common Stock of the
Company acquired for any Participant's Stock Share Account. The Agent's duty to
purchase shares of Common Stock of the Company under the Plan shall be subject
to any and all legal restrictions or limitations at any time by governmental
authority, including, but not limited to, the Securities and Exchange
Commission, and shall be subject to any other restrictions, limitations or
considerations deemed valid by the Agent.
Accordingly, neither the Agent, the Company, any Participating Company
shall be liable in any way if, as a result of such restrictions, limitations or
considerations, the whole amount of funds
9
<PAGE>
available in the Participant's Cash Accounts for purchase of Common Stock of the
Company is not applied to the purchase of such shares at the time herein
otherwise provided or contemplated.
ARTICLE VIII.
ALLOCATION OF STOCK
-------------------
As promptly as practical after each purchase of Common Stock of the Company
for the benefit of the Participants in the Plan, the Agent shall determine the
average cost per share of all shares so purchased. The Agent shall then ratably
allocate such shares to the Stock Share Accounts of the Participants according
to the balances in their respective Cash Accounts, charging each Cash Account
with the average cost, including transactional costs, of the shares allocated to
each Stock Share Account. Full shares and fractional share interests in one
share (to three decimal places) shall be allocated, accordingly.
ARTICLE IX.
ISSUANCE OF STOCK CERTIFICATES
------------------------------
Stock certificates for all or a part of the full number of shares of Common
Stock of the Company in a Participant's Stock Share Account shall be issued by
the Agent as promptly as practicable to such Participant after receipt by the
Agent from the Company of a written request therefore from such Participant and
the approval of such written request by the Company.
ARTICLE X.
DIVIDENDS AND DISTRIBUTIONS
---------------------------
Cash dividends, stock dividends and stock splits received by the Agent for
the Plan will be allocated by the Company to each Participant's Cash Account or
Stock Share Account, whichever
10
<PAGE>
is appropriate, to the extent that such cash or stock is attributable to the
allocated Common Stock of the Company in each Participant's Stock Share Account.
Cash dividends so allocated shall be used to acquire additional shares of Common
Stock of the Company.
ARTICLE XI.
VOTING RIGHTS
-------------
Each Participant in the Plan shall have the rights and powers of ordinary
shareholders with respect to the shares of Common Stock of the Company in such
Participant's Stock Share Account, including, but not limited to, the right to
vote such shares. The Company shall deliver or cause to be delivered to the
Participants in the Plan at the time and in the manner such materials are sent
to shareholders of the Company generally, all reports, proxy solicitation
materials and all other disclosure type communications distributed to
shareholders of the Company generally.
ARTICLE XII.
REPORTS TO PARTICIPANTS
-----------------------
As soon as practical following the end of each Plan Year, or more often and
as often as the Company may elect, the Company shall send to each Participant a
written report of all transactions in this Cash Account and Stock Share Account
and the number of shares of Common Stock of the Company allocated to his Stock
Share Account and the value of his Cash Account as of the date of such report.
11
<PAGE>
ARTICLE XIII.
TERMINATION OF PARTICIPATION IN PLAN
------------------------------------
A Participant may terminate his participation in the Plan by directing the
Participating Company with which he maintains his demand deposit account from
which the automatic transfer for contributions are made to his Cash Account in
writing at least 10 days prior to a Contribution Date to cease making such
automatic transfers. As promptly as practical and after the approval of the
Company, the Agent, upon written notification given to it by the Company, shall
deliver to the former Participant a certificate for the number of full shares of
Common Stock of the Company allocated to his Stock Share Account, together with
a check for any fractional share interests and any remaining balance in his Cash
Account. If a Participant terminates his participation in the Plan, he may not
reenter the Plan until the expiration of a six-month waiting period.
Assignments or pledges of any interest under the Plan are prohibited.
ARTICLE XIV.
TERMINATION OF STATUS AS A DIRECTOR
-----------------------------------
Participation of the Plan shall automatically terminate without notice upon
termination of a Participant's status as a Director whether by death,
retirement, resignation, or otherwise. If termination is other than by death, as
promptly as practical and after the approval of the Company, the Agent, upon
written notification given to it by the Company, shall deliver to the former
Participant a certificate for the number of full shares of Common Stock of the
Company allocated to his Stock Share Account and not previously distributed,
together with a check for any fractional share interests any remaining balance
in his Cash Account. If termination is by reason of death, settlement shall be
made, as promptly as practical and after approval of the Company, by the Agent,
12
<PAGE>
upon written notification given to it by the Company, in the same manner and
shall be to the Participant's duly appointed legal representative after
satisfaction of any applicable legal requirements.
