<PAGE>
As Filed With the Securities And Exchange Commission on July 12, 1996;
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________________
FIRST ALLIANCE BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 6025 58-1793778
--------------- ------------------ -------------------
(State of other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classi- Identification No.)
incorporation) fication Code No.)
63 Barrett Parkway, N.E.
Marietta, Georgia 30066
(770) 425-2265
-------------------------------------------------------------
(Address, including ZIP Code, and telephone number, including
area code, of registrant's principal executive offices)
Kathryn L. Knudson, Esq.
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor, 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6952
--------------------------------------------------
(Name, address, including ZIP Code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of the proposed sale of the securities to the
- ------------------------------------------------------------------------------
public: As soon as practicable after this Registration Statement becomes
- ------
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G check the following box. ___
[Cover Page Continued]
Exhibit Index on page _____.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
=========================================================================================
Proposed Proposed
Title of each class maximum maximum Amount of
of securities Amount to be offering aggregate Registration
to be registered registered price per unit offering price Fee
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 746,530/(1)/ shares $7.82/(2)/ $5,837,865/(2)/ $2,014/(2)/
$1.00 par value
=========================================================================================
</TABLE>
(1) The number of shares being registered assumes shareholder approval of an
increase in the number of authorized shares of the Registrant's common stock
from 2,000,000 to 20,000,000. Following shareholder approval of such matter at
the Registrant's Special Meeting of Shareholders, the Registrant will amend its
Articles of Incorporation to authorize the requisite number of shares of common
stock. The Registrant will deregister the indicated shares if the Registrant's
shareholders fail to approve the matter described above.
(2) In accordance with Rule 457(f)(2), the total registration fee has been
calculated based on the book value per share of the Premier common stock as of
March 31, 1996 ($7.82).
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
FIRST ALLIANCE BANCORP, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Item
Number Caption in Form S-4 Caption in Prospectus
- ------ ------------------- ---------------------
1 Forepart of Facing Page of Registration
Registration Statement; Joint Proxy
Statement and Statement/Prospectus Cover
Outside Front Cover Page
Page of Prospectus...
2 Inside Front and Joint Proxy
Outside Back Cover Statement/Prospectus Cover
Pages of Prospectus.. Page; Available Information
3 Risk Factors, Ratio Summary
of Earnings to Fixed
Charges and Other
Information..........
4 Terms of the Summary; The Merger; Effect
Transaction.......... of the Merger on the Rights
of Shareholders; Appendices
A through C
5 Pro Forma Financial Summary; Pro Forma Combined
Information.......... Condensed Financial Data
6 Material Contracts Summary; The Merger
with the Company
Being Acquired.......
7 Additional Not Applicable
Information Required
for Reoffering by
Persons and Parties
Deemed to be
Underwriters.........
8 Interests of Named Not Applicable
Experts and Counsel..
9 Disclosure of Part II of Registration
Commission Position Statement--Undertakings
on Indemnification
for Securities Act
Liabilities..........
10 Information with Not Applicable
Respect to S-3
Registrants..........
11 Incorporation of Not Applicable
Certain Information
by Reference.........
<PAGE>
Item
Number Caption in Form S-4 Caption in Prospectus
- ------ ------------------- ---------------------
12 Information with Not Applicable
Respect to S-2 or
S-3 Registrants......
13 Incorporation of Not Applicable
Certain Information
by Reference.........
14 Information with Available Information;
Respect to Summary; First Alliance
Registrants Other Financial Statements; First
Than S-2 or S-3 Alliance Management's
Registrants.......... Discussion and Analysis of
Financial Condition and
Results of Operations;
Business of First Alliance;
Comparative Market Prices
and Dividends; First
Alliance Selected
Historical Financial Data;
Description of First
Alliance Common Stock
15 Information with Not Applicable
Respect to S-3
Companies............
16 Information with Not Applicable
Respect to S-2 or
S-3 Companies........
17 Information with Summary; Premier Financial
Respect to Companies Statements; Premier
Other Than S-2 or Management's Discussion and
S-3 Companies........ Analysis of Financial
Condition and Results of
Operations; Business of
Premier; Comparative Market
Prices and Dividends;
Premier Selected Historical
Financial Data
18 Information if Summary; The Premier
Proxies, Consents or Meeting; The First Alliance
Authorizations Are Meeting; The Merger;
to be Solicited...... Certain Relationships and
Related Transactions;
Management of First
Alliance; Management of
Premier; Certain Regulatory
Considerations; Proposals
Presented to the First
Alliance Shareholders Only
19 Information if Not Applicable
Proxies, Consents or
Authorizations Are
Not to be Solicited
in an Exchange Offer
<PAGE>
To the Holders of Premier Common Stock:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Meeting") of Premier Bancshares, Inc. ("Premier"), to be held at 2180 Atlanta
Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, on , 1996,
at , local time, notice of which is enclosed.
At the Meeting, you will be asked to consider and vote on a proposal to
approve an Agreement and Plan of Reorganization (the "Agreement"), entered
into with First Alliance Bancorp, Inc. ("First Alliance") pursuant to which
Premier will merge (the "Merger") with and into First Alliance, and Premier
Bank, FSB ("Premier Bank") and Premier Lending Corporation ("Premier
Lending"), which are wholly owned subsidiaries of Premier, will become wholly
owned subsidiaries of First Alliance. Upon consummation of the Merger, each
share of Premier common stock ("Premier Common Stock") issued and outstanding
will be converted into and exchanged for the right to receive one share of
First Alliance common stock.
The accompanying Joint Proxy Statement/Prospectus includes a description of
the proposed Merger and also provides other specific information concerning
the Meeting. In addition, it contains two proposals to be submitted only to
the First Alliance shareholders, who will not be voting on the proposed
Merger. Although you are welcome to review the additional proposals, you may
only vote on the proposal to approve the Merger.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors has agreed to vote all Premier shares beneficially owned by such
member (other than in a fiduciary capacity) in favor of the Merger.
Consummation of the Merger is subject to certain conditions, including
approval of the Agreement by the holders of Premier Common Stock, approval of
the proposal to authorize additional shares of First Alliance common stock by
First Alliance shareholders and approval of the Merger by various regulatory
agencies.
It is important to understand that approval of the Agreement requires the
affirmative vote of a majority of the shares of Premier Common Stock entitled
to vote at the Meeting. Consequently, a failure to vote will have the same
effect as a vote against the Agreement.
Accordingly, whether or not you plan to attend the Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger is a significant transaction for
Premier, and your vote on this matter is of great importance. ON BEHALF OF THE
BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE MERGER BY MARKING
THE ENCLOSED PROXY CARD "FOR" THE MERGER.
Sincerely,
Darrell D. Pittard
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
Dear First Alliance Bancorp, Inc. Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Meeting") of First Alliance Bancorp, Inc. ("First Alliance") to be held at
First Alliance's main office, 63 Barrett Parkway, N.E., Marietta, Georgia
30066, on , 1996, at , local time, notice of which is enclosed.
At the Meeting, you will be asked to consider and vote on proposals to amend
First Alliance's Articles of Incorporation to increase the number of shares of
authorized $1.00 par value common stock ("First Alliance Common Stock") from
2,000,000 to 20,000,000 and to authorize 2,000,000 shares of preferred stock,
with such designations, relative rights and preferences as may from time to
time be approved by the Board of Directors. The text of these proposals begins
on page of the attached Joint Proxy Statement/Prospectus.
Because the proposed amendment to authorize additional shares of First
Alliance Common Stock must be adopted in order to effect the proposed merger
(the "Merger") of Premier Bancshares, Inc. with and into First Alliance,
information regarding the Merger has been provided in addition to the
description of the proposals listed above in the Joint Proxy
Statement/Prospectus that accompanies this letter. PLEASE NOTE THAT ONLY THE
HOLDERS OF PREMIER COMMON STOCK ARE ENTITLED TO VOTE ON THE MERGER AND THAT
THE INFORMATION REGARDING THE MERGER IS PRESENTED TO YOU ONLY IN CONNECTION
WITH YOUR CONSIDERATION OF THE PROPOSAL TO AUTHORIZE ADDITIONAL SHARES OF
FIRST ALLIANCE COMMON STOCK. Please read the Joint Proxy Statement/Prospectus
carefully and consider thoughtfully the information set forth therein.
The proposals listed above have been approved unanimously by your Board of
Directors and are recommended by the Board to you for approval. Each member of
the Board of Directors has agreed to vote all shares of First Alliance Common
Stock beneficially owned by such member (other than in a fiduciary capacity)
in favor of the proposals listed above.
Whether or not you plan to attend the Meeting, you are urged to complete,
sign, and return promptly the enclosed proxy card. If you attend the Meeting,
you may vote in person if you wish, even if you previously have returned your
proxy card. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR
APPROVAL OF THE PROPOSALS PRESENTED BY MARKING THE ENCLOSED PROXY CARD "FOR"
PROPOSALS ONE AND TWO.
Sincerely,
J. Edward Mulkey, Jr.
President and Chief Executive
Officer
<PAGE>
PREMIER BANCSHARES, INC.
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(404) 814-3090
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1996
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Premier Bancshares, Inc. ("Premier") will be held at Premier's
main office, 2180 Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia
30326 on , 1996, at .m., local time, for the following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Reorganization,
dated as of January 30, 1996, as amended (the "Agreement"), by and between
First Alliance Bancorp, Inc. ("First Alliance") and Premier pursuant to which
(i) First Alliance will acquire all of the issued and outstanding common stock
("Premier Common Stock") of Premier through the merger of Premier with and
into First Alliance (the "Merger"), and (ii) each share of Premier Common
Stock (except for certain shares held by Premier or First Alliance) will be
converted into one share of First Alliance common stock, as described more
fully in the accompanying Joint Proxy Statement/Prospectus.
2. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if necessary,
further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Premier Common Stock entitled to vote at the Meeting. Only
shareholders of record at the close of business on , 1996 are entitled to
receive notice of and to vote at the Meeting or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF PREMIER COMMON
STOCK VOTE "FOR" THE MERGER AS DESCRIBED ABOVE.
Holders of Premier Common Stock have the right to dissent from approval of
the Agreement and obtain payment for the fair value of their shares of Premier
Common Stock by following the procedures described in Title 14, Chapter 2,
Article 13 of the Georgia Business Corporation Code. See Appendix B hereto and
"The Merger--Dissenters' Rights."
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of
Premier an instrument of revocation or a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
Barbara J. Burtt
Secretary
Atlanta, Georgia
, 1996
<PAGE>
FIRST ALLIANCE BANCORP, INC.
63 BARRETT PARKWAY, N.E.
MARIETTA, GEORGIA 30066
(770) 425-2265
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1996
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of First Alliance Bancorp, Inc. ("First Alliance") will be held at
First Alliance's main office, 63 Barrett Parkway, N.E., Marietta, Georgia,
30066 on , 1996, at .m., local time, for the following purposes:
1. Increase in Authorized Shares of Common Stock. To consider and vote on an
amendment to the First Alliance Articles of Incorporation to increase the
number of authorized shares of common stock from 2,000,000 to 20,000,000.
2. Authorization of Preferred Stock. To consider and vote on an amendment to
the First Alliance Articles of Incorporation to authorize 2,000,000 shares of
preferred stock, with such designations, relative rights and preferences as
may be approved from time to time by the Board of Directors.
3. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if necessary,
further solicitation of proxies.
Only shareholders of record at the close of business on , 1996, are
entitled to receive notice of and to vote at the Meeting or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FIRST ALLIANCE
COMMON STOCK VOTE "FOR" THE PROPOSALS LISTED ABOVE.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of
First Alliance an instrument of revocation or a duly executed proxy bearing a
later date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
John B. Harwell
Secretary
Marietta, Georgia
, 1996
<PAGE>
JOINT PROXY STATEMENT
FOR THE SPECIAL MEETING FOR THE SPECIAL MEETING
OF SHAREHOLDERS OF SHAREHOLDERS
TO BE HELD ON , 1996 TO BE HELD ON , 1996
FIRST ALLIANCE BANCORP, INC. PREMIER BANCSHARES, INC.
63 BARRETT PARKWAY, N.E. 2180 ATLANTA PLAZA
MARIETTA, GEORGIA 30066 950 EAST PACES FERRY ROAD
(770) 425-2265 ATLANTA, GEORGIA 30326
(404) 814-3090
---------------
PROSPECTUS
OF
FIRST ALLIANCE BANCORP, INC.
63 BARRETT PARKWAY, N.E.
MARIETTA, GEORGIA 30066
(770) 425-2265
FOR
746,530 SHARES OF COMMON STOCK
---------------
This Prospectus of First Alliance Bancorp, Inc., a bank holding company
organized and existing under the laws of the state of Georgia ("First
Alliance"), relates to the shares of its common stock, par value $1.00 per
share ("First Alliance Common Stock"), which are issuable to the shareholders
of Premier Bancshares, Inc. ("Premier") upon consummation of the proposed
merger (the "Merger") described herein, pursuant to which Premier will merge
with and into First Alliance pursuant to the terms of an Agreement and Plan of
Reorganization dated as of January 30, 1996, as amended, by and between First
Alliance and Premier (the "Agreement"). A copy of the Agreement is attached to
this Joint Proxy Statement/Prospectus as Appendix A.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) Premier will merge with and into First
Alliance, and (ii) each outstanding share of the no par value common stock of
Premier ("Premier Common Stock") will be converted into one share of First
Alliance Common Stock.
Upon consummation of the Merger, Premier will merge with and into First
Alliance. First Alliance will survive the Merger and the separate existence of
Premier will cease, and First Alliance will change its name to "First
Alliance/Premier Bancshares, Inc." Premier Bank and Premier Lending will
become wholly owned subsidiaries of First Alliance. First Alliance intends to
combine the operations of First Alliance Bank with those of Premier Bank into
a commercial bank to be known as "Premier Bank" after the Merger. For a
further description of the terms of the Merger, see "The Merger."
This Prospectus also constitutes a Joint Proxy Statement of First Alliance
and Premier and is being furnished to their respective shareholders in
connection with the solicitation of proxies by their respective Boards of
Directors. The proxies solicited by the Premier Board of Directors will be
used at the Special Meeting of Shareholders of Premier (the "Premier Meeting")
to be held on , 1996, including any adjournment or postponement thereof,
to consider and vote on the proposed Merger and to transact such other
business as may properly come before the Premier Meeting or any adjournments
thereof. The proxies solicited by the First Alliance Board of Directors will
be used at the Special Meeting of Shareholders of First Alliance (the "First
Alliance Meeting") to be held on , 1996, including any adjournment or
postponement thereof, for the following purposes: (i) to consider and vote on
an amendment to First Alliance's Articles of Incorporation increasing the
number of authorized shares of First Alliance Common Stock from 2,000,000 to
20,000,000; (ii) to consider and vote on an amendment to First Alliance's
Articles of Incorporation to authorize the issuance of 2,000,000 shares of
preferred stock with such designations, relative rights and preferences as may
be approved from time to time by its Board of Directors; and (iii) to transact
such other business as may properly come before the First Alliance Meeting or
any adjournment(s) thereof. This Joint Proxy Statement/Prospectus and the
accompanying proxy cards are first being mailed to shareholders of First
Alliance and Premier on or about , 1996.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is , 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 1
SUMMARY..................................................................... 2
The Parties............................................................... 2
Special Meeting of Premier Shareholders................................... 2
Special Meeting of First Alliance Shareholders............................ 3
The Merger; Exchange Ratio................................................ 3
Dissenters' Rights........................................................ 3
Reasons for the Merger.................................................... 4
Fairness Opinion.......................................................... 4
Effective Date............................................................ 5
Conversion of Premier Preferred Stock to Premier Common Stock............. 5
Exchange of Stock Certificates............................................ 5
Regulatory Approvals and Other Conditions................................. 5
Waiver, Amendment, and Termination of the Agreement....................... 6
Directors and Executive Officers Following the Merger..................... 6
Interests of Certain Persons in the Merger................................ 6
Certain Federal Income Tax Consequences of the Merger..................... 6
Accounting Treatment...................................................... 6
Certain Differences in Shareholders' Rights............................... 7
Comparative Market Prices of Common Stock................................. 7
Comparative Per Share Data................................................ 8
Selected Pro Forma Financial Data......................................... 9
THE PREMIER MEETING......................................................... 10
General................................................................... 10
Record Date; Vote Required................................................ 10
THE FIRST ALLIANCE MEETING.................................................. 12
General................................................................... 12
Record Date; Vote Required................................................ 12
THE MERGER.................................................................. 14
General................................................................... 14
Treatment of Premier Options.............................................. 14
Background of and Reasons for the Merger.................................. 14
Fairness Opinion.......................................................... 16
Effective Date of the Merger.............................................. 20
Conversion of Premier Preferred Stock to Premier Common Stock............. 20
Distribution of Stock Certificates After the Merger....................... 21
Conditions to Consummation of the Merger.................................. 21
Regulatory Approvals...................................................... 22
Waiver, Amendment, and Termination of the Agreement....................... 22
Conduct of Business Pending the Merger.................................... 23
Directors and Executive Officers Following the Merger..................... 24
Interests of Certain Persons in the Merger................................ 24
Dissenters' Rights........................................................ 25
Certain Federal Income Tax Consequences of the Merger..................... 27
Accounting Treatment...................................................... 28
Expenses and Fees......................................................... 29
Resales of First Alliance Common Stock.................................... 29
</TABLE>
<PAGE>
<TABLE>
<S> <C>
COMPARATIVE MARKET PRICES AND DIVIDENDS................................... 29
BUSINESS OF FIRST ALLIANCE................................................ 31
General................................................................. 31
First Alliance Bank..................................................... 32
Employees............................................................... 34
Properties.............................................................. 34
Legal Proceedings....................................................... 34
MANAGEMENT OF FIRST ALLIANCE.............................................. 35
Directors............................................................... 35
Executive Officers...................................................... 36
Executive Compensation.................................................. 36
Compensation of Directors............................................... 37
Employment Agreement.................................................... 37
Security Ownership of Certain Beneficial Owners and Management.......... 38
Certain Relationships and Related Transactions.......................... 40
SELECTED HISTORICAL FINANCIAL DATA OF FIRST ALLIANCE...................... 41
FIRST ALLIANCE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION................................................. 42
BUSINESS OF PREMIER....................................................... 57
General................................................................. 57
Premier Bank............................................................ 57
Premier Lending Corporation............................................. 58
MANAGEMENT OF PREMIER..................................................... 62
Directors............................................................... 62
Executive Officers...................................................... 62
Executive Compensation.................................................. 63
Compensation of Directors............................................... 64
Employment Agreement.................................................... 64
Security Ownership of Certain Beneficial Owners and Management.......... 65
Certain Relationships and Related Transactions.......................... 66
SELECTED HISTORICAL FINANCIAL DATA OF PREMIER............................. 67
PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 68
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION........................ 77
DESCRIPTION OF FIRST ALLIANCE COMMON STOCK................................ 82
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS............................ 83
Authorized Capital Stock................................................ 83
Removal of Directors.................................................... 84
Vote Required for Shareholder Approval.................................. 84
Actions by Shareholders Without a Meeting............................... 84
Special Meeting of Shareholders......................................... 85
Shareholder Nominations................................................. 85
Number of Directors..................................................... 85
</TABLE>
<PAGE>
<TABLE>
<S> <C>
CERTAIN REGULATORY CONSIDERATIONS.......................................... 85
General.................................................................. 85
Payment of Dividends..................................................... 87
Capital Adequacy......................................................... 88
Support of Subsidiary Institutions....................................... 89
Prompt Corrective Action................................................. 89
FDIC Insurance Assessments............................................... 91
Safety and Soundness Standards........................................... 92
Depositor Preference..................................................... 93
Certain Applicable Thrift Regulations.................................... 93
EXPERTS.................................................................... 93
OPINIONS................................................................... 94
PROPOSALS PRESENTED TO THE FIRST ALLIANCE SHAREHOLDERS ONLY................ 95
FIRST ALLIANCE BANCORP, INC. FINANCIAL STATEMENTS.......................... F-1
PREMIER BANCSHARES, INC. FINANCIAL STATEMENTS.............................. F-26
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED............... A-1
APPENDIX B: ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE............ B-1
APPENDIX C: OPINION OF ALEX SHESHUNOFF INVESTMENT BANKING.................. C-1
</TABLE>
<PAGE>
AVAILABLE INFORMATION
First Alliance is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements, and other information can be obtained, at prescribed rates, from
the SEC by addressing written requests for such copies to the Public Reference
Section at the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. In addition, such reports, proxy statements, and other information
can be inspected at the public reference facilities referred to above and at
the regional offices of the SEC at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.
