<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[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>
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: September 22, 1998 /s/ Gregory B. Faison
-----------------------------------
Gregory B. Faison, President, Chief
Executive Officer and Director
30
<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.
/s/ MAULDIN & JENKINS, LLC
Albany, Georgia
February 4, 1998
F-2
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
ASSETS 1997 1996
------ ------------ ------------
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, 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
============ ============
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
- --------------------------------------------------------------------------------
1997 1996
---------- ----------
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
---------- ----------
3,754,564 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
========== ==========
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
COMMON STOCK AVAILABLE
--------------------- CAPITAL RETAINED FOR SALE,
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAXES TOTAL
--------- ---------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 676,602 $ 676,602 $ 909,189 $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) (191,381)
Two-for-one common
stock split 676,602 676,602 (676,602) - - -
--------- ---------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1996 1,353,204 1,353,204 232,587 9,221,469 (92,409) 10,714,851
Net income - - - 1,007,392 - 1,007,392
Cash dividend declared,
$.14 per share - - - (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 options 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 $ 107,779 $9,737,976 $ (2,344) $11,941,327
========= ========== ========= ========== ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
------------ ------------
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 for sale (19,697) (27,470)
(Increase) decrease in interest
receivable 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
accruals, net (960,132) (620,612)
------------ ------------
Total adjustments (206,110) (413,063)
------------ ------------
Net cash provided by
operating activities 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)
------------ ------------
F-6
<PAGE>
EUFAULA BANCCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits $14,243,546 $6,750,906
Proceeds from the exercise of stock
options 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 banks (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.
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
=========== ======== ========= ===========
<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
fixed rate of 6.58% due on March 14, 1999. $2,500,000 $ -
Advances from Federal Home Loan Bank with interest at
adjustable rates (currently at 6.50% at December 31,
1997) due on September 23, 1998. 600,000 -
---------- ----
$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
-------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
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 - -
Exercised (68,117) 3.27 - -
Forfeited (111,883) 4.00 - -
--------- --------
Under option, end of year 433,234 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>
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>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. STOCK OPTIONS (CONTINUED)
As permitted by SFAS No. 123, "Accounting for Stock-based
Compensation", the Company recognizes compensation cost for stock-
based employee awards in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company recognized no
compensation cost for stock-based employee compensation for the years
ended December 31, 1997 and 1996 because the exercise price is equal
to the fair value of the stock at the grant date. No options were
granted during the year ended December 31, 1996. Pro forma net income
and pro forma earnings per share required by SFAS No. 123 have not
been presented for the year ended December 31, 1997 because the
reduction in proforma net income and proforma earnings per share was
immaterial.
The fair value of the options granted in 1997 was based upon the
discounted value of future cash flows of the options using the
following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate 6.13%
Expected life of the options 10 years
Expected dividends (as a percent of the fair value of the stock) 1.92%
Expected volatility 23.30%
</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:
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
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
=========== ===========
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
AMOUNT VALUE AMOUNT 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 accruals, net (33,018) -
---------- -----------
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