ARTICLE XV.
EXPENSES
--------
The Company shall bear the cost of administering the Plan, including any
transfer taxes incurred in transferring the Common Stock of the Company from the
Plan to the Participants. Any broker's fees, commissions, postage or other
transaction costs incurred will be included in the cost of the Common Stock of
the Company to the Participant.
ARTICLE XVI.
LIMITATION ON THE SALE OF STOCK
-------------------------------
No Common Stock of the Company will be offered or sold under the Plan to
any Director in any state where the sale of such stock is not permitted under
the applicable laws of such state. For purpose of this Article XVI, the offering
or sale of stock is not permitted under the applicable laws of state if, inter
alia, the securities laws of such state would require the Plan and/or the stock
offered pursuant thereto, to be registered in such state and the Plan and/or
stock is not registered therein.
ARTICLE XVII.
AMENDMENT, TERMINATION AND SUSPENSION OF THE PLAN
-------------------------------------------------
The Company reserves the right to amend the Plan at any time; however, no
amendment shall affect or diminish any Participant's right to the benefit of
contributions made by him or his
13
<PAGE>
Participating Company prior to the date of such amendment, and no amendment
shall affect the authority, duties, rights, liabilities or indemnities of the
Agent without the Agent's prior written consent. Participants shall be notified
by first class mail to the address of record on the books of the agent of any
amendments to the Plan.
The Company reserves the right to terminate the Plan and each Participating
Company reserves the right to terminate its participation in the Plan. In such
event, there will be no further Participant contributions and no further
Participating Company contributions, but the Agent shall endeavor to make
purchases of Common Stock of the Company out of available funds and the Company
shall allocate such stock to the Stock Share Accounts of the former Participants
in the usual manner. As soon as practical thereafter, the Agent shall deliver to
each former Participant a certificate for all the full shares of Common Stock of
the Company allocated to his Stock Share Account, together with a check for any
fractional share interests and any remaining balance in his Cash Account.
The Company reserves the right to suspend Participating Company
contributions to the Plan if the Board of Directors of the Company feels that
the financial condition of the Company and/or any one or all of the
Participating Companies warrants such suspension. Upon suspension of
contributions by the Company, no Participating Company contributions shall be
made by any Participating Company or accepted by the Agent. Such suspension
shall remain in effect until such time as the Board of Directors of the Company
determines that the financial condition of the Company and/or any one or all of
the Participating Companies warrants the restoration of the Plan to full active
status. During the time Participating Company contributions are suspended, the
Board of Directors of the Company shall determine whether Participant
contributions are to be continued
14
<PAGE>
or suspended. If the Board of Directors of the Company permits the continuance
of Participant contributions, each Participant may elect to continue or suspend
Participant contributions on his own behalf. If the Participant elects to
continue to make Participant contributions while Participating Company
contributions are suspended by the Company, neither the Company nor any other
Participating Company shall be under any obligation at any future date to make
Participating Company contributions with respect to such Participant's
contribution made during such period of suspension by the Company. During any
period of suspension, under this Article XVII, the Plan shall continue normal
operation to the extent practical.
ARTICLE XVIII.
SUSPENSION OR TERMINATION IF
STOCK PURCHASE IS PROHIBITED
----------------------------
In addition to all rights to terminate or suspend the Plan otherwise
reserved herein, it is understood that the Plan may be suspended or terminated
at any time or from time to time by the Board of Directors of the Company for
the Company and all Participating Companies, if the Plan's continuance would,
for any reason, be prohibited under any federal and state law even though such
prohibition arises because of some act on the part of the Company, including,
but not limited to, the Company engaging in a distribution of securities. If the
Plan is suspended under this Article XVIII, no Participating Company
contributions or Participant contributions shall be made and no Common Stock of
the Company shall be purchased until the Plan is restored to an active status.