This Joint Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of First Alliance (including any exhibits and amendments
thereto, the "Registration Statement") filed with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the securities
offered hereby. This Joint Proxy Statement/Prospectus does not include all of
the information in the Registration Statement, certain portions of which have
been omitted pursuant to the rules and regulations of the SEC. For further
information about First Alliance and the securities offered hereby, reference
is made to the Registration Statement. The Registration Statement may be
inspected and copied, at prescribed rates, at the SEC's public reference
facilities at the addresses set forth above. First Alliance Common Stock is
traded in the Nasdaq SmallCap Market. Reports, proxy statements, and other
information concerning First Alliance may be inspected at the offices of the
National Association of Securities Dealers, Inc. (the "NASD"), 1735 K Street,
N.W., Washington, D.C. 20006.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST
ALLIANCE OR PREMIER. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FIRST ALLIANCE OR PREMIER SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
All information included in this Joint Proxy Statement/Prospectus with
respect to First Alliance was supplied by First Alliance, and all information
included herein with respect to Premier was supplied by Premier.
1
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Premier
Meeting, the First Alliance Meeting, the proposed Merger, and the shares of
First Alliance Common Stock to be issued upon consummation thereof. This
summary does not purport to be complete and is qualified in its entirety by
the more detailed information appearing elsewhere or incorporated by reference
in this Joint Proxy Statement/Prospectus. Shareholders are urged to read
carefully the entire Joint Proxy Statement/Prospectus, including the
Appendices. As used in this Joint Proxy Statement/Prospectus, the terms "First
Alliance" and "Premier" refer to those entities, respectively, and, where the
context requires, to those entities and their respective subsidiaries.
THE PARTIES
First Alliance. First Alliance is a bank holding company headquartered in
Marietta, Georgia, with five branch locations of its state-chartered bank
subsidiary, First Alliance Bank, located in Cobb County. First Alliance also
holds a controlling interest in Alliance Finance Company ("Alliance Finance"),
which has offices in Cobb and Paulding Counties. As of March 31, 1996, First
Alliance had total consolidated assets of approximately $166.7 million, total
consolidated deposits of approximately $132.9 million and total consolidated
shareholders' equity of approximately $17.2 million. Through its subsidiaries,
First Alliance offers a broad range of banking and banking-related services.
First Alliance, formerly known as Commex Financial Corporation, was
incorporated in 1988 under the laws of Georgia and the regulations of the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). First Alliance's
principal executive offices are located at 63 Barrett Parkway, N.E., Marietta,
Georgia 30066, and its telephone number at such address is (770) 425-2265.
Premier. Premier is a thrift holding company headquartered in Atlanta,
Georgia. Premier operates through its thrift subsidiary, Premier Bank, FSB
("Premier Bank"), which has offices in Acworth and Dunwoody, Georgia, and
engages in mortgage, commercial and construction lending through another
subsidiary, Premier Lending Corporation ("Premier Lending"), which has offices
in Atlanta, Marietta, Dunwoody, Roswell, Duluth, Snellville and Stockbridge,
Georgia. As of March 31, 1996, Premier had total consolidated assets of
approximately $96.2 million, total consolidated deposits of approximately
$60.2 million and total consolidated shareholders' equity of approximately
$6.5 million.
Premier, formerly known as Premier Lending Corporation, was incorporated in
1993 under the laws of Georgia, and became a thrift holding company in 1995
under regulations promulgated by the Office of Thrift Supervision (the "OTS").
Premier's principal executive offices are located at 2180 Atlanta Plaza, 950
East Paces Ferry Road, Atlanta, Georgia 30326, and its telephone number at
such address is (404) 814-3090.
SPECIAL MEETING OF PREMIER SHAREHOLDERS
The Premier Meeting will be held at .m., local time, on , 1996, at
Premier's main office, 2180 Atlanta Plaza, 950 East Paces Ferry Road, Atlanta,
Georgia 30326, for the purpose of considering and voting on approval of the
Agreement and transacting such other business as may properly come before the
meeting. See "The Premier Meeting."
Only holders of record of Premier Common Stock at the close of business on
, 1996 (the "Record Date"), will be entitled to vote at the Premier
Meeting. Approval of the Agreement requires the affirmative vote of a majority
of the shares of Premier Common Stock entitled to vote at the Premier Meeting.
As of the Record Date, there were 435,669 shares of Premier Common Stock
outstanding and entitled to be voted.
The directors and executive officers of Premier beneficially owned, as of
the Record Date, 193,900 shares (or approximately 42.55% of the outstanding
shares) of Premier Common Stock. The foregoing beneficial
2
<PAGE>
ownership figures do not reflect the ownership of an aggregate of 80,437
shares of Premier Convertible Preferred Stock ("Premier Preferred Stock"),
which is convertible into 80,437 shares of Premier Common Stock. Assuming the
conversion of all of the shares of Premier Preferred Stock beneficially owned
by the directors and executive officers of Premier prior to the Record Date,
such directors and executive officers would beneficially own 274,337 shares
(or approximately 53.16% of the outstanding shares) of Premier Common Stock
and would therefore be able to ensure shareholder approval of the Merger.
Although each member of the Board of Directors of Premier has agreed to vote
those shares of Premier Common Stock beneficially owned by such member (except
for shares held in a fiduciary capacity) in favor of the Merger, management
does not anticipate that the directors or executive officers of Premier will
convert their shares of Premier Preferred Stock into Premier Common Stock
prior to the Record Date.
As of the Record Date, the directors and executive officers of First
Alliance did not beneficially own any shares of Premier Common Stock. As of
that date, neither Premier nor First Alliance held any shares of Premier
Common Stock in a fiduciary capacity for others. See "The Premier Meeting."
SPECIAL MEETING OF FIRST ALLIANCE SHAREHOLDERS
The First Alliance Meeting will be held at , local time, on ,
1996, at First Alliance's main office, 63 Barrett Parkway, N.E., Marietta,
Georgia 30066, for the following purposes: (i) to consider and vote on an
amendment to the First Alliance Articles of Incorporation to increase the
number of authorized shares of First Alliance Common Stock from 2,000,000 to
20,000,000; (ii) to consider and vote on an amendment to the First Alliance
Articles of Incorporation to authorize the issuance of 2,000,000 shares of
preferred stock with such designations, relative rights and preferences as may
be approved from time to time by its Board of Directors; and (iii) to transact
such other business as may properly come before the Special Meeting or any
adjournment(s) thereof. See "The First Alliance Meeting."
Only holders of record of First Alliance Common Stock at the close of
business on , 1996 (the "Record Date") will be entitled to vote at the
First Alliance Meeting. The affirmative vote of a majority of the First
Alliance Common Stock outstanding and entitled to vote at the First Alliance
Meeting will be required to approve the proposed amendments to the Articles of
Incorporation. Approval of any other matter will require the affirmative vote
of a majority of the shares present in person or by proxy and entitled to
vote. As of the Record Date, there were 1,604,999 shares of First Alliance
Common Stock outstanding and entitled to vote.
The directors and executive officers of First Alliance beneficially owned,
as of the Record Date, 493,257 shares (or approximately 30.59% of the
outstanding shares) of First Alliance Common Stock. Each member of the Board
of Directors of First Alliance has agreed to vote those shares beneficially
owned by such member (except for shares held in a fiduciary capacity) in favor
of the proposals to be presented at the First Alliance Meeting. As of the
Record Date, the directors and executive officers of Premier did not
beneficially own any shares of First Alliance Common Stock. As of that date,
neither First Alliance nor Premier held any shares of First Alliance Common
Stock in a fiduciary capacity for others. See "The First Alliance Meeting."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the combination of Premier with First Alliance
pursuant to the merger of Premier with and into First Alliance. On the
Effective Date, each share of Premier Common Stock then issued and outstanding
(excluding any shares held by First Alliance, Premier or their respective
subsidiaries, other than shares held in a fiduciary capacity or in
satisfaction of debts previously contracted) will be converted into one share
of First Alliance Common Stock. See "The Merger--General."
DISSENTERS' RIGHTS
Holders of Premier Common Stock who dissent from the Merger are entitled to
the rights and remedies of dissenting shareholders set forth in Article 13 of
the Georgia Business Corporation Code (the "Georgia Code"),
3
<PAGE>
subject to compliance with the procedures set forth therein. Among other
things, a dissenting shareholder is entitled to receive cash in an amount
equal to the "fair value" of such holder's shares. A copy of Article 13 of the
Georgia Code is set forth in Appendix B to this Joint Proxy
Statement/Prospectus and a summary thereof is included under "The Merger--
Dissenters' Rights." TO PERFECT DISSENTERS' RIGHTS, A SHAREHOLDER MUST COMPLY
WITH ARTICLE 13 OF THE GEORGIA CODE, WHICH REQUIRES, AMONG OTHER THINGS, THAT
A SHAREHOLDER GIVE PREMIER NOTICE OF SUCH HOLDER'S INTENT TO DISSENT FROM
APPROVAL OF THE AGREEMENT PRIOR TO THE VOTE OF THE SHAREHOLDERS AT THE PREMIER
MEETING AND THAT SUCH SHAREHOLDER NOT VOTE HIS OR HER SHARES IN FAVOR OF THE
AGREEMENT. ANY SHAREHOLDER WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE
INSTRUCTIONS AS TO THE MANNER IN WHICH SUCH HOLDER'S SHARES ARE TO BE VOTED
WILL BE DEEMED TO HAVE VOTED IN FAVOR OF THE AGREEMENT AND THUS WILL NOT BE
ENTITLED TO ASSERT DISSENTERS' RIGHTS.
REASONS FOR THE MERGER
Premier's Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, Premier and its shareholders. ACCORDINGLY, PREMIER'S BOARD
UNANIMOUSLY RECOMMENDS THAT PREMIER'S SHAREHOLDERS VOTE FOR APPROVAL OF THE
AGREEMENT. EACH MEMBER OF THE BOARD OF DIRECTORS OF PREMIER HAS AGREED TO VOTE
SUCH MEMBER'S SHARES OF PREMIER COMMON STOCK IN FAVOR OF THE AGREEMENT. In
approving the Merger, Premier's directors considered First Alliance's
financial condition, various alternatives to the Merger (including remaining
as an independent thrift holding company), the consideration to be received by
Premier's shareholders relative to First Alliance's book value and earnings
per share of common stock, the anticipated synergies and enhanced resources
and capabilities that would result from the Merger, the increased liquidity of
the First Alliance Common Stock to be received in the Merger, the competitive
and regulatory environments for financial institutions and commercial lending
businesses generally, the income tax aspects of the Merger as a tax-free
exchange and the likelihood that the Merger would be approved by applicable
regulatory authorities without undue conditions or delay.
The First Alliance Board of Directors has unanimously approved the Agreement
and has determined that the Merger is in the best interests of First Alliance
and its shareholders. In approving the Merger, First Alliance's directors
considered Premier's financial condition, operations and market area; First
Alliance's overall strategic focus; the financial terms and income tax
consequences of the Merger; the opportunity to leverage First Alliance's
excess capital by acquiring Premier's business and operations; the trading
prices of the First Alliance Common Stock during September and October 1995;
and the management philosophy of Premier and its compatibility with that of
First Alliance. See "The Merger--Background of and Reasons for the Merger."
FAIRNESS OPINION
Premier. The Board of Directors of Premier has determined not to obtain an
opinion from an independent third party regarding the fairness of the Merger
to the Premier shareholders. However, the terms of the Merger have been
reviewed and unanimously approved by the Premier Board of Directors. In that
regard, the Board of Directors determined that the Merger is fair to, and in
the best interests of, Premier's shareholders, customers and employees and the
communities in which Premier operates based upon its evaluation of the
considerations described in "The Merger--Background of and Reasons for the
Merger."
First Alliance. Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") has
rendered an opinion to First Alliance that, based on and subject to the
procedures, matters, and limitations described in its opinion and such other
matters as it considered relevant, as of the date of its opinion, the terms of
the Merger were fair, from a financial point of view, to the shareholders of
First Alliance. Sheshunoff's opinion is attached as Appendix C to this Joint
Proxy Statement/Prospectus. Shareholders are urged to read the opinion in its
entirety for a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith. See "The
Merger--Fairness Opinion."
4
<PAGE>
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
a Certificate of Merger filed by First Alliance with the Georgia Secretary of
State. If no effective date or time is specified, the Merger will become
effective upon the filing of the Certificate of Merger. Unless otherwise
agreed upon by First Alliance and Premier, and subject to the conditions to
the obligations of the parties to effect the Merger, the parties will use
their reasonable efforts to cause the Effective Date to occur by the last
business day of the month in which the last of the following events occurs:
(i) the effective date (including the expiration of any applicable waiting
period) of the last federal or state regulatory approval required for the
Merger or; (ii) the date on which the Agreement is approved by the requisite
vote of Premier shareholders. The parties expect that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated in the third quarter of 1996, although there can be no assurance
as to whether or when the Merger will occur. See "The Merger--Effective Date
of the Merger, --Conditions to Consummation of the Merger, and --Waiver,
Amendment, and Termination of the Agreement."
CONVERSION OF PREMIER PREFERRED STOCK TO PREMIER COMMON STOCK
The Certificate of Designation of the Premier Preferred Stock provides that
the Premier Preferred Stock may, at Premier's option, be converted into an
equal number of shares of Premier Common Stock upon approval by the holders of
the Premier Common Stock of a merger of Premier with and into another
corporation. Consequently, upon approval of the Merger by the holders of the
Premier Common Stock, the Board of Directors will order the conversion (the
"Conversion") of all outstanding shares of Premier Preferred Stock (except for
78,261 shares held by First Alliance, which will be cancelled in lieu of
conversion) into an equal number of shares of Premier Common Stock effective
immediately prior to, and contingent upon, consummation of the Merger. The
former holders of Premier Preferred Stock will therefore receive in the Merger
one share of First Alliance Common Stock for each share of Premier Common
Stock into which their Premier Preferred Stock was converted.
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, First Alliance will cause SunTrust Bank,
acting in its capacity as exchange agent for First Alliance (the "Exchange
Agent"), to mail to the former shareholders of Premier a letter of
transmittal, together with instructions for the exchange of such shareholders'
certificates representing shares of Premier Common Stock or Premier Preferred
Stock for certificates representing shares of First Alliance Common Stock and
reflecting the change of First Alliance's name to First Alliance/Premier
Bancshares, Inc. Former shareholders of Premier will not be entitled to
receive dividends on their shares of First Alliance Common Stock until First
Alliance has received their Premier stock certificates. PREMIER SHAREHOLDERS
SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER
OF TRANSMITTAL AND INSTRUCTIONS. See "The Merger--Distribution of Stock
Certificates After the Merger."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the OTS and the Department of Banking
and Finance of the State of Georgia (the "Georgia Department"). Applications
for the requisite approvals have been filed with these agencies, each of which
has yet to issue its approval of the Merger. There can be no assurance that
the approvals of these agencies will be given or as to the timing or
conditions of such approvals.
Consummation of the Merger is also subject to the approval by the First
Alliance shareholders of an amendment to the First Alliance Articles of
Incorporation increasing the number of authorized shares of First Alliance
Common Stock from 2,000,000 to 20,000,000. Following shareholder approval of
this matter at the First Alliance Meeting, and effective prior to the
consummation of the Merger, First Alliance will amend its Articles of
Incorporation to authorize the requisite number of shares of common stock. If
the proposal to authorize additional shares of First Alliance Common Stock is
not approved, the Articles of Incorporation cannot be amended and the Merger
will not be consummated.
5
<PAGE>
Consummation of the Merger is subject to various other conditions, including
receipt of the required approval of the Premier shareholders, receipt of an
opinion of counsel as to the tax-free nature of certain aspects of the Merger,
and certain other customary conditions. See "The Merger--Conditions to
Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date by mutual action of the Boards of Directors of both
Premier and First Alliance, or by action of the Board of Directors of either
company under certain circumstances, including if the Merger is not
consummated by September 30, 1996, unless the failure to consummate by such
time is due to a breach of the Agreement by the party seeking to terminate. If
for any reason the Merger is not consummated, Premier will continue to operate
as a thrift holding company under its present management. See "The Merger--
Waiver, Amendment, and Termination of the Agreement."
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
The Agreement provides that the directors of the surviving corporation after
the Merger (the "Surviving Corporation") will consist of five current
directors of First Alliance and three current directors of Premier, with
Darrell D. Pittard, the current Chairman, President and Chief Executive
Officer of Premier, serving as Chairman and Chief Executive Officer of the
Surviving Corporation and J. Edward Mulkey, Jr., the current President and
Chief Executive Officer of First Alliance, serving as the President and Chief
Operating Officer of the Surviving Corporation. Messrs. Pittard and Mulkey
will both serve as directors of the Surviving Corporation after the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers and directors of First Alliance and of Premier
have interests in the Merger in addition to their respective interests as
First Alliance or Premier shareholders generally. Those interests relate to,
among other things, provisions in the Agreement regarding indemnification and
eligibility for certain First Alliance employee benefits, and treatment of
outstanding options to acquire Premier Common Stock. See "The Merger--
Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
First Alliance and Premier have received an opinion of Powell, Goldstein,
Frazer & Murphy, counsel to First Alliance, to the effect that, among other
things: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) the exchange in the Merger of Premier Common Stock for First Alliance
Common Stock will not give rise to gain or loss to Premier shareholders,
except to the extent of any cash received; and (iii) neither First Alliance
nor Premier will recognize income, gain or loss as a consequence of the Merger
(except for income, gain or loss that has been deferred and is required to be
recognized pursuant to Treasury Regulations issued under Section 1502 of the
Code). See "The Merger--Certain Federal Income Tax Consequences of the
Merger."
DUE TO THE INDIVIDUAL NATURE OF THE INCOME TAX CONSEQUENCES OF THE MERGER,
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Premier will be carried forward and
recorded on the financial statements of First Alliance at their previously
recorded amounts.
6
<PAGE>
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Premier Common
Stock must be exchanged for First Alliance Common Stock. First Alliance owns
78,261 shares of Premier Preferred Stock, representing 9.49% of the aggregate
shares of Premier Common Stock and Premier Preferred Stock that are currently
outstanding. Although these shares are nonvoting and not convertible for three
years from the date of purchase, the number of voting common shares to be
issued applicable to the voting common stock interests of Premier has been
reduced by the intercorporate investment, in determining an exchange of 90% or
more of the voting common stock of Premier. Thus, a maximum of 4,218 shares
(.51%) of the outstanding shares of Premier Common Stock may dissent to the
Merger, in order for the Merger to be accounted for as a pooling of interests.
If the number of shares held by dissenting shareholders exceeds 4,218,
however, the Merger will not qualify for pooling-of-interests accounting
treatment. In that event, the Merger would be abandoned. Premier's management
currently has no reason to believe that any of its shareholders will dissent
from the Merger.
There are certain other criteria that must be satisfied in order for the
Merger to qualify as a pooling of interests, some of which criteria cannot be
satisfied until after the Effective Date.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
On the Effective Date, Premier shareholders, whose rights are governed by
the Georgia Code and by Premier's Articles of Incorporation and Bylaws, will
automatically become First Alliance shareholders, and their rights as First
Alliance shareholders will be determined by the Georgia Code and by First
Alliance's Articles of Incorporation, as they will be amended prior to or
contemporaneously with the consummation of the Merger, and by First Alliance's
Bylaws. Upon consummation of the Merger, the rights of First Alliance
shareholders will differ from the rights of Premier shareholders in certain
respects, some of which will constitute additional antitakeover provisions.
See "Effect of the Merger on the Rights of Shareholders" and "Description of
First Alliance Common Stock."
COMPARATIVE MARKET PRICES OF COMMON STOCK
First Alliance Common Stock is traded on the Nasdaq SmallCap Market. Premier
Common Stock is not traded in any established market. The following table sets
forth the last sale price of First Alliance Common Stock on October 23, 1995,
the date of the last sale reported by the Nasdaq SmallCap Market prior to
October 31, 1995 (the date of public announcement of the proposed Merger) and
the sale price of Premier Common Stock on September 6, 1995, the date of the
last reported sale of Premier Common Stock prior to October 31, 1995. It also
provides the last sale price of First Alliance Common Stock on , 1996,
the date of the last sale reported by the Nasdaq SmallCap Market prior to the
mailing of this Joint Proxy Statement/Prospectus, and the sale price of
Premier Common Stock on November 10, 1995, the date of the most recent
reported sale of Premier Common Stock.
<TABLE>
<CAPTION>
FIRST ALLIANCE COMMON
STOCK PREMIER COMMON STOCK
--------------------- ---------------------------
<S> <C>
$16.25 at October 23, 1995 $8.00 at September 6, 1995
$ at , 1996 $10.00 at November 10, 1995
</TABLE>
The October 23, 1995 trade of First Alliance Common Stock represents a
single trade of 1,000 shares and the only trade during the month of October
1995. During September 1995, a total of 24,000 shares of First Alliance Common
Stock were sold at an average price of $15.375 per share.
Shareholders are advised to obtain current market quotations for First
Alliance Common Stock. Sterne, Agee & Leach, Inc., The Robinson-Humphrey
Company, Inc. and J.C. Bradford & Co. are market makers for the First Alliance
Common Stock and can provide such quotations upon request. No assurance can be
given as to the market price of First Alliance Common Stock at or after the
Effective Date.
7
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
First Alliance and Premier, (ii) a pro forma combined basis per share of First
Alliance Common Stock, giving effect to the Merger, and (iii) an equivalent
pro forma basis per share of Premier Common Stock, giving effect to the
Merger. The data also retroactively reflects the effect of First Alliance's
May 1995 five percent stock dividend. The First Alliance and Premier pro forma
combined information gives effect to the Merger on a pooling-of-interests
accounting basis and assumes an exchange ratio (the "Exchange Ratio") of one
share of First Alliance Common Stock for each share of Premier Common Stock.
See "The Merger--Accounting Treatment." The unaudited pro forma data is
presented for informational purposes only and is not necessarily indicative of
the results of operations or combined financial position that would have
resulted had the Merger been consummated at the dates or during the periods
indicated, nor is it necessarily indicative of future results of operations or
combined financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of First
Alliance and Premier, including the respective notes thereto, and the pro
forma financial information included herein. See "--Selected Historical
Financial Data of First Alliance," "--Selected Financial Data of Premier," "--
Summary Pro Forma Financial Data," "Pro Forma Condensed Combined Financial
Information," "First Alliance Financial Statements" and "Premier Financial
Statements."
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS DECEMBER 31,(1)
ENDED -----------------
MARCH 31, 1996 1995 1994
-------------- -------- --------
(UNAUDITED) (UNAUDITED EXCEPT
FIRST ALLIANCE
HISTORICAL)
<S> <C> <C> <C>
INCOME PER SHARE
First Alliance historical.................. $ .34 $ 1.15 $ .83
Premier historical......................... .27 1.05 (2.85)
First Alliance and Premier pro forma com-
bined(2).................................. .32 1.07 --
Premier pro forma Merger equivalent(3)..... .32 1.07 --
DIVIDENDS DECLARED PER COMMON SHARE
First Alliance historical.................. $ .50 -- $ .20
Premier historical......................... -- -- --
First Alliance and Premier pro forma com-
bined(2).................................. .34 -- .14
Premier pro forma Merger equivalent(4)..... .34 -- .14
BOOK VALUE PER SHARE (PERIOD END)
First Alliance historical.................. $10.73 $ 11.12 $ 9.93
Premier historical......................... 7.94 7.87 6.17
First Alliance and Premier pro forma com-
bined(2).................................. 9.66 9.85
Premier pro forma Merger equivalent(3)..... 9.66 9.85
</TABLE>
- --------
(1) In the case of Premier historical and pro forma combined income
information, the information reflects for Premier the years ended March
31, 1996 and 1995. Premier's fiscal year end is March 31 and First
Alliance's fiscal year end is December 31. Information for the interim
three months ended March 31, 1996 reflects the actual three-month period
for both First Alliance and Premier. The interim three-month period for
Premier is included in the fiscal year end and interim period information.
Income per share and book value per share for Premier are presented as if
all Preferred Stock had been converted into Common Stock.
(2) Represents the combined results of First Alliance and Premier as if the
Merger were consummated on January 1, 1995 and were accounted for as a
pooling-of-interests transaction.
(3) Represents pro forma combined information multiplied by the Exchange
Ratio.
(4) Represents historical dividends declared per share by First Alliance
multiplied by the Exchange Ratio.
8
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives effect to the
acquisition of Premier as of the date or at the beginning of the period
indicated, assuming the acquisition is accounted for as a pooling-of-
interests. The unaudited pro forma financial data is presented for
informational purposes only and is not necessarily indicative of the combined
financial position or results of operation which actually would have occurred
if the transaction had been consummated at the date and for the periods
indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET
Total assets............................................ $260,774 $237,530
Loans, net.............................................. 181,647 157,173
Investment securities available for sale................ 35,672 45,415
Federal funds sold...................................... 12,620 2,530
Interest-bearing deposits in banks...................... 6,651 9,960
Total deposits.......................................... 193,079 175,194
Other borrowings........................................ 37,843 28,861
Stockholders' equity.................................... 22,711 23,168
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS DECEMBER 31,(1)
ENDED ------------------------
MARCH 31, 1996 1995 1994
----------------- ----------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA
Interest income.................... $ 5,558 $ 19,959 $ 10,854
Interest expense................... 2,608 9,396 4,205
Net interest income................ 2,950 10,563 6,649
Provision for loan losses.......... 144 403 285
Net interest income after provision
for loan losses................... 2,806 10,160 6,364
Other income....................... 2,134 7,748 3,058
Other expenses..................... 3,886 14,245 8,764
Income taxes....................... 310 1,137 569
Net income......................... 744 2,526 89
Net income per common and common
equivalent share.................. 0.28 1.12 --
Net income assuming full dilution.. 0.32 1.07
</TABLE>
- --------
(1) Selected pro forma financial data for Premier reflects information for the
years ended March 31, 1996 and 1995.
9
<PAGE>
THE PREMIER MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Premier Common Stock in connection with the solicitation by the Premier Board
of Directors of proxies for use at the Premier Meeting, at which such Premier
shareholders will be asked to vote upon a proposal to approve the Agreement.
The Premier Meeting will be held at , local time, on , 1996, at the
main office of Premier, located at 2180 Atlanta Plaza, 950 East Paces Ferry
Road, Atlanta, Georgia 30326.
Premier shareholders are requested promptly to sign, date, and return the
accompanying proxy card to Premier in the enclosed postage-paid, addressed
envelope.
Any Premier shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
Premier a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by Premier before the vote of shareholders or
in open meeting prior to the taking of the shareholder vote at the Premier
Meeting. Any notice of revocation should be sent to Premier Bancshares, Inc.,
2180 Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326,
Attention: Corporate Secretary. A proxy will not be revoked by death or
supervening incapacity of the stockholder executing the proxy unless, before
the vote, notice of such death or incapacity is filed with the Secretary. The
shares represented by properly executed proxies received at or prior to the
Premier Meeting and not subsequently revoked will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE DISCRETION OF THE PROXY
HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE PREMIER
MEETING. IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY
HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO
PERMIT FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO
APPROVE THE AGREEMENT. PROXIES MARKED TO BE VOTED AGAINST THE MERGER WILL NOT
BE VOTED IN FAVOR OF SUCH A PROPOSAL TO ADJOURN. As of the date of this Joint
Proxy Statement/Prospectus, Premier is unaware of any other matter to be
presented at the Premier Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees
of Premier, who will receive no additional compensation for such solicitation
but may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
Premier shareholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
Premier's Board of Directors has established the close of business on ,
1996, as the Record Date for determining the shareholders entitled to notice
of and to vote at the Premier Meeting. Only record holders of Premier Common
Stock as of the Record Date will be entitled to vote at the Premier Meeting.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Premier Common Stock entitled to vote at the Premier Meeting.
Approval of any other matter presented requires the affirmative vote of a
plurality of the votes cast by shareholders entitled to vote on the matter.
Therefore, an abstention or failure to return a properly executed proxy card
will have the same effect as a vote against the Agreement, but will not affect
the outcome of any other matter presented. As of the Record Date, there were
approximately [91] holders of 435,669 shares of Premier Common Stock
outstanding and entitled to vote at the Premier Meeting, with each share
entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of Premier Common Stock is necessary to constitute a quorum of the
shareholders in order to take action at the Premier Meeting. For these
purposes, shares of Premier Common Stock that are present, or represented by
proxy, at the Premier Meeting will be counted for quorum purposes regardless
of whether the holder of the shares or proxy fails to vote on the Agreement.
10
<PAGE>
The directors and executive officers of Premier and their affiliates
beneficially owned, as of the Record Date, 193,900 shares (or approximately
42.55% of the outstanding shares) of Premier Common Stock. The foregoing
beneficial ownership figures do not reflect the ownership of an aggregate of
80,437 shares of Premier Preferred Stock, which is convertible into 80,437
shares of Premier Common Stock. Assuming the conversion of all of the shares
of Premier Preferred Stock beneficially owned by the directors and executive
officers of Premier prior to the Record Date, such directors and executive
officers would beneficially own 274,337 shares (or approximately 53.16% of the
outstanding shares) of Premier Common Stock and would therefore be able to
ensure shareholder approval of the Merger. Although each member of the Board
of Directors of Premier has agreed to vote those shares of Premier Common
Stock beneficially owned by such member (except for shares held in a fiduciary
capacity) in favor of the Merger, management does not anticipate that the
directors or executive officers of Premier will convert their shares of
Premier Preferred Stock into Premier Common Stock prior to the Record Date.
As of the Record Date, the directors and executive officers of First
Alliance and their affiliates did not beneficially own any shares of Premier
Common Stock. As of that date, neither Premier nor First Alliance held any
shares of Premier Common Stock in a fiduciary capacity for others.
11
<PAGE>
THE FIRST ALLIANCE MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
First Alliance Common Stock in connection with the solicitation by the First
Alliance Board of Directors of proxies for use at the First Alliance Meeting,
at which First Alliance shareholders will be asked to vote upon the following
proposals:
1. To approve an amendment to the First Alliance Articles of Incorporation
to increase the number of authorized shares of common stock from
2,000,000 to 20,000,000.
2. To approve an amendment to the First Alliance Articles of Incorporation
to authorize 2,000,000 shares of preferred stock, with such
designations, relative rights and preferences as may be approved from
time to time by the Board of Directors.
The First Alliance Meeting will be held at , local time, on ,
1996, at the main office of First Alliance, located at 63 Barrett Parkway,
N.E., Marietta, Georgia 30066.
First Alliance shareholders are requested promptly to sign, date, and return
the accompanying proxy card to First Alliance in the enclosed postage-paid,
addressed envelope.
Any First Alliance shareholder who has delivered a proxy may revoke it at
any time before it is voted by giving notice of revocation in writing or
submitting to First Alliance a signed proxy card bearing a later date,
provided that such notice or proxy card is actually received by First Alliance
before the vote of shareholders or in open meeting prior to the taking of the
shareholder vote at the First Alliance Meeting. Any notice of revocation
should be sent to First Alliance Bancorp, Inc., 63 Barrett Parkway, N.E.,
Marietta, Georgia 30066, Attention: Corporate Secretary. A proxy will not be
revoked by death or supervening incapacity of the stockholder executing the
proxy unless, before the vote, notice of such death or incapacity is filed
with the Secretary.
The shares of First Alliance Common Stock represented by properly executed
proxies received at or prior to the First Alliance Meeting and not
subsequently revoked will be voted as directed in such proxies. IF
INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED WILL BE
VOTED FOR THE AMENDMENT TO THE ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK FROM 2,000,000 TO 20,000,000; FOR THE
AMENDMENT TO THE ARTICLES OF INCORPORATION AUTHORIZING 2,000,000 SHARES OF
PREFERRED STOCK; AND IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER
MATTERS THAT PROPERLY MAY COME BEFORE THE FIRST ALLIANCE MEETING. IF
NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO
MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE MEETING TO PERMIT FURTHER
SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE A
MATTER. PROXIES MARKED TO BE VOTED AGAINST EITHER OF THE PROPOSALS WILL NOT BE
VOTED IN FAVOR OF SUCH A PROPOSAL TO ADJOURN. As of the date of this Joint
Proxy Statement/Prospectus, First Alliance is unaware of any other matter to
be presented at the First Alliance Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees
of First Alliance, who will receive no additional compensation for such
solicitation but may be reimbursed for out-of-pocket expenses. Brokerage
houses, nominees, fiduciaries, and other custodians will be requested to
forward solicitation materials to beneficial owners and will be reimbursed for
their reasonable out-of-pocket expenses.
RECORD DATE; VOTE REQUIRED
First Alliance's Board of Directors has established the close of business on
, 1996, as the Record Date for determining the First Alliance
shareholders entitled to notice of and to vote at the First Alliance Meeting.