If the Plan is terminated pursuant to this Article XVIII, there shall be no
further Participant contributions and no further Participating Company
contribution and there shall be no additional purchases of Common Stock of the
Company. As soon as practical after the termination pursuant to this Article
15
<PAGE>
XVIII, the Agent shall deliver to each former Participant a certificate for all
the full shares of Common Stock of the Company allocated to his Stock Share
Account, together with a check for any fractional share interests and any
remaining balance in his Cash Account.
ARTICLE XIX.
CONSTRUCTION
------------
This Plan shall be governed by and construed under the laws of the State of
Alabama.
ARTICLE XX.
NOTICES
-------
Notice to any of the parties hereto shall be made by mail addressed as
follows:
If to the Agent:
Synovus Trust Company - As Plan agent for
Eufaula BancCorp, Inc. Director Stock Purchase Plan
Attention: Corporate Trust Dept.
Post Office Box 120
Columbus, Georgia 31902
If to any of the other parties hereto or to the Company:
Eufaula BancCorp, Inc.
Attention: Gloria Hagler
Post Office Box 1269
Eufaula, Alabama 36072-1269
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers thereunto duly authorized and its corporate seal to be affixed
hereto and attested, and the Agent has caused this Agreement to be executed by
its officers thereunto duly authorized and its corporate seal to be affixed
hereto, all as of the day and year first above written.
16
<PAGE>
Eufaula BancCorp, Inc.
Date: June 13, 1995 By:__________________________________________
_____________________________________________
Chairman of the Board
Date: June 13, 1995 Attest:______________________________________
_____________________________________________
Vice President and Secretary/Treasurer
(Corporate Seal)
"AGENT"
Synovus Trust Company
Date: June 21,1995 By:__________________________________________
_____________________________________________
Vice President
Date: June 21, 1995 Attest:______________________________________
_____________________________________________
Assistant Vice President
(Corporate Seal)
17
<PAGE>
Subsidiaries and affiliates of Eufaula BancCorp, Inc. Participating in the
Director Stock Purchase Plan signify their adoption of the Plan and become a
party to this Agreement by herein below executing this Plan.
EUFAULA BANK & TRUST CO.
Date: By:__________________________________________
_____________________________________________
Title
Date: Attest:______________________________________
_____________________________________________
Title
(Corporate Seal)
1/st/ AMERICAN BANK OF WALTON CO.
Date: By:__________________________________________
_____________________________________________
Title
Date: Attest:______________________________________
_____________________________________________
Title
(Corporate Seal)
18
<PAGE>
AUTOMATIC TRANSFER CONTRIBUTION FORM
Gentlemen:
I, there undersigned Director of ____________________________ hereby elect
to participate in Eufaula BancCorp, Inc. Director Stock Purchase Plan ("the
Plan") and hereby constitute and appoint Synovus Trust Company, Agent of the
Plan, to cause to be acquired for my benefit shares of Common Stock of Eufaula
BancCorp, Inc. pursuant to the terms and provisions of the Plan.
________________________________ (Name of Subsidiary Bank of Eufaula
BancCorp, Inc.) is authorized and directed to make monthly automatic transfers
from my checking account at such bank bearing the account number
_________________ to the Agent of the Plan, said monthly account transfers to be
in the amount of $______________ (multiples of $50.00, not to exceed $200.00 per
month.)
I understand that such monthly automatic transfers will continue to be made
in this account until I authorize a change in this amount, until I withdraw from
the Plan, or until the occurrence of some other terminating event under the
Plan.
I, the undersigned Director, acknowledge receipt of a Copy of the Eufaula
-------
BancCorp, Inc. Director Stock Purchase Plan; and acknowledge that I have read
- -------------------------------------------
and am thoroughly familiar with the content thereof.
This instrument is hereby executed in _________________ (Name of City),
_____________ (Name of State), this ____ day of _______________, 19____.
Witnesses:
______________________________ ________________________________________
Director's Signature
______________________________
________________________________________
Print Director's Name
______________________________
Contribution Date (To be ________________________________________
completed by Agent and Director's Social Security No.
Subsidiary Bank of Eufaula
BancCorp, Inc. with whom
________________________________________
Director's checking account Street Address
is maintained.)
________________________________________
City State Zip
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
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