Only First Alliance shareholders of record as of the Record Date will be
entitled to vote at the meeting. The affirmative vote of a majority of the
First Alliance Common Stock outstanding and entitled to vote at the
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<PAGE>
First Alliance Meeting will be required to approve the proposed amendments to
the Articles of Incorporation, while approval of any other matter will require
the affirmative vote of a majority of the shares present in person or by proxy
and entitled to vote. Abstentions or failures to return a properly executed
proxy card will have the same effect as a vote against the proposed amendments
to the Articles of Incorporation. Broker non-votes, which occur when a broker
submits a proxy card without exercising discretionary voting authority on a
non-routine matter, are not counted for purposes of determining whether a
proposal has been approved. As a result, broker non-votes will have the effect
of votes against the proposed amendments to the Articles of Incorporation. As
of the Record Date, there were approximately [587] holders of 1,604,999 shares
of First Alliance Common Stock outstanding and entitled to vote at the First
Alliance Meeting, with each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of First Alliance Common Stock entitled to vote at the First Alliance Meeting
is necessary to constitute a quorum of the shareholders in order to take
action at the meeting. For these purposes, shares of First Alliance Common
Stock that are present, or represented by proxy, at the First Alliance Meeting
will be counted for quorum purposes regardless of whether the holder of the
shares or proxy fails to vote on any matter or whether a broker with
discretionary authority fails to exercise its discretionary voting authority
with respect to any matter.
The directors and executive officers of First Alliance beneficially owned,
as of the Record Date, 493,257 shares (or approximately 30.59% of the
outstanding shares) of First Alliance Common Stock. As of the Record Date, the
directors and executive officers of Premier did not beneficially own any
shares of First Alliance Common Stock. As of that date, neither Premier nor
First Alliance held any shares of First Alliance Common Stock in a fiduciary
capacity for others.
13
<PAGE>
THE MERGER
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the Appendices hereto, including the Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and
incorporated herein by reference. All shareholders are urged to read the
Appendices in their entirety.
GENERAL
Upon consummation of the Merger, Premier will merge with and into First
Alliance, First Alliance will survive the Merger and the separate existence of
Premier will cease, and First Alliance will change its name to "First
Alliance/Premier Bancshares, Inc." Premier Bank and Premier Lending will
become wholly owned subsidiaries of First Alliance. First Alliance intends to
combine the operations of First Alliance Bank with those of Premier Bank into
a commercial bank to be known as "Premier Bank" after the Merger.
At the Effective Date, each share of Premier Common Stock (excluding any
shares held by Premier, First Alliance, or their respective subsidiaries,
other than shares held in a fiduciary capacity or in satisfaction of debts
previously contracted) issued and outstanding will be converted into one share
of First Alliance Common Stock, subject to adjustment in the event of a stock
dividend, stock split or similar stock reclassification. Each share of First
Alliance Common Stock outstanding immediately prior to the Effective Date will
remain outstanding and unchanged as a result of the Merger. No fractional
shares of First Alliance Common Stock will be issued in connection with the
Merger.
TREATMENT OF PREMIER OPTIONS
The Agreement provides that all rights with respect to Premier Common Stock
pursuant to stock options granted by Premier under its stock option plans
which are outstanding at the Effective Date, whether or not then exercisable,
will be converted into and will become rights with respect to First Alliance
Common Stock, and First Alliance will assume each of such options in
accordance with the terms of the plan under which it was issued and the
agreement by which it is evidenced. After the Effective Date, those options
will become options to purchase First Alliance Common Stock, with the exercise
price and number of shares of First Alliance Common Stock purchasable
thereunder being equal to the exercise price and number of shares of Premier
Common Stock that could have been purchased thereunder immediately prior to
the consummation of the Merger. The executive officers and directors of
Premier collectively hold exercisable options to purchase 28,331 shares of
Premier Common Stock.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. During the first quarter of 1995, the Chief
Executive Officers of First Alliance and Premier began to explore the
possibility of combining First Alliance and Premier. The discussions were
abandoned late in the first quarter, however, when the parties could not agree
on an appropriate exchange ratio for the combination. At that time, Premier's
results of operations did not support an exchange ratio that would be
sufficiently favorable for the Premier Board of Directors to recommend a
merger to the holders of Premier Common Stock.
As a result of its acquisition of Allatoona Federal Savings Bank (now known
as Premier Bank) in April 1995, Premier acquired additional branching
opportunities. Its earnings also improved and, during the summer of 1995,
Premier's Chief Executive Officer contacted First Alliance's Chief Executive
Officer to reopen discussions regarding a possible combination of their
respective institutions. These discussions continued throughout the summer and
fall of 1995. Both Chief Executive Officers received authorization for, and
kept their respective Boards of Directors apprised of, these discussions.
Premier's management did not seek other acquisition opportunities during the
course of the discussions with First Alliance.
15
<PAGE>
On October 27, 1995, the parties executed a non-binding letter of intent,
which generally outlined the terms of the proposed Merger and the parties'
mutual intentions concerning the Merger. On October 31, 1995, the parties
issued a joint press release announcing execution of the letter of intent.
From November 1, 1995 to January 30, 1996, the parties conducted various due
diligence activities and negotiated the terms and conditions of the definitive
merger agreement. Premier's Board of Directors met with counsel to Premier and
First Alliance's Board of Directors met with counsel to First Alliance on
January 25, 1996 and January 30, 1996, respectively. In each case, the Board
reviewed the results of its due diligence investigation, certain historical
and pro forma financial information and the terms of the definitive merger
agreement. After discussion concerning the information presented, each Board
unanimously approved the terms of the Merger on terms and conditions
substantially as provided in the proposed Merger Agreement, subject, in the
case of First Alliance, to receipt of a fairness opinion from Sheshunoff. On
January 30, 1996, the parties executed the Agreement and issued a joint press
release announcing execution of the Agreement.
Premier's Reasons for the Merger. The Premier Board of Directors has
unanimously approved the Agreement and has determined that the Merger is in
the best interests of Premier and its shareholders. The terms of the Merger
were the result of arms-length negotiations between representatives of Premier
and representatives of First Alliance. Without assigning any relative or
specific weights to the factors, the Board of Directors of Premier considered
the following material factors:
(a) the information presented to the directors by Premier's management
concerning (i) the business, operations, earnings and financial condition,
including capital levels and asset quality, of First Alliance, and
compliance with regulatory capital requirements on a historical and
prospective basis, and (ii) the results of a due diligence review of First
Alliance by Premier management;
(b) the alternatives to the Merger, including remaining as an independent
thrift holding company with separate residential construction lending and
commercial financial lending operations in light of current economic
conditions in Premier's primary markets and the competition presented by
larger financial institutions operating in such markets;
(c) the enhancement of shareholder value as a result of the value of the
consideration to be received by Premier's shareholders relative to First
Alliance's book value and earnings per share of common stock;
(d) the anticipated synergies and operating efficiencies (including
increased data processing capacity), increased access to capital, increased
utilization of capital for lending, and the increased managerial resources
and enhanced service capabilities that would result from the Merger;
(e) the current lack of marketability of the Premier Common Stock,
contrasted with the ability of Premier's shareholders to exchange their
Premier Common Stock for First Alliance Common Stock in connection with the
Merger and thereafter have the ability to trade such securities on the
Nasdaq SmallCap Market;
(f) the competitive and regulatory environment for financial institutions
and commercial lending businesses generally;
(g) the income tax aspects of the Merger as a tax-free exchange of
Premier Common Stock for First Alliance Common Stock; and
(h) the likelihood that the Merger will be approved by applicable
regulatory authorities without undue conditions or delay.
Each member of the Board of Directors of Premier has agreed to vote such
member's shares of Premier Common Stock in favor of the Merger.
PREMIER'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PREMIER
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
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<PAGE>
First Alliance's Reasons for the Merger. The First Alliance Board of
Directors has unanimously approved the Agreement and has determined that the
Merger is in the best interests of First Alliance and its shareholders. In
approving the Agreement, the First Alliance Board considered a number of
factors. Without assigning any relative or specific weights to the factors,
the First Alliance Board of Directors considered the following material
factors:
(a) a review, based in part on a presentation by First Alliance's
management, of (i) the business, operations, earnings, and financial
condition, including capital levels and asset quality, of Premier on an
historical, prospective, and pro forma basis and in comparison to other
financial institutions in the area, (ii) the demographic, economic, and
financial characteristics of the markets in which Premier operates,
including existing competition, history of the market areas with respect to
financial institutions, and average demand for credit, on an historical and
prospective basis; and (iii) the results of a due diligence review of
Premier by First Alliance management;
(b) a variety of factors affecting and relating to the overall strategic
focus of First Alliance, including First Alliance's desire to expand into
markets in the general vicinity of its core market;
(c) the financial terms and income tax consequences of the proposed
Merger;
(d) the opportunity to leverage First Alliance's excess capital by using
such capital to acquire Premier's business and operations;
(e) the trading prices of the First Alliance Common Stock during
September and October 1995, which reflected trades of an aggregate of
24,000 shares in September at an average price of $15.375 per share and a
single 1,000-share trade in October at $16.25 per share; and
(f) the management philosophy of Premier and its compatibility with that
of First Alliance.
FAIRNESS OPINION
Premier. The Board of Directors of Premier has determined not to obtain an
opinion from an independent third party regarding the fairness of the Merger
to the Premier shareholders. However, the terms of the Merger have been
reviewed and unanimously approved by the Premier Board of Directors. In that
regard, the Board of Directors determined that the Merger is fair to, and in
the best interests of, Premier's shareholders, customers and employees and the
communities in which Premier operates based upon its evaluation of the
considerations described in "--Background of and Reasons for the Merger."
First Alliance. In January 1996, First Alliance retained Alex Sheshunoff &
Co. Investment Banking ("Sheshunoff"), an investment banking firm based in
Austin, Texas, on the basis of its experience, to render a written fairness
opinion (the "Opinion") to the Board of Directors of First Alliance.
Sheshunoff has been in the business of consulting for the banking and thrift
industry for over twenty years, including the appraisal and valuation of
banking and thrift institutions and their securities in connection with
mergers and acquisitions and equity offerings. Sheshunoff has a long history
of familiarity and involvement with the banking and thrift industry
nationwide, as well as familiarity with the Georgia market and recent
transactions in this market. Sheshunoff has reviewed the negotiated terms of
the Agreement, including corporate governance matters. Prior to being retained
for this assignment, Sheshunoff has provided professional services and
products to First Alliance. The revenues derived from such services and
products are insignificant when compared to Sheshunoff's total gross revenues.
On , 1996, in connection with their consideration of the Agreement,
Sheshunoff issued its Opinion to the Board of Directors of First Alliance
that, in its opinion as investment bankers, the terms of the Merger as
provided in the Agreement are fair and equitable, from a financial
perspective, to First Alliance and its shareholders. The Opinion is based upon
conditions as they existed on March 31, 1996. A copy of the Opinion is
attached as Appendix C to this Proxy Statement/Prospectus and should be read
in its entirety. Sheshunoff's written opinion does not constitute an
endorsement of the Merger or a recommendation to any shareholder as to how
such shareholder should vote.
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<PAGE>
In rendering its Opinion, Sheshunoff reviewed certain publicly available
information concerning First Alliance and Premier. Sheshunoff considered many
factors in making its evaluation. In arriving at its Opinion regarding the
fairness of the transaction, Sheshunoff reviewed: (i) the Agreement; (ii) the
most recent external auditor's reports to the Board of Directors of each
organization; (iii) the March 31, 1996 balance sheet and income statement for
each organization, the audited December 31, 1995 balance sheet and income
statement for First Alliance and the audited March 31, 1996 balance sheet and
income statement for Premier; (iv) each organization's listing of marketable
securities showing rate, maturity and market value as compared to book value;
(v) each organization's internal loan classification list; (vi) the budget and
projected operating plan of each organization; (vii) a listing of unfunded
letters of credit and any other off-balance sheet risks for each organization;
(viii) the minutes of the Board of Directors meetings of each organization;
(ix) the most recent Board report for each organization; (x) material leases
on real and personal property for each organization; (xi) the directors and
officers liability and blanket bond insurance policies for each organization;
and (xii) market conditions and current trading levels of outstanding common
stock of both organizations. Sheshunoff conducted an on-site review of First
Alliance and Premier and had discussions with management to discuss each
organization's historical performance and current financial condition.
In reaching its Opinion, Sheshunoff analyzed the total purchase price on a
fair market value basis using standard evaluation techniques (as discussed
below) including comparable sales multiples (market value), net present value,
cash flow analysis, return on investment and the price as a percentage of
total assets based on certain assumptions of projected growth, earnings and
dividends and a range of discount rates from 10% to 16%. Sheshunoff also
considered as one of the methods of determining the fairness of the
transaction, the projected pro forma impact on First Alliance's earnings per
share and equity per share (appreciation/dilution analysis), which was based
upon stand-alone financial projections for both First Alliance and Premier
compared with pro forma financial projections.
In performing its analysis, Sheshunoff relied upon financial projections for
First Alliance which were prepared and furnished by the management of First
Alliance. Premier's projections were prepared by Sheshunoff based on its
review of information provided by Premier and First Alliance and discussions
with the management of Premier and First Alliance. First Alliance and Premier
do not publicly disclose internal management projections of the type provided
to Sheshunoff in connection with its review of the Merger. Such projections
were not prepared with a view towards public disclosure. The projections were
based on numerous variables and assumptions which are inherently uncertain,
including without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.
In addition, Sheshunoff discussed with the management of First Alliance and
Premier the relative operating performance and future prospects of each
organization, primarily with respect to the current level of their earnings
and future expected operating results, giving weight to Sheshunoff's
assessment of the future of the banking and thrift industry and each
organization's performance within the industry.
Many variables affect the value of banks and thrifts, not the least of which
is the uncertainty of future events, so that the relative importance of the
valuation variables differs in different situations, with the result that
appraisal theorists argue about which variables are the most appropriate ones
on which to focus. However, most appraisers agree that the primary financial
variables to be considered are earnings, equity, dividends or dividend-paying
capacity, asset quality and cash flow. In addition, in most instances, if not
all, value is further tempered by non-financial factors such as marketability,
voting rights or block size, history of past sales of the banking or thrift
company's stock, nature and relationship of the other shareholdings in the
bank or thrift, and special ownership or management considerations.
NET ASSET VALUE is the value of the net equity of a bank or thrift,
including every kind of property and value. This approach normally assumes
liquidation on the date of appraisal with the recognition of securities gains
or losses, real estate appreciation or depreciation, adjustments to the loan
loss reserve, discounts to the loan portfolio
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<PAGE>
and changes in the net value of other assets. As such, it is not the best
approach to use when valuing a going concern, because it is based on
historical costs and varying accounting methods. Even if the assets and
liabilities are adjusted to reflect prevailing prices and yields (which is
often of limited accuracy because readily available data is often lacking), it
still results in a liquidation value for the concern. Furthermore, since this
method does not take into account the values attributable to the going concern
such as the interrelationship among the company's assets and liabilities,
customer relations, market presence, image and reputation, and staff expertise
and depth, little weight is given by Sheshunoff to the net asset value method
of valuation.
MARKET VALUE is generally defined as the price, established on an "arms-
length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The market value is frequently used to determine the price of a
minority block of stock when BOTH the quantity and the quality of the
"comparable" data are deemed sufficient. However, the relative thinness of the
specific market for the stock of the banking or thrift company being appraised
may result in the need to review alternative markets for comparative pricing
purposes. The "hypothetical" market value for a small bank or thrift with a
thin market for its stock is normally determined by comparison to the average
price to earnings, price to equity and dividend yield of local or regional
publicly-traded bank or thrift securities, adjusting for significant
differences in financial performance criteria and for any lack of
marketability or liquidity. The market value in connection with the evaluation
of control of a bank or thrift is determined by the previous sales of banks or
thrifts in the state or region. In valuing a business enterprise, when
sufficient comparable trade data is available, the market value deserves
greater weighing than the net asset value and similar emphasis as the
investment value as discussed below.
Sheshunoff maintains substantial files concerning the prices paid for
banking and thrift institutions nationwide. The database includes transactions
involving thrift organizations in the South which sold for 100% common stock
in 1995 and over the past five years. The database provides comparable pricing
and financial performance data for thrift organizations sold or acquired.
Organized by different peer groups, the data presents averages of financial
performance and purchase price levels, thereby facilitating a valid
comparative purchase price analysis. In analyzing the transaction value of
Premier, Sheshunoff has considered the market approach and has evaluated price
to equity and price to earnings multiples of thrift organizations in the South
with total assets less than $500 million that sold for 100% stock from March
1, 1995 through March 1, 1996. The following table provides the 11 thrift
organizations in the South with total assets less than $500 million that sold
for 100% stock from March 1, 1995 through March 1, 1996:
<TABLE>
<CAPTION>
PURCHASE PRICE PURCHASE PRICE PURCHASE PRICE TO
SELLER CITY STATE TO EQUITY (X) TO EARNINGS (X) TOTAL ASSETS (%)
------ ---- ----- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Guaranty
FSB......... Clarksville TN 2.20 17.60 12.03
CSB Financial
Corp........ Lynchburg VA 1.27 NM 18.40
Valley
Federal SB.. Sheffield AL 1.35 24.09 11.19
First FB-
Northwest
GA.......... Cedartown GA 1.29 12.36 17.66
Mutual Svgs
Bank, FSB... Danville VA 1.59 23.93 27.80
Kentucky
Enterprise.. Newport KY 1.20 NM 22.08
Seaboard Svgs
Bk SSB...... Plymouth NC 1.59 NM 19.96
Jessamine
First
FS&LA....... Nicholasville KY 2.08 18.88 19.20
First
Colonial
Bank........ Hopewell VA 1.64 19.24 9.87
Laurel
Bancorp..... Laurel MD 1.44 18.35 23.86
Mt. Vernon
Financial... Dunwoody GA 1.46 7.67 9.28
AVERAGES 1.55X 17.77X 17.39%
</TABLE>
Comparable Sales Multiples. Sheshunoff calculated an "Adjusted Book Value"
of $ per share based on Premier's March 31, 1996 common equity (adjusted for
the conversion of preferred stock not currently owned by First Alliance) and
the average price to equity multiple of 1.55x for the thrift organizations in
the South with total assets less than $500 million that sold for 100% stock
from March 1, 1995 through March 1, 1996. Sheshunoff calculated an "Adjusted
Earnings Value" of $ per share based on Premier's 1996 earnings and
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the average price to earnings multiple of 17.77x for thrift organizations that
sold in the South for 100% stock from March 1, 1995 through March 1, 1996. The
financial performance characteristics of the regional thrift organizations
vary, sometimes substantially, from those of Premier. When the variance is
significant for relevant performance factors, adjustments to the price
multiples are appropriate when comparing them to the transaction value.
The INVESTMENT VALUE is sometimes referred to as the income value or
earnings value. One investment value method frequently used estimates the
present value of an enterprise's future earnings or cash flow. Another popular
investment value method is to determine the level of current annual benefits
(earnings, cash flow, dividends, etc.), and then capitalize one or more of the
benefit types using an appropriate capitalization rate such as an earnings or
dividend yield. Yet another method of calculating investment value is a cash
flow analysis of the ability of a banking or thrift company to service
acquisition debt obligations (at a certain price level) while providing
sufficient earnings for reasonable dividends and capital adequacy
requirements. In connection with the cash flow analysis, the return on
investment that would accrue to a prospective buyer at the transaction value
is calculated. The investment value methods which were analyzed in connection
with this transaction were the net present value analysis, the cash flow
analysis and the return on investment analysis, which are discussed below.
Net Present Value Analysis. The investment or earnings value of any banking
or thrift organization's stock is an estimate of the present value of the
future benefits, usually earnings, cash flow or dividends, which will accrue
to the stock. An earnings value is calculated using an annual future earnings
stream over a period of time of not less than ten years and the residual value
of the earnings stream after ten years, assuming no earnings growth, and an
appropriate capitalization rate (the net present value discount rate).
Sheshunoff's computations were based on an analysis of the thrift industry,
the economic and competitive situations in Premier's market area, its current
financial condition and historical levels of growth and earnings. Using a net
present value discount rate of 16%, an acceptable discount rate considering
the risk-return relationship most investors would demand for an investment of
this type as of the valuation date, the "Net Present Value of Future Earnings"
equaled $ per share.
Cash Flow Analysis. The cash flow method assumes the formation of a new
holding company with maximum leverage according to regulatory guidelines and
analyzes the ability of the thrift to retire holding company acquisition debt
within a reasonable period of time while maintaining adequate capital. Using
this method Sheshunoff arrived at a value of $ per share.
Return on Investment Analysis. Return on investment analysis (ROI) also
assumes the formation of a new holding company using maximum regulatory
leverage and analyzes the ten year ROI of a 33.33% equity investment at the
transaction value of $ per share for Premier compared to a liquidation at
book value in the year 2005 and a sale at ten times projected earnings for the
year 2005. This ROI analysis provides a benchmark for assessing the validity
of the transaction value of a majority block of stock. The ROI analysis is one
approach to valuing a going concern, and is directly impacted by the earnings
stream, dividend payout levels and levels of debt, if any. Other financial and
nonfinancial factors indirectly affect the ROI; however, these factors more
directly influence the level of ROI an investor would demand from an
investment in a majority block of stock of a specific thrift at a certain
point in time. The ROI assuming liquidation at book value in 2005 equaled %,
and the ROI assuming sale at ten times projected earnings in 2005 equaled %.
Transaction Value as a Percentage of Total Assets. Furthermore, a price
level indicator, the transaction value as a percentage of total assets, may be
used to confirm the validity of the transaction value. The transaction value
as a percentage of total assets facilitates a truer price level comparison
with comparable thrift organizations, regardless of the differing levels of
equity capital and earnings. In this instance, a transaction value of $ per
share results in a transaction value as a percentage of adjusted total assets
of %.
Finally, another test of appropriateness for the transaction value of a
majority block of stock is the net present value-to-transaction value ratio.
Theoretically, an earnings stream may be valued through the use of a net
present value analysis. In Sheshunoff's experience with majority block
community bank and thrift stock
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valuations, it has determined that a relationship does exist between the net
present value of an "average" community banking or thrift organization and the
transaction value of a majority block of the banking or thrift organization's
stock. The net present value-to-transaction value ratio equals % for
Premier. There are many other factors to consider, when valuing a going
concern, which do not directly impact the earnings stream and the net present
value but which do exert a degree of influence over the fair market value of a
going concern. These factors include, but are not limited to, the general
condition of the industry, the economic and competitive situations in the
market area and the expertise of the management of the organization being
valued.
Projected Impact on First Alliance Shareholders. Sheshunoff considered this
transaction as a merger rather than a purchase. Consideration was given to the
levels of book value and earnings per share appreciation or dilution
percentages between the merger partners over the next three to five years
after consummation. To justify the fairness of the transaction for First
Alliance shareholders, it is important to project, based upon realistic
projections of future performance, a positive impact for First Alliance
shareholders. It is important to note that the appreciation/dilution analysis
is one of the methods utilized by Sheshunoff. The projected
appreciation/dilution analysis supports Sheshunoff's Opinion as to the
fairness of the transaction to First Alliance's shareholders from a financial
point of view.
Neither First Alliance nor Premier imposed any limitation upon the scope of
the investigation to be performed by Sheshunoff in formulating such Opinion.
In rendering its Opinion, Sheshunoff did not independently verify the asset
quality and financial condition of First Alliance or Premier, but instead
relied upon the data provided by or on behalf of First Alliance and Premier to
be true and accurate in all material respects.
For its services as an independent financial analyst for the merger,
including the rendering of its Opinion referred to above, First Alliance has
paid Sheshunoff aggregate fees of $12,500. Prior to being retained for this
assignment, Sheshunoff has provided professional services and products to
First Alliance. The revenues derived from such services and products are
insignificant when compared to Sheshunoff's total gross revenues.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
a Certificate of Merger filed by First Alliance with the Georgia Secretary of
State. If no effective date or time is specified, the Merger will become
effective upon the filing of the Certificate of Merger. Unless otherwise
agreed upon by First Alliance and Premier, and subject to the conditions to
the obligations of the parties to effect the Merger, the parties will use
their reasonable efforts to cause the Effective Date to occur by the last
business day of the month in which the last of the following events occurs:
(i) the effective date (including the expiration of any applicable waiting
period) of the last federal or state regulatory approval required for the
Merger or (ii) the date on which the Agreement is approved by the requisite
vote of Premier shareholders.
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. First Alliance and Premier anticipate that all
conditions to consummation of the Merger will be satisfied so that the Merger
can be consummated in the third quarter of 1996. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either First Alliance or Premier generally may
terminate the Agreement if the Merger is not consummated by September 30,
1996, unless the failure to consummate by that date is the result of a breach
of the Agreement by the party seeking termination. See "--Conditions to
Consummation of the Merger" and "--Waiver, Amendment, and Termination of the
Agreement."
CONVERSION OF PREMIER PREFERRED STOCK TO PREMIER COMMON STOCK
The Certificate of Designation of the Premier Preferred Stock provides that
the Premier Preferred Stock may, at Premier's option, be converted into an
equal number of shares of Premier Common Stock upon approval
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by the holders of the Premier Common Stock of a merger of Premier with and
into another corporation. Consequently, upon approval of the Merger by the
holders of the Premier Common Stock, the Board of Directors will order the
conversion of all outstanding shares of Premier Preferred Stock (except for
78,261 shares held by First Alliance, which will be cancelled in lieu of
conversion) into an equal number of shares of Premier Common Stock effective
immediately prior to, and contingent upon, consummation of the Merger. The
former holders of Premier Preferred Stock will therefore receive in the Merger
one share of First Alliance Common Stock for each share of Premier Common
Stock into which their Premier Preferred Stock was converted.
DISTRIBUTION OF STOCK CERTIFICATES AFTER THE MERGER
Promptly after the Effective Date, First Alliance will cause SunTrust Bank,
acting in the capacity of Exchange Agent, to mail to the former shareholders
of Premier a letter of transmittal, together with instructions for the
exchange of such shareholders' certificates representing shares of Premier
Common Stock or Premier Preferred Stock for certificates representing shares
of First Alliance Common Stock and reflecting First Alliance's name change to
"First Alliance/Premier Bancshares, Inc."
PREMIER SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the
Exchange Agent of certificates for Premier Common Stock or Premier Preferred
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of Premier Common Stock or Premier Preferred
Stock surrendering such items a certificate or certificates representing the
number of shares of First Alliance Common Stock to which such holder is
entitled as a result of the Conversion and the Merger. After the Effective
Date, to the extent permitted by law, holders of record of Premier Common
Stock (including Premier Common Stock issued in connection with the
Conversion) as of the Effective Date will be entitled to vote at any meeting
of First Alliance shareholders the number of shares of First Alliance Common
Stock into which their Premier Common Stock has been converted, regardless of
whether such shareholders have surrendered their Premier stock certificates.
NO DIVIDEND OR OTHER DISTRIBUTION PAYABLE AFTER THE EFFECTIVE DATE WITH
RESPECT TO FIRST ALLIANCE COMMON STOCK, HOWEVER, WILL BE PAID TO THE HOLDER OF
ANY UNSURRENDERED PREMIER STOCK CERTIFICATE UNTIL THE HOLDER DULY SURRENDERS
SUCH CERTIFICATE. Upon such surrender, all undelivered dividends and other
distributions will be delivered to such shareholder, in each case without
interest.
After the Effective Date, there will be no transfers of shares of Premier
Common Stock or Premier Preferred Stock on Premier's stock transfer books. If
certificates representing shares of Premier Common Stock or Premier Preferred
Stock are presented for transfer after the Effective Date, they will be
canceled and exchanged for the shares of First Alliance Common Stock
deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve, OTS and the Georgia Department
without any conditions or restrictions that would, in the reasonable
judgment of either party, so materially adversely impact the economic
benefits of the transactions contemplated by the Agreement as to render
inadvisable the consummation of the Merger, and the expiration of
applicable waiting periods under the BHC Act;
(b) approval by the holders of a majority of the shares of Premier Common
Stock entitled to vote on the Merger;
(c) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(d) the receipt of an opinion of counsel to the effect that, among other
things: (i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code; (ii) the exchange in the Merger of Premier
Common Stock for First Alliance Common Stock will not give rise to gain or
loss to Premier shareholders, except to the extent of any cash received;
and (iii) neither First Alliance nor Premier will recognize gain or loss as
a consequence of the Merger (except for deferred gain or loss recognized
pursuant to Treasury Regulations issued under Section 1502 of the Code).
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(e) approval for listing on the Nasdaq SmallCap or National Market of the
shares of First Alliance Common Stock to be issued in the Merger;
(f) receipt of a letter from Mauldin & Jenkins, dated as of the Effective
Date, confirming that the Merger will qualify for pooling-of-interests
accounting treatment; and
(g) not more than 4,218 shares of Premier Common Stock dissenting to the
Merger.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by First Alliance and Premier of opinions of their respective
counsel and certificates executed by their respective Chief Executive Officers
and Chief Financial Officers as to compliance with the Agreement; and (ii) as
of the Effective Date, the accuracy of certain representations and warranties
and the compliance in all material respects with the agreements and covenants
of each party.
Finally, consummation of the Merger is subject to approval by the First
Alliance shareholders of an amendment to the First Alliance Articles of
Incorporation increasing the number of authorized shares of First Alliance
Common Stock from 2,000,000 to 20,000,000. Following shareholder approval of
such matter at the First Alliance Meeting, and effective prior to the
consummation of the Merger, First Alliance will amend its Articles of
Incorporation to authorize the requisite number of shares of common stock. If
the proposal to authorize the additional shares of First Alliance Common Stock
is not approved, the Articles of Incorporation cannot be amended and the
Merger will not be consummated.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have
been submitted to the appropriate regulatory agencies.
First Alliance and Premier are not aware of any material governmental
approvals or actions that are required for consummation of the Merger, except
as described below. Should any other approval or action be required, it
presently is contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 4 of the BHC Act. In granting its approval under Section 4 of the BHC
Act, the Federal Reserve must take into consideration, among other factors,
the financial and managerial resources and future prospects of the
institutions and whether the acquisition can reasonably be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. Under the BHC Act, the Merger may not
be consummated until either the 15th day or the 30th day following the date of
Federal Reserve approval, during which time the United States Department of
Justice may challenge the transaction on antitrust grounds. The commencement
of any antitrust action would stay the effectiveness of the Federal Reserve's
approval, unless a court specifically orders otherwise.
The Merger also is subject to the approval of the OTS and the Georgia
Department. In their evaluations, the OTS and the Georgia Department will take
into account considerations similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between First Alliance
and Premier approved by their respective Boards of Directors; provided,
however, that after approval by the Premier shareholders, no amendment that
would require further approval by such shareholders under the Georgia Code may
be made without the approval of such shareholders.
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The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date, either before or after approval by the Premier
shareholders, under certain circumstances, including:
(i) by the Board of Directors of either party upon final nonappealable
denial of any required regulatory approval;
(ii) by the Board of Directors of either party, if the shareholders of
Premier have not approved the Agreement in accordance with the provisions
of the Georgia Code;
(iii) by mutual agreement of the Boards of Directors of First Alliance
and Premier;
(iv) by the Board of Directors of either party, in the event of the other
party's breach or failure to comply with any provision of the Agreement
which meets certain standards specified in the Agreement; or
(v) by the Board of Directors of either party if the Merger shall not
have been consummated by September 30, 1996, but only if the failure to
consummate the Merger by such date has not been caused by the terminating
party's breach of the Agreement.
If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. See "--Expenses and Fees" for additional information concerning
the payment of expenses.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Premier and First Alliance generally has agreed, unless the prior
consent of the other party is obtained, and except as otherwise contemplated
by the Agreement, to operate its business only in the ordinary course,
preserve intact its business organization and assets, maintain its rights and
franchises, and take no action that would affect, adversely and materially,
the ability of either party to perform its covenants and agreements under the
Agreement or that would adversely affect either party's ability to obtain any
consent or approval required for the consummation of the transactions
contemplated by the Agreement. In addition, the Agreement contains certain
other restrictions applicable to the conduct of the business of either Premier
or First Alliance prior to consummation of the Merger, as described below.
Each party has agreed not to take certain actions relating to the operation
of its business pending consummation of the Merger without the prior approval
of the other party. Those actions generally include, without limitation: (i)
amending its Articles of Incorporation or Bylaws; (ii) becoming responsible
for any obligation for borrowed money in excess of an aggregate of $100,000
(except in the ordinary course of business consistent with past practices);
(iii) acquiring or exchanging any shares of its capital stock or paying any
dividend or other distribution in respect of its capital stock, except for
dividends legally and contractually required to be paid with respect to the
Premier Preferred Stock and except that First Alliance was permitted to
declare and pay a cash dividend of up to $.50 per share on the shares of First
Alliance Common Stock during the first two months of 1996; (iv) issuing or
selling any additional shares of its capital stock, any rights to acquire any
such stock, or any security convertible into such stock, including, in the
case of Premier, shares of Premier Common Stock issuable upon conversion of
the Premier Preferred Stock (except as set forth in the Agreement, as
previously disclosed to the other party, or pursuant to the exercise of
outstanding stock options); (v) adjusting or reclassifying any of its capital
stock, disposing of or encumbering any shares of capital stock of any
subsidiary (excluding inter-company transfers) or disposing of or encumbering
any asset with a book value of $50,000 or more other than in the ordinary
course of business; (vi) acquiring control over any other entity; (vii)
granting any increase in compensation or benefits to employees or officers
(except in accordance with past practice or prior obligation, in each case as
previously disclosed to the other party or as required by law), paying any
bonus (except as previously disclosed or in accordance with any existing
program or plan), entering into or amending any severance agreements with
officers, or granting any increase in compensation or other benefits to
directors of the holding company or any subsidiary; (viii) entering into or
amending any employment contract that it does not have the unconditional right
to terminate without liability other than for services already rendered; (ix)
adopting any new employee benefit plan or program, or materially changing any
existing plan or program except
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for any change required by law or advisable to maintain the tax qualified
status of any such plan; (x) making any significant change in any tax or
accounting methods or systems of internal accounting controls (except in
conformity to changes in tax laws, regulatory accounting requirements or
generally accepted accounting principles ("GAAP")); (xi) commencing any
litigation (except in accordance with past practice), settling any litigation
involving liability of the holding company or any subsidiary for damages in
excess of $50,000 or material restrictions upon its operations; or (xii)
modifying or terminating any material contract except in the ordinary course
of business.
In addition, each party has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Each party also has
agreed not to negotiate with respect to any such proposal, provide nonpublic
information to any party making such a proposal, or enter into any agreement
with respect to any such proposal, except in compliance with the fiduciary
obligations of its Board of Directors. In addition, each party has agreed to
use reasonable efforts to cause its advisors and other representatives not to
engage in any of the foregoing activities.
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
Immediately following consummation of the Merger, First Alliance will change
its name to "First Alliance/Premier Bancshares, Inc." (the "Surviving
Corporation"). The directors of the Surviving Corporation from and after that
time will consist of five current directors of First Alliance and three
current directors of Premier who will serve in accordance with the Bylaws of
the Surviving Corporation. Darrell D. Pittard will be the Chairman of the
Board and Chief Executive Officer of the Surviving Corporation, and J. Edward
Mulkey, Jr. will be its President and Chief Operating Officer. Such officers,
together with such additional persons as may thereafter be elected, will serve
as the officers of the Surviving Corporation from and after the Effective Date
in accordance with the Bylaws of the Surviving Corporation. In addition,
Messrs. Pittard and Mulkey will both serve as directors of the Surviving
Corporation after the Merger. See "Management of First Alliance" and
"Management of Premier ."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement provides that the Surviving Corporation will maintain all
rights of indemnification existing in favor of each person entitled to
indemnification from Premier or any of its subsidiaries to the full extent
permitted under the Georgia Code and under the Articles of Incorporation and
Bylaws of Premier or its subsidiaries, as the case may be, and that such
rights will continue in full force and effect for three years from the
Effective Date with respect to matters occurring at or prior to the Effective
Date.
The Agreement also provides that the Surviving Corporation shall use its
reasonable efforts to maintain Premier's existing directors' and officers'
liability insurance policy (or a policy, including First Alliance's existing
policy, providing at least comparable coverage) covering persons who were
covered by such insurance on the date the Agreement was signed for a period of
three years after the Effective Date on terms no less favorable than those in
effect on the date of the Agreement. The Surviving Corporation will not be
obligated to make annual premium payments exceeding, for the portion related
to Premier's directors and officers, 150% of the annual premium payments on
Premier's policy in effect as of the date of the Agreement.
The Agreement also provides that, after the Effective Date, the Surviving
Corporation will provide generally to officers and employees of Premier and
its subsidiaries who become officers or employees of the Surviving Corporation
or its subsidiaries, employee benefits under employee benefit plans on terms
and conditions that, taken as a whole, are substantially similar to those
currently provided by First Alliance and its subsidiaries to their similarly
situated officers and employees. For purposes of participation and vesting
under such employee benefit plans (but not benefit accruals funded by
insurance or vesting under the First Alliance Bank 401(k) Profit Sharing
Plan), service with Premier or its subsidiaries prior to the Effective Date
will be treated as service with the Surviving Corporation or its subsidiaries.
The Agreement further provides that the Surviving Corporation will honor all
employment, severance, consulting, and other compensation contracts previously
disclosed to First
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Alliance between Premier or its subsidiaries and any current or former
director, officer, or employee, and all provisions for vested amounts earned
or accrued through the Effective Date under Premier's benefit plans.
As described above under "--Treatment of Premier Options," the Agreement
also provides that all rights with respect to Premier Common Stock pursuant to
stock options granted by Premier under its stock option and other stock-based
compensation plans which are outstanding at the Effective Date, whether or not
then exercisable, will be converted into and will become rights with respect
to First Alliance Common Stock, and First Alliance will assume each of such
options in accordance with its terms.
As of the Record Date, the directors and executive officers of Premier
beneficially owned no shares of First Alliance Common Stock.
DISSENTERS' RIGHTS
In accordance with the applicable provisions of the Georgia Code, the
holders of shares of Premier Common Stock are entitled to dissent from the
Merger and to receive an appraised value of such shares in cash. Subject to
the resale restrictions applicable to executive officers, directors and 10%
shareholders described under "--Resales of First Alliance Common Stock",
holders of Premier Common Stock may also sell the shares of First Alliance
Common Stock they receive in the Merger on the Nasdaq SmallCap Market.
Pursuant to the provisions of Article 13 of the Georgia Code, if the Merger
is consummated, any shareholder who (i) gives to Premier, prior to the vote at
the meeting with respect to the approval of the Agreement, written notice of
such holder's intent to demand payment for such holder's shares and (ii) does
not vote in favor thereof, shall be entitled to receive, upon compliance with
the statutory requirements summarized below, the fair value of such holder's
shares as of the Effective Date. The Agreement requires, as a condition to
consummation of the Merger, that the holders of no more than 4,218 shares of
Premier Common Stock may assert dissenters' rights with respect to approval of
the Agreement unless the other party permits a greater number. The parties to
the Agreement agreed to this condition in order to be able to account for the
Merger as a pooling-of-interests, to avoid the administrative difficulties
inherent in dealing with substantial numbers of dissenters' claims and as a
means of enabling the Merger to be abandoned if a substantial number of
shareholders were to dissent from the Merger.
A record shareholder may assert dissenters' rights as to fewer than all of
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial shareholder and
such holder notifies Premier in writing of the name and address of each person
on whose behalf such holder asserts dissenters' rights. The rights of such a
partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different shareholders.
The written objection requirement referred to above will not be satisfied
under the Georgia Code by merely voting against approval of the Agreement by
proxy or in person at the Premier Meeting. Any shareholder who returns a
signed proxy but fails to provide instructions as to the manner in which such
shares are to be voted will be deemed to have voted in favor of the Merger and
will not be entitled to assert dissenters' rights. In addition to not voting
in favor of the Agreement, a shareholder wishing to preserve the right to
dissent and seek appraisal must give a separate written notice of such
holder's intent to demand payment for such holder's shares if the Merger is
effected, as hereinabove provided.
Any written objection to the Agreement satisfying the requirements discussed
above should be addressed to Premier Bancshares, Inc., 2180 Atlanta Plaza, 950
East Paces Ferry Road, Atlanta, Georgia 30326, Attention: President.
If the Merger is authorized at the Premier Meeting, Premier must deliver a
written dissenters' notice (the "Dissenters' Notice") to all of its
shareholders who satisfied the foregoing requirements. The Dissenters' Notice
must be sent within 10 days after the Effective Date and must (i) state where
the demand for payment must be
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sent and where and when certificates for the shares must be deposited, (ii)
inform holders of uncertificated shares to what extent transfer of these
shares will be restricted after the demand for payment is received, (iii) set
a date by which Premier must receive the demand for payment (which date may
not be fewer than 30 nor more than 60 days after the Dissenters' Notice is
delivered), and (iv) be accompanied by a copy of Article 13 of the Georgia
Code.
A record shareholder who receives the Dissenters' Notice must demand payment
and deposit such holder's certificates in accordance with the Dissenters'
Notice. Such shareholder will retain all other rights of a shareholder until
those rights are canceled or modified by the consummation of the Merger. A
record shareholder who does not demand payment or deposit such holder's share
certificates where required, each by the date set in the Dissenters' Notice,
is not entitled to payment for such holder's shares under Article 13 of the
Georgia Code.
Except as described below, the Surviving Corporation must, within 10 days of
the later of the Effective Date or receipt of a payment demand, offer to pay
to each dissenting shareholder who complied with the payment demand and
deposit requirements described above the amount the Surviving Corporation
estimates to be the fair value of such holder's shares, plus accrued interest
from the Effective Date. Such offer of payment must be accompanied by (i)
certain recent financial statements of Premier, (ii) the Surviving
Corporation's estimate of the fair value of the shares, (iii) an explanation
of how the interest was calculated, (iv) a statement of the dissenter's right
to demand payment under Section 14-2-1327 of the Georgia Code, and (v) a copy
of Article 13 of the Georgia Code. If the shareholder accepts the Surviving
Corporation's offer by written notice to the Surviving Corporation within 30
days after the Surviving Corporation's offer, payment must be made within 60
days after the later of the making of the offer or the Effective Date.
If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, Premier must return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, the Surviving Corporation must send a new Dissenters' Notice and
repeat the payment demand procedure described above.
Section 14-2-1327 of the Georgia Code provides that a dissenting shareholder
may notify the Surviving Corporation in writing of such holder's own estimate
of the fair value of such holder's shares and the interest due, and may demand
payment of such holder's estimate, if (i) such holder believes that the amount
offered by the Surviving Corporation is less than the fair value of such
holder's shares or that the interest due has been calculated incorrectly, or
(ii) Premier, having failed to effect the Merger, does not return the
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment.
A dissenting shareholder waives such holder's right to demand payment under
Section 14-2-1327 unless such holder notifies the Surviving Corporation of
such holder's demand in writing within 30 days after the Surviving Corporation
makes or offers payment for such holder's shares. If the Surviving Corporation
does not offer payment within 10 days of the later of the Effective Date or
receipt of a payment demand, then (i) the shareholder may demand the financial
statements and other information required to accompany the Surviving
Corporation's payment offer, and the Surviving Corporation must provide such
information within 10 days after receipt of the written demand, and (ii) the
shareholder may notify the Surviving Corporation of such holder's own estimate
of the fair value of such holder's shares and the amount of interest due, and
may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, the
Surviving Corporation must commence a nonjury equity valuation proceeding in
the Superior Court of Cobb County, Georgia, within 60 days after receiving the
payment demand and must petition the court to determine the fair value of the
shares and accrued interest. If the Surviving Corporation does not commence
the proceeding within those 60 days, it is required to pay each dissenting
shareholder whose demand remains unsettled the amount demanded. The Surviving
Corporation is required to make all dissenting shareholders whose demands
remain unsettled parties to the proceeding and to serve a copy of the petition
upon each dissenting shareholder. The court may appoint appraisers to receive
evidence and to recommend a decision on fair value. Each dissenting
shareholder made a party to the proceeding is entitled to judgment for the
fair value of such holder's shares plus interest to the date of judgment.
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The court in an appraisal proceeding commenced under the foregoing provision
must determine the costs of the proceeding, excluding fees and expenses of
attorneys and experts for the respective parties, and must assess those costs
against the Surviving Corporation, except that the court may assess the costs
against all or some of the dissenting shareholders to the extent the court
finds they acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Section 14-2-1327. The court also may assess the fees and
expenses of attorneys and experts for the respective parties against the
Surviving Corporation if the court finds the Surviving Corporation did not
substantially comply with the requirements of specified provisions of Article
13 of the Georgia Code, or against either the Surviving Corporation or a
dissenting shareholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by
Article 13 of the Georgia Code.
If the court finds that the services of attorneys for any dissenting
shareholder were of substantial benefit to other dissenting shareholders
similarly situated, and that the fees for those services should be not
assessed against the Surviving Corporation, the court may award those
attorneys reasonable fees out of the amounts awarded the dissenting
shareholders who were benefited. No action by any dissenting shareholder to
enforce dissenters' rights may be brought more than three years after the
Effective Date, regardless of whether notice of the Merger and of the right to
dissent was given by Premier or the Surviving Corporation in compliance with
the Dissenters' Notice and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting
shareholder, but is qualified in its entirety by reference to Article 13 of
the Georgia Code, included as Appendix B to this Joint Proxy
Statement/Prospectus. Any shareholder who intends to dissent from approval of
the Agreement should carefully review the text of such provisions and should
also consult with such holder's attorney. No further notice of the events
giving rise to dissenters' rights or any steps associated therewith will be
furnished to shareholders, except as indicated above or otherwise required by
law.
Any dissenting shareholder who perfects such holder's right to be paid the
value of such holder's shares will recognize taxable gain or loss upon receipt
of cash for such shares for federal income tax purposes. See "Certain Federal
Income Tax Consequences of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-
EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS,
AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER
UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL,
AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Powell, Goldstein,
Frazer & Murphy, counsel to First Alliance, has rendered an opinion to First
Alliance and Premier concerning certain federal income tax consequences of the
proposed Merger under federal income tax law. It is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Georgia
Code, the Merger will be a reorganization within the meaning of Section
368(a) of the Code.
27
<PAGE>
(b) The shareholders of Premier will recognize no gain or loss upon the
exchange of their Premier Common Stock solely for shares of First Alliance
Common Stock.
(c) Premier shareholders who dissent from the Merger will be treated as
having received such payment as a distribution in redemption of their
shares of stock. Generally, any gain or loss recognized will be capital
gain or loss, provided the Premier Common Stock constitutes a capital asset
in the hands of the exchanging shareholder and the requirements of Section
302(b)(1), (2) or (3) are met. Premier shareholders electing to exercise
dissenters' rights should consult their own tax advisers as to the tax
treatment in their particular circumstances.
(d) No income, gain or loss will be recognized for federal income tax
purposes by First Alliance or Premier as a consequence of the Merger,
except for deferred gain or loss recognized pursuant to Treasury
Regulations issued under Section 1502 of the Code.
Among other things, the opinion of Powell, Goldstein, Frazer & Murphy is
based on Premier shareholders maintaining sufficient equity ownership interest
in First Alliance after the Merger. The Internal Revenue Service takes the
position for purposes of issuing an advance ruling on reorganizations, that
the shareholders of an acquired corporation (i.e., Premier) must maintain a
continuing equity ownership interest in the acquiring corporation (i.e., First
Alliance) equal, in terms of value, to at least 50% of their interest in the
acquired corporation. Moreover, shares of Premier Common Stock, Premier
Preferred Stock and First Alliance Common Stock held by Premier shareholders
and otherwise sold, redeemed or disposed of prior to or shortly after the
Effective Date are taken into account. In addition, management of First
Alliance has represented that it has no plan or intention to cause First
Alliance to redeem or otherwise reacquire the shares of First Alliance Common
Stock issued in the Merger. In addition to the foregoing requirements, certain
additional matters must be true with respect to the Merger. First Alliance
believes that these additional factual matters will be satisfied.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX CONSEQUENCES
OF THE MERGER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO THEM INDIVIDUALLY,
INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Premier will be carried forward and
recorded on the financial statements of First Alliance at their previously
recorded amounts.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Premier Common
Stock must be exchanged for First Alliance Common Stock. First Alliance owns
78,261 shares of Premier Preferred Stock, representing 9.49% of the collective
shares of Premier Common Stock and Premier Preferred Stock that are currently
outstanding. Although these shares are nonvoting and not convertible for three
years from the date of purchase, the number of voting common shares to be
issued applicable to the voting common stock interests of Premier has been
reduced by the intercorporate investment, in determining an exchange of 90% or
more of the voting common stock of Premier. Thus, a maximum of 4,218 shares
(.51%) of the outstanding shares of Premier Common Stock may dissent to the
Merger, in order for the Merger to be accounted for as a pooling of interests.
If the number of shares held by dissenting shareholders
28
<PAGE>
exceeds 4,218, however, the Merger will not qualify for pooling-of-interests
accounting treatment. In that event, the Merger would be abandoned. Premier's
management currently has no reason to believe that any of its shareholders
will dissent from the Merger.
There are certain other criteria that must be satisfied in order for the
Merger to qualify as a pooling of interests, some of which criteria cannot be
satisfied until after the Effective Date.
For information concerning certain conditions to be imposed on the exchange
of Premier Common Stock for First Alliance Common Stock in the Merger by
affiliates of Premier and certain restrictions to be imposed on the
transferability of the First Alliance Common Stock received by those
affiliates in the Merger in order, among other things, to ensure the
availability of pooling-of-interests accounting treatment, see "--Resales of
First Alliance Common Stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that Premier
and First Alliance will each bear and pay one-half of the filing fees and
printing costs in connection with this Joint Proxy Statement/Prospectus.
The Agreement also provides that if it is terminated because one of the
parties breaches its representations and warranties or one of its covenants,
and the breach cannot be or has not been cured within 30 days after written
notice of the breach is given to the breaching party, then the breaching party
agrees to pay the non-breaching party (i) an amount equal to the reasonable
and documented fees and expenses incurred by the non-breaching party in
connection with the Merger and (ii) the sum of (x) $50,000 if the breach were
not willful or (y) $150,000 if the breach were willful or if the Agreement
were terminated in contemplation of a competing proposal to acquire the
breaching party.
RESALES OF FIRST ALLIANCE COMMON STOCK
The shares of First Alliance Common Stock to be issued to Premier
shareholders in the Merger have been registered under the Securities Act, but
that registration does not cover resales of those shares by persons who
control, are controlled by, or are under common control with, Premier (such
persons are referred to hereinafter as "affiliates" and generally include
executive officers, directors, and 10% shareholders) at the time of the
Premier Meeting. Affiliates may not sell shares of First Alliance Common Stock
acquired in connection with the Merger, except pursuant to an effective
registration statement under the Securities Act or in compliance with SEC Rule
145 or another applicable exemption from the Securities Act registration
requirements and until such time as financial results covering at least 30
days of combined operations of First Alliance and Premier after the
consummation of the Merger have been published.
Each person who Premier reasonably believes to be an affiliate of Premier
has delivered to First Alliance a written agreement providing that such person
generally will not sell, pledge, transfer, or otherwise dispose of any First
Alliance Common Stock to be received by such person upon consummation of the
Merger, except in compliance with the Securities Act, the rules and
regulations of the SEC promulgated thereunder and applicable restrictions
regarding pooling-of-interests accounting treatment.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Market Prices. The First Alliance Common Stock has been listed for quotation
on the Nasdaq SmallCap Market under the symbol "FABC" since January 25, 1995.
Prior to that date, the First Alliance Common Stock was not traded on an
established trading market. As a result, prices for the First Alliance Common
Stock during
29
<PAGE>
that period do not necessarily reflect the price that would be paid for such
stock in an active market. The following table sets forth, for the indicated
periods, the high and low closing sales prices for First Alliance Common Stock
as reported by Nasdaq since January 25, 1995 and the high and low sales prices
for the First Alliance Common Stock for each of the quarters in which trading
occurred in 1994. The 1994 prices set forth below have been volunteered by
shareholders and market makers and reflect only information that has come to
management's attention.
<TABLE>
<CAPTION>
SALES PRICE
-------------
CALENDAR PERIOD HIGH LOW
--------------- ------ ------
<S> <C> <C>
1994
First Quarter................................................ $12.00 $10.50
Second Quarter............................................... 11.50 10.50
Third Quarter................................................ 14.75 10.75
Fourth Quarter............................................... 13.50 12.75
1995
First Quarter................................................ $13.75 $13.00
Second Quarter............................................... 15.00 13.75
Third Quarter................................................ 15.75 15.00
Fourth Quarter............................................... 16.75 16.00
1996
First Quarter................................................ $17.75 $16.00
Second Quarter............................................... 19.50 16.75
</TABLE>
On , 1996, the last reported sales price of First Alliance Common Stock
as reported on the Nasdaq SmallCap Market was $ per share, and the price of
Premier Common Stock in the last known transaction, which occurred on November
10, 1995, was $10.00 per share. At the close of trading on October 23, 1995,
the date of the last sale reported by the Nasdaq SmallCap Market prior to
October 31, 1995 (the date the proposed Merger was publicly announced), the
last reported sales price of First Alliance Common Stock was $16.25 per share
and the price of Premier Common Stock in the last known transaction prior to
October 31, 1995, which occurred on September 6, 1995, was $8.00 per share.
The October 23, 1995 trade of First Alliance Common Stock represents a single
trade of 1,000 shares and the only trade during the month of October 1995.
During September 1995, a total of 24,000 shares of First Alliance Common Stock
were sold at an average price of $15.375 per share.
Based on actual transactions of which Premier management is aware, sales of
Premier Common Stock since January 1, 1994 have occurred in a price range of
$8.00 to $10.00 per share. However, over such period there has been only a
very limited number of transactions and all such transactions have involved
limited numbers of shares of Premier Common Stock. No assurance can be given
that the stated price range represents the actual market value of the Premier
Common Stock.
Dividends. The holders of First Alliance Common Stock are entitled to
receive dividends when and if declared by the Board of Directors out of funds
legally available therefor. First Alliance paid a $.50 per share cash dividend
on January 31, 1996 to shareholders of record on January 27, 1996 and paid a
$.20 per share cash dividend on November 15, 1994 to shareholders of record on
October 31, 1994. In addition, First Alliance paid a five percent stock
dividend in May 1995 to its shareholders of record as of April 30, 1995. The
decisions to declare these dividends were based on First Alliance's
performance in 1995 and 1994, respectively. First Alliance has no current plan
to initiate the regular payment of cash dividends or to declare any stock
dividends. The future declaration and payment of dividends will depend upon
the earnings of its bank subsidiaries, business conditions, operating results,
capital and reserve requirements, and the Board of Directors' consideration of
other relevant factors.
The payment of cash dividends to the holders of Premier Common Stock is
subject to authorization by the Board of Directors of Premier. Premier has
never declared or paid any cash dividends on the Premier Common Stock and does
not anticipate paying any cash dividends in the foreseeable future.
30
<PAGE>
First Alliance and Premier are legal entities separate and distinct from
their respective subsidiaries and their revenues depend in significant part on
the payment of dividends from their subsidiary financial institutions, which
are subject to certain legal restrictions on the amount of dividends they are
permitted to pay. See "Certain Regulatory Considerations--Payment of
Dividends."
Shareholders of Record. As of the Record Date, there were [587] holders of
record of First Alliance Common Stock, [91] holders of record of Premier
Common Stock and [28] holders of record of Premier Preferred Stock.
BUSINESS OF FIRST ALLIANCE
GENERAL
First Alliance is a bank holding company organized and existing under the
laws of the State of Georgia and headquartered in Marietta, Georgia. Its bank
subsidiary, First Alliance Bank (referred to in this section of the Joint
Proxy Statement/Prospectus as the "Bank") has five branch locations in Cobb
County, Georgia that offer a broad range of banking and banking-related
services. As of March 31, 1996, First Alliance had total consolidated assets
of approximately $166.7 million, total consolidated deposits of approximately
$132.9 million and total consolidated shareholders' equity of approximately
$17.2 million.
Effective as of January 31, 1995, First Alliance acquired a finance company
business owned by Interim Alliance Corporation (d/b/a Alliance Finance) from
J. Edward Mulkey, Jr. for $28,000, the same investment made by Mr. Mulkey in
the business plus his out-of-pocket expenses associated with the business.
(Mr. Mulkey is the President and Chief Executive Officer of First Alliance and
the Bank). Mr. Mulkey acquired the business with the prior approval of First
Alliance's Board of Directors with the understanding that he would convey it
to First Alliance when regulatory approval for the acquisition by First
Alliance was obtained.
Alliance Finance is a traditional consumer finance company that makes small
loans to individuals secured by varied collateral. Alliance Finance has two
locations in Cobb County and Paulding County, Georgia. As of March 31, 1996,
Alliance Finance had assets of approximately $2.5 million, net loans of
approximately $2.2 million and shareholders' equity of approximately $24,000,
with net income for the 11-month period ended December 31, 1995 of
approximately $64,000.
Any additional nonbanking activities to be conducted by First Alliance may
include financial and other activities permitted by law, and such activities
could be conducted by subsidiary corporations that have not yet been
organized. Commencement of nonbanking operations by First Alliance or by its
subsidiaries, if they are organized, will be contingent upon approval by the
Board of Directors of First Alliance and by appropriate regulatory
authorities.
First Alliance was organized to facilitate the Bank's ability to serve its
customers' requirements for financial services. The holding company structure
also provides flexibility for expansion of First Alliance's banking business
through the possible acquisition of other financial institutions and the
provision of additional banking-related services that a traditional commercial
bank may not provide under present laws. First Alliance continually evaluates
business combination opportunities and frequently conducts due diligence
activities in connection with possible business combinations. As a result,
business combination discussions and, in some cases, negotiations regularly
take place, and future business combinations involving cash, debt, or equity
securities can be expected. Any future business combination or series of
business combinations that First Alliance might undertake may be material, in
terms of assets acquired or liabilities assumed, to First Alliance's financial
condition. Recent business combinations in the banking industry have typically
involved the payment of a premium over book and market values. This practice
could result in dilution of book value and net income per share for the
acquiror.
First Alliance, formerly known as Commex Financial Corporation, was
incorporated in 1988 under the laws of Georgia and the regulations of the BHC
Act. First Alliance's principal executive offices are located at 63 Barrett
Parkway, N.E., Marietta, Georgia 30066, and its telephone number at such
address is (770) 425-2265.
31
<PAGE>
FIRST ALLIANCE BANK
General. The Bank's predecessor, Commercial Exchange Bank, opened for
business in 1984. Thereafter, it merged with First Peoples Bank of Cobb in
1992, and Georgia Security Bank in 1993. It is organized under the laws of the
State of Georgia and operates a full-service commercial banking business based
in Cobb County, Georgia. It provides all customary banking services such as
checking and savings accounts, various types of time deposits, money
transfers, safe deposit facilities, all types of credit and debit cards, and
individual retirement accounts. It also finances short- and medium-term
commercial transactions, makes secured and unsecured loans, performs
commercial cash management services and provides other ancillary financial
services to its customers. In addition, the Bank provides a traditional first
mortgage product to its customers providing financing for single-family homes
on a permanent basis. Until June 30, 1994, the Bank made mutual fund and other
investments, which were not insured by the Federal Deposit Insurance
Corporation, available to its retail customers through The Investment Center,
which leased space from the Bank at its main office. The Bank discontinued its
relationship with The Investment Center because it was not sufficiently
profitable.
Market Area and Competition. The Bank has five locations in Marietta,
Georgia, at 63 Barrett Parkway, 2760 Cobb Parkway, 4210 Wade Green Road, 833
South Cobb Drive, and 1269 Barclay Circle, from which it serves its primary
market area of northern Metropolitan Atlanta (as defined by Cobb, DeKalb,
Fulton and Gwinnett Counties). The Bank competes for both deposits and loan
customers with many other financial institutions with equal or greater
resources than are available to the Bank. Currently, there are approximately
50 different commercial banks located in the northern Metropolitan Atlanta
banking market. The banking business in this market is highly competitive.
Deposits. The Bank offers a wide range of commercial and consumer deposit
accounts, including noninterest bearing checking accounts, money market
checking accounts (consumer and commercial), negotiable order of withdrawal
("NOW") accounts, individual retirement accounts, time certificates of
deposit, and regular savings accounts. The sources of deposits typically are
residents and businesses and their employees within the Bank's market area and
are obtained through personal solicitation by the Bank's officers and
directors, direct mail solicitation, and advertisements published in the local
media. The Bank pays competitive interest rates on time and savings deposits
and has implemented a service charge fee schedule competitive with other
financial institutions in the Bank's market area, covering such matters as
maintenance fees on checking accounts, per item processing fees on checking
accounts, returned check charges, and the like.
For additional information including the amounts of deposits in the various
types and information concerning deposits greater than or equal to $100,000,
see the information set forth under the caption "First Alliance Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Lending Activities. As is typical of community banks in the Bank's primary
market area, the Bank makes loans primarily secured by real estate for single
family home construction, owner-occupied commercial buildings, and other loans
to small businesses and individuals who secure these loans by mortgages on
their homes (71% of total loans). In addition, loans are made to small- and
medium-sized commercial business (13% of total loans), as well as to consumers
for a variety of purposes (16% of total loans). With the exception of single
family home construction loans, repayment of the Bank's loans does not depend
on the sale or cash flow from the collateral securing the loan.
For information concerning the dollar amount of each of the following loan
types and loan loss experience associated with the loan types, see the
information set forth under "First Alliance Management's Discussion and
Analysis of Financial Condition and Results of Operations."
REAL ESTATE LOANS. The Bank makes single-family residential construction
loans, generally for one- to four-unit structures. The Bank requires a first
lien position on the land associated with the construction projects and offers
these loans only to bona fide professional building contractors. Loan
disbursements require independent, on-site inspections to assure the project
is on budget and that the loan proceeds are being used in
32
<PAGE>
accordance with the plans, specifications and survey for the construction
project and not being diverted to other uses. The loan-to-value ratio for such
loans is predominately 75% of the as-built appraised value. Loans for
construction can present a high degree of risk to the lender, depending on,
among other things, whether the builder can sell the home to a buyer, whether
the buyer can obtain permanent financing, whether the transaction produces
income in the interim, and the nature of changing economic conditions. The
Bank seeks to reduce this risk by limiting the number of loans to any one
builder and the number of loans made in any one subdivision.
The Bank offers traditional first mortgage loans to individuals on single-
family homes which it sells in the secondary market. Since the Bank is an
originator of mortgages rather than an investor, it sells them servicing
released. It offers loan-to-value amounts from 70% up to 95%. The Bank
represents many investors, and all types of fixed-rate and variable-rate
products are available. Risks involved with residential mortgage lending
include, but are not limited to, title defects, fraud, general real estate
market deterioration, inaccurate appraisals, violation of banking protection
laws, interest rate fluctuations and financial deterioration of the borrower.
Additionally, the Bank makes acquisition and development loans to Bank-
approved developers for the purpose of developing acreage into single-family
lots on which houses will be built. These loans are carefully scrutinized by
outside members of the Board of Directors as well as the senior officers of
the Bank and require independent inspection of the project by professional
inspectors to ensure adherence to the loan agreement as well as to the
construction budget. The loan-to-value ratio for such loans does not exceed
80%, or 100% of the discounted value, whichever is less, as defined by an
independent appraisal. Loans for acquisition and development can present a
high degree of risk to the lender, depending upon, among other things, whether
the developer can find builders to buy the lots, whether the builder can
obtain financing, whether the transaction produces income in the interim, and
the nature of changing economic conditions. The Bank seeks to reduce this risk
by limiting the number of loans to any one developer and the size of the
development.
CONSUMER LOANS. The Bank makes consumer loans, consisting primarily of
installment loans to individuals for personal, family and household purposes
including loans for automobiles, home improvements and investments. Consumer
lending decisions are based on a determination of the borrower's ability and
willingness to repay the loan, which in turn are impacted by such factors as
the borrower's income, job stability, length of time as a resident in the
community, previous credit history and collateral for the loan. Risks
associated with these loans include, but are not limited to, fraud,
deteriorated or non-existing collateral, general economic downturn, and
customer financial problems.
COMMERCIAL LOANS. Commercial lending is directed principally toward
businesses (i) whose annual sales are in the $1 to $5 million category within
the defined trade area of the Bank or whose demand for funds falls within the
Bank's legal lending limits and (ii) which are existing or potential deposit
customers of the Bank. Commercial lending decisions are based upon a
determination of the borrower's ability and willingness to repay the loan,
which in turn are impacted by such factors as the borrower's cash flow, sales
trends and inventory levels, as well as relevant economic conditions. This
category includes loans made to individual, partnership or corporate borrowers
and obtained for a variety of purposes. Risks associated with these loans can
be significant. Risks include, but are not limited to, fraud, bankruptcy,
economic downturn, deteriorated or non-existing collateral, and changes in
interest rates.
Investment Activities. After establishing necessary cash reserves and
funding loans, the Bank invests its remaining liquid assets in investments
allowed under banking laws and regulations. The Bank invests primarily in
obligations of the United States or obligations guaranteed as to principal and
interest by the United States, and other taxable securities and in certain
obligations of states and municipalities. The Bank also engages in Federal
Funds transactions with its principal correspondent banks and primarily acts
as a net seller of such funds. The sale of Federal Funds amounts to a short-
term loan from the Bank to another bank. Risks associated with these
investments include, but are not limited to, mismanagement in terms of
interest rate, maturity and concentration. Historically, losses associated
with the investment portfolio have been minimal.
For additional information concerning Investment Activities, see the
information set forth under "First Alliance Management's Discussion and
Analysis of Financial Condition and Results of Operations."
33
<PAGE>
Asset/Liability Management. It is the objective of the Bank to manage its
assets and liabilities to provide a satisfactory, consistent level of
profitability within the framework of established cash, loan, investment,
borrowing and capital policies. Certain officers of the Bank are charged with
the responsibility for developing and monitoring policies and procedures that
are designed to insure acceptable composition of the asset/liability mix. It
is the overall philosophy of management to support asset growth primarily
through growth of core deposits, which include deposits of all categories made
by individuals, partnerships and corporations. Management seeks to invest the
largest portion of the Bank's assets in loans to local builders, small
businesses and individuals. The Bank's asset/liability mix is monitored on a
timely basis with a report reflecting interest-sensitive assets and interest-
sensitive liabilities being prepared and presented to the asset/liability
committee of the Bank's Board of Directors on a quarterly basis. In addition,
the Bank's liquidity is monitored on a monthly basis by its Board of
Directors. The objective of this policy is to manage interest-sensitive assets
and liabilities so as to minimize the impact of substantial movements in
interest rates on the Bank's earnings. See "First Alliance Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EMPLOYEES
As of March 31, 1996, the Bank had 77 full-time equivalent employees and
Alliance Finance had 5 full-time equivalent employees. Neither First Alliance
nor any of its subsidiaries is a party to any collective bargaining agreement.
In the opinion of management, First Alliance and its subsidiaries enjoy
excellent relations with their respective employees. First Alliance does not
have any employees who are not also employees of the Bank.
PROPERTIES
The Bank's five offices are located in Marietta, Georgia, at 63 Barrett
Parkway, 2760 Cobb Parkway, 4210 Wade Green Road, 833 South Cobb Drive, and
1269 Barclay Circle. Alliance Finance's offices are located at 3451 South Cobb
Drive, Smyrna, Georgia and at 680 Hiram/Acworth Road, Hiram, Georgia.
The Bank leases the land on which its main office is located pursuant to an
agreement dated August 28, 1985, as amended. The lease provides for an initial
term of 5 years following the capitalization of First Peoples Bank of Cobb (a
predecessor to First Alliance), with 9 renewal periods of 5 years each. Rent
escalation features include a 5% increase every 5 years plus an additional
amount equal to the average yearly amount for the Consumer Price Index (CPI)
for metropolitan Atlanta for the previous five years, not to exceed 8% per
year. At any time after the first 5 years, the Bank may exercise an option to
purchase the property for $1,000,000. The Bank also leases its branch office
at Barclay Circle pursuant to an agreement dated December 6, 1990. The lease
provides for an initial term of 5 years following regulatory approval of the
branch with 2 renewal periods of 4 years each. By letter agreement dated
December 15, 1995, the parties agreed to renew the lease for 3 years at the
then current annual rental amount. The Bank owns the remaining branches
without encumbrance.
Alliance Finance leases its main office pursuant to an agreement dated March
23, 1996. The lease provides for an initial term of one year (from May 1, 1993
through April 30, 1994), with two renewal periods of one year each. Alliance
Finance owns its other office without encumbrance.
Other than normal real estate and commercial lending activities of the Bank,
First Alliance generally does not invest in real estate, interests in real
estate, real estate mortgages, or securities of or interests in persons
primarily engaged in real estate activities.
LEGAL PROCEEDINGS
There are no material pending proceedings to which First Alliance is a party
or of which any of its properties are subject; nor are there material
proceedings known to First Alliance to be contemplated by any governmental
authority; nor are there material proceedings known to First Alliance, pending
or contemplated, in which any director, officer or affiliate or any principal
security holder of First Alliance, or any associate of any of the foregoing,
is a party or has an interest adverse to First Alliance.
34
<PAGE>
MANAGEMENT OF FIRST ALLIANCE
DIRECTORS
The members of the Board of Directors of First Alliance are elected by the
shareholders. The Board of Directors of First Alliance presently consists of 12
members, each of whom also serves as a director of First Alliance Bank. The
members of the Board of Directors of First Alliance Bank are elected annually
by First Alliance, acting as sole shareholder of First Alliance Bank.
The following table sets forth for each director (i) the person's name, (ii)
his or her age at December 31, 1995, (iii) the year he or she was first elected
as a director of First Alliance (or its predecessor), and (iv) his or her
positions with First Alliance other than as a director and his or her other
business experience for the past five years.
<TABLE>
<CAPTION>
YEAR
FIRST
NAME AGE ELECTED BUSINESS EXPERIENCE
---- --- ------- -------------------
<S> <C> <C> <C>
Billy L. 61 1993 President, Ask-Kay Electric, Inc.
Askea (electrical contractor)
James L. 54 1988
Coxwell, President, Jim Coxwell GMC, Inc.
Sr. (truck dealership)
Robert E. 43 1988
Flournoy,
III Attorney
James E. 59 1988 President, Kenworth of Atlanta
Freeman (truck dealership)
John B. 64 1992 Partner, Harwell-Owens and Realtech Firms
Harwell (real estate development)
Charles 56 1988
E.
Holmes Partner, Chegwidden, Dorsey, Holmes (architects)
Robin R. 31 1992 Private Investor (Chairman of Farmers and Merchants Bank,
Howell Summerville, GA)
Nisbet S. 43 1993
Kendrick,
III Partner, Johnson & Montgomery (attorneys)
Billy H. 54 1993
Martin Owner and President, Hallmart Office Supplies, Inc.
J. Edward 56 1992
Mulkey, President and Chief Executive Officer of First Alliance and
Jr.(1) First Alliance Bank
James L. 70 1988
Newsome Retired Educator; Owner and Operator, Newsome Landscaping
A. McKoy 67 1992
Rose,
Jr.,
M.D. Retired Surgeon
</TABLE>
- --------
(1)See "Executive Officers" below for Mr. Mulkey's prior business experience.
There are no arrangements or understandings between First Alliance and any
person pursuant to which any of the above persons have been or will be elected
a director.
35
<PAGE>
EXECUTIVE OFFICERS
The table below sets forth for each executive officer of First Alliance (i)
the person's name, (ii) his or her age at December 31, 1995, (iii) the year he
or she was first elected as an officer of First Alliance (or its predecessor),
and (iv) his or her positions with First Alliance or First Alliance Bank and
his or her other business experience for the past five years.
<TABLE>
<CAPTION>
YEAR
FIRST
NAME AGE ELECTED BUSINESS EXPERIENCE
---- --- ------- -------------------
<S> <C> <C> <C>
James L. Newsome 70 1988 Chairman of the Board of First Alliance
and First Alliance Bank; Owner and
operator of Newsome Landscaping
J. Edward Mulkey, Jr.(1) 56 1992 President and Chief Executive Officer of
First Alliance and First Alliance Bank
Nisbet S. Kendrick, III 43 1993 Vice President of First Alliance;
Partner, Johnson & Montgomery
John B. Harwell 64 1992 Secretary of First Alliance; Partner,
Harwell-Owens and Realtech Firms
James E. Freeman 59 1988 Treasurer of First Alliance; President,
Kenworth of Atlanta
Frank H. Roach(2) 43 1992 Chief Financial Officer/Assistant
Secretary of First Alliance and Senior
Vice President, Chief Financial Officer
and Assistant Secretary of First
Alliance Bank
</TABLE>
- --------
(1) Mr. Mulkey has served as President of First Alliance and First Alliance
Bank since 1992. From 1987 until 1992, when First Peoples Bank of Cobb and
Commercial Exchange Bank were merged to form First Alliance, Mr. Mulkey
served as President of First Peoples Bank of Cobb.
(2) Mr. Roach has served as an officer of First Alliance and First Alliance
Bank since 1992. From 1974 until 1992, Mr. Roach served in various
capacities including Group Vice President and Controller of First American
Bank, Atlanta, Georgia.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by First Alliance and its subsidiaries to or on
behalf of its Chief Executive Officer for the years indicated. No other
executive officer of First Alliance earned over $100,000 in salary and bonus
during fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED(#) COMPENSATION
- --------------------------- ---- -------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Edward Mulkey, Jr. 1995 $126,666 $20,000 $ 0 5,000 $6,767(2)
President and 1994 $125,000 $15,000 $ 0 0 $6,400(3)
Chief Executive Officer 1993 $125,000 $37,435(4) $ 0 0 $6,500(5)
of First Alliance
</TABLE>
- --------
(1) Does not reflect non-cash compensation in the form of personal benefits,
the value of which did not exceed the lesser of $50,000 or 10% of Mr.
Mulkey's salary and bonus for any fiscal year to which such benefits
pertain.
(2) Consists of $3,600 for life insurance premiums and a $3,167 401(k) plan
matching contribution.
(3) Consists of $3,600 for life insurance premiums and a $2,800 401(k) plan
matching contribution.
(4) Includes a special bonus of $25,435 paid in connection with First Alliance
Bank's merger with Georgia Security Bank.
(5) Consists of $3,600 for life insurance premiums and a $2,900 401(k) match.
36
<PAGE>
The following table sets forth information regarding the grant of stock
options to Mr. Mulkey during fiscal 1995. First Alliance did not award any
stock appreciation rights ("SARs") during fiscal 1995.
OPTION GRANTS IN FISCAL 1995
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE
- ---- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C>
J. Edward Mulkey, Jr. .......... 5,000(1) 100% $14.50 8/8/05
</TABLE>
- --------
(1) The option was granted with an exercise price equal to the fair market
value on the date of grant (August 8, 1995) as determined in accordance
with the terms of the First Alliance 1995 Stock Option Plan. The option is
fully vested and became exercisable on February 8, 1996, six months
following the date of grant.
The following table sets forth information concerning the options held by
Mr. Mulkey at December 31, 1995. Mr. Mulkey did not exercise any stock options
during fiscal 1995.
FISCAL 1995 YEAR-END OPTION HOLDINGS AND VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31, 1995 OPTIONS AT DECEMBER 31, 1995(1)
------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. Edward
Mulkey,
Jr. ..... 0 5,000 $ 0 $ 7,500
</TABLE>
- --------
(1) Calculated by subtracting the exercise price ($14.50) from $16.00, the
closing price of the First Alliance Common Stock as reported by the Nasdaq
SmallCap Market on December 28, 1995, the last day of fiscal 1995 on which
the First Alliance Common Stock was traded, and multiplying the difference
by the number of shares underlying the option.
COMPENSATION OF DIRECTORS
While the directors of First Alliance are not compensated for their services
as First Alliance directors or committee members, such individuals also serve
as directors of First Alliance Bank and are paid $500 per month for their
service as bank directors and $75 per bank committee meeting attended. Mr.
Mulkey does not receive these fees. First Alliance Bank also maintains a
Director Defined Benefit Plan, which is a retirement plan including both
defined benefit and defined contribution features. Eligible directors are
entitled to receive an annual retirement benefit beginning upon the later of
that director's retirement from the Board of Directors or attainment of age
70.
EMPLOYMENT AGREEMENT
As of July 1, 1995, First Alliance and First Alliance Bank entered into an
employment agreement with J. Edward Mulkey, Jr., with regard to Mr. Mulkey's
continued service as President and Chief Executive Officer of First Alliance
and of First Alliance Bank. The term of the agreement extends through June 30,
1998, subject to an additional 12-month extension upon written notice to Mr.
Mulkey from First Alliance and First Alliance Bank of their intent to extend
the term and Mr. Mulkey's written acceptance of such offer. Mr. Mulkey's
annual base salary is $130,000 for the first 12-month period under the
agreement, $132,500 for the second 12-month period and $135,000 for the third
12-month period. Mr. Mulkey is also entitled to such additional incentive
compensation as may be awarded from time to time by the Boards of Directors of
First Alliance or First Alliance Bank or any committee designated thereby in
their discretion. Mr. Mulkey's base salary and incentive compensation will be
reviewed and approved at least annually by the Boards of Directors of First
Alliance and First Alliance Bank or any committee designated thereby, and Mr.
Mulkey's base salary may be increased in
37
<PAGE>
their discretion to reflect his performance. The agreement also entitles Mr.
Mulkey to participate in employee benefit programs generally, including health
and life insurance, grants him the use of an automobile and entitles him to
reimbursement for country club and other professional association dues.
In the event of disability, Mr. Mulkey will be entitled to receive 100% of
his then current base salary during the first 12 months of his disability. If
he is disabled for a continuous period exceeding 12 months, however, First
Alliance or First Alliance Bank may terminate the agreement, in which event
payment of Mr. Mulkey's base salary will cease. If Mr. Mulkey is terminated
for "cause" (as defined in the agreement), he will have no right to
compensation or other benefits. If his employment is terminated for any reason
other than cause or disability, Mr. Mulkey will receive a severance payment
equal to his then current annual base salary. In the event of a "change of
control" (defined as any transaction resulting in control of more than 50% of
any class of First Alliance voting securities or the sale, transfer,
consolidation or merger of First Alliance Bank with a corporation that is not
a majority owned subsidiary of First Alliance), and within six months
preceding or one year after the change of control, Mr. Mulkey's employment is
terminated for any reason other than for cause, Mr. Mulkey will receive a
severance payment of $300,000 as liquidated damages in lieu of all other
claims. The agreement also contains a non-competition provision that prohibits
Mr. Mulkey from performing banking services substantially identical to those
performed on behalf of First Alliance or First Alliance Bank within the limits
of Cobb County, Georgia for a period of one year after the termination of his
employment and a non-solicitation provision prohibiting him from employing or
attempting to employ First Alliance or First Alliance Bank employees in a
competing bank or other business. The agreement also prohibits his disclosure
of any confidential information regarding First Alliance or First Alliance
Bank during his employment and for a period of one year beginning upon
termination of his employment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the First
Alliance Common Stock owned, as of the Record Date and on a pro forma basis
giving effect to the Merger (including the conversion of the Premier Preferred
Stock into Premier Common Stock immediately prior to consummation of the
Merger), (i) by each person who beneficially owned more than 5% of the shares
of First Alliance Common Stock outstanding, (ii) by each First Alliance
director, (iii) by the Chief Executive Officer of First Alliance and (iv) by
all First Alliance directors and executive officers as a group.
<TABLE>
<CAPTION>
PRO FORMA
PERCENT OF CLASS PERCENT OF CLASS
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PRIOR TO MERGER FOLLOWING MERGER
- ------------------------ ------------------- ---------------- ----------------
<S> <C> <C> <C>
Billy L. Askea........... 42,730(2) 2.66 1.82
James L. Coxwell, Sr. ... 53,713(3) 3.35 2.28
Robert E. Flournoy, III.. 26,132(4) 1.63 1.11
James E. Freeman......... 154,143(5) 9.60 6.56
John B. Harwell.......... 30,734(6) 1.91 1.31
Charles E. Holmes........ 1,291(7) * *
Robin R. Howell.......... 50,962(8) 3.17 2.16
Nisbet S. Kendrick, III.. 5,912(9) * *
Billy H. Martin.......... 21,231(10) 1.31 *
J. Edward Mulkey, Jr. ... 27,984(11) 1.38 1.19
James L. Newsome......... 7,455(12) * *
J. Mack Robinson......... 262,111(13) 16.34 11.15
A. McKoy Rose, Jr.,
M.D. ................... 67,949(14) 3.78 2.89
All directors and
executive officers as a
group
(13 persons)............ 493,257(15) 30.59 20.91
</TABLE>
- --------
*Represents less than one percent of the shares outstanding.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. The information shown above is based upon
38
<PAGE>
information furnished by the named persons and based upon "beneficial
ownership" concepts set forth in rules promulgated under the Exchange Act.
Under such rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within 60 days. More than one person may be deemed to be a
beneficial owner of the same securities.
(2) Consists of (a) 38,803 shares owned directly by Mr. Askea; and (b) 3,927
shares owned by his spouse, as to which Mr. Askea shares beneficial
ownership. Mr. Askea's address is 4600 Somerset Road, Smyrna, Georgia
30080.
(3) Consists of 53,713 shares owned directly by Mr. Coxwell. Mr. Coxwell's
address is 3830 Baltimore Place, Acworth, Georgia 30101.
(4) Consists of (a) 8,626 shares owned jointly by Mr. Flournoy with his
spouse; (b) 7,650 shares owned by Merrill, Lynch, Fenner, Price & Smith
in an IRA for Mr. Flournoy; (c) 2,646 shares owned by Mr. Flournoy's
grandmother, as to which beneficial ownership is shared; (d) 7,100 shares
owned by Mr. Flournoy's father, as to which beneficial ownership is
shared; and (e) 110 shares owned by Mr. Flournoy's father as guardian for
Collier Ross, as to which beneficial ownership is shared. Mr. Flournoy's
address is 236 Washington Avenue, Marietta, Georgia 30060.
(5) Consists of (a) 139,947 shares owned by Mr. Freeman; and (b) 14,196
shares owned by his spouse, as to which Mr. Freeman shares beneficial
ownership. Mr. Freeman's address is 6770 Atlanta Yacht Club Drive,
Acworth, Georgia 30102.
(6) Consists of (a) 16,601 shares owned directly by Mr. Harwell; and (b)
14,133 shares owned by Merrill, Lynch, Fenner, Price & Smith in an IRA
for Mr. Harwell. Mr. Harwell's address is 3508 Naples View, Kennesaw,
Georgia 30152.
(7) Consists of 1,291 shares owned directly by Mr. Holmes. Mr. Holmes'
address is 4960 Burnt Hickory Road, Kennesaw, Georgia 30152.
(8) Consists of 50,962 shares held by Harriett J. Robinson, as trustee for
the benefit of Robin Robinson Howell, as to which beneficial ownership is
shared. Ms. Howell's address is 567 Peachtree Battle Avenue, Atlanta,
Georgia 30305. J. Mack Robinson and Ms. Howell are father and daughter,
and the 50,962 shares beneficially owned by Ms. Howell are also listed as
beneficially owned by Mr. Robinson.
(9) Consists of (a) 5,058 shares owned directly by Mr. Kendrick; and (b) 854
shares held by Mr. Kendrick as custodian for his children, as to which
Mr. Kendrick shares beneficial ownership. Mr. Kendrick's address is 4738
Talleybrook Drive, Kennesaw, Georgia 30152.
(10) Consists of (a) 21,000 shares owned directly by Mr. Martin; and (b) 231
shares owned by Sterne, Agee Leach in an IRA for Mr. Martin. Mr. Martin's
address is 3420 Pinetree Drive, Smyrna, Georgia 30080.
(11) Consists of (a) 7,166 shares owned directly by Mr. Mulkey; (b) 3,908
shares held in First Alliance Bank's 401(k) plan for the benefit of Mr.
Mulkey; (c) 11,805 shares held by his spouse, as to which Mr. Mulkey
shares beneficial ownership; (d) 105 shares held by his spouse and son,
as to which Mr. Mulkey shares beneficial ownership; and (e) 5,000 shares
subject to currently exercisable options. Mr. Mulkey's address is 170
Hardage Drive, Marietta, Georgia 30064.
(12) Consists of (a) 3,990 shares owned directly by Mr. Newsome; and (b) 3,465
shares owned jointly by Mr. Newsome and his spouse, as to which
beneficial ownership is shared. Mr. Newsome's address is 3830 Stilesboro
Road, Kennesaw, Georgia 30152.
(13) Consists of (a) 55,010 shares owned directly by Mr. Robinson; (b) 20,069
shares owned by Mr. Robinson's spouse as to which beneficial ownership is
shared; (c) 83,654 shares owned by Mr. Robinson's spouse for the benefit
of their two daughters, as to which beneficial ownership is shared; (d)
525 shares owned by one of Mr. Robinson's daughters as to which
beneficial ownership is shared; (e) 88,225 shares owned by Delta Life
Insurance Co. and (f) 14,628 shares owned by Delta Fire & Casualty. Mr.
Robinson's address is 3500 Tuxedo Road, Atlanta, Georgia 30305. Mr.
Robinson is not a director or an executive officer of First Alliance. Mr.
Robinson and Robin R. Howell are father and daughter, and the 50,962
shares beneficially owned by Ms. Howell are also listed as beneficially
owned by Mr. Robinson.
39
<PAGE>
(14) Consists of 53,809 shares held in various trusts as to which Dr. Rose is
both trustee and beneficiary and 14,140 shares held by Dr. Rose's son as
to which Dr. Rose shares beneficial ownership. Dr. Rose's address is 201
Whitlock Avenue, Marietta, Georgia 30064-2325.
(15) Includes 7,500 shares subject to currently exercisable options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
First Alliance's directors and executive officers, their immediate family
members and certain companies and other entities associated with them, have
been customers of and have had banking transactions with First Alliance Bank
and are expected to continue such relationships with First Alliance Bank in
the future. As of March 31, 1996, the aggregate outstanding balance of all
such loans was $1,318,000, or 7.65% of shareholders' equity. In the opinion of
First Alliance's management, the extensions of credit made by First Alliance
Bank to such individuals, companies and entities since January 1, 1995 (i)
were made in the ordinary course of business, (ii) were made on substantially
the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons and (iii) did not
involve more than a normal risk of collectibility or present other unfavorable
features.
40
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF FIRST ALLIANCE
The following selected financial data is derived from the consolidated
financial statements of First Alliance. The following data should be read in
conjunction with First Alliance's consolidated financial statements and the
related notes contained elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, QUARTERS ENDED MARCH 31,
----------------------------------- -------------------------
1995 1994 1993 1992 1996 1995
-------- -------- -------- -------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets.... $156,355 $143,605 $134,299 $130,383 $ 166,710 $ 143,354
Loans, net...... 94,418 79,640 83,192 82,221 103,418 81,562
Investment secu-
rities......... 45,811 32,506 26,427 25,444 36,072 34,684
Federal funds
sold........... 2,530 19,110 10,880 9,027 12,620 14,610
Interest-bearing
deposits....... 588 -- -- 794 623 24
Deposits........ 127,759 118,166 117,323 113,751 132,862 124,572
Borrowings...... 9,648 9,150 1,500 -- 15,150 1,985
Stockholders'
equity......... $ 17,840 $ 15,173 $ 14,814 $ 14,205 $ 17,216 $ 15,871
OPERATING DATA:
Interest in-
come........... $ 12,757 $ 10,301 $ 10,086 $ 10,359 $ 3,523 $ 2,891
Interest ex-
pense.......... 5,293 3,796 3,795 4,928 1,461 1,099
Net interest
income......... 7,464 6,505 6,291 5,431 2,062 1,791
Provisions for
losses on
loans.......... 318 285 1,007 441 79 77
Net interest
income after
provision for
losses on
loans.......... 7,146 6,220 5,284 4,990 1,983 1,714
Other income.... 1,487 1,688 2,090 1,446 435 321
Other expenses.. 5,896 6,009 6,674 6,277 1,558 1,393
Income tax ex-
pense.......... 874 568 98 5 310 206
Net income.... $ 1,850 $ 1,331 $ 602 $ 154 $ 548 $ 432
Net income per
share(1)....... $ 1.15 $ .83 $ .38 $ .10 $ .34 $ .27
</TABLE>
- --------
(1) Per share amounts have been restated to reflect the May 1995 five percent
common stock dividend.
41
<PAGE>
FIRST ALLIANCE MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
BACKGROUND
First Alliance Bancorp, Inc. (referred to in this section of the Joint Proxy
Statement/Prospectus as "First Alliance" or the "Company"), formerly known as
Commex Financial Corporation, was incorporated in 1988 under the laws of
Georgia and the regulations of the Bank Holding Company Act of 1956. First
Alliance's major subsidiary, First Alliance Bank (referred to in this section
of the Joint Proxy Statement/Prospectus as the "Bank"), formerly known as
Commercial Exchange Bank, opened for business in 1984. On January 31, 1995,
First Alliance purchased 80% of Alliance Finance (a consumer finance company)
for $28,000. At that time, Alliance Finance (the "Finance Company") had total
assets of $2,016,000 and loans of $1,912,000.
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
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 Bank to meet those needs. The Bank seeks to meet
liquidity requirements primarily through management of short-term investments
(principally Federal Funds sold), monthly amortizing loans, repayment of
single payment loans and periodic repayments of mortgage backed securities. In
addition, at March 31, 1996, the Bank had $6,000,000 in approved Federal Funds
lines with correspondent banks which could provide funds on an immediate basis
if the need arose. The Bank also held $36,071,561 in its Available for Sale
securities portfolio at March 31, 1996, and which, if sold, would have no
additional impact on the Bank's capital as, in accordance with FASB 115, the
Available for Sale portfolio is marked-to-market on a periodic basis. Also,
the Bank has access to various Certificate of Deposit ("CD") networks which
would allow it to raise deposits from credit unions and other small banks for
varying time periods at rates comparable to the short-term U.S. Government
Bond rate curve. These deposits are not brokered and no fee outside of the
market rate is paid.
Additionally, the Bank is a member of the Federal Home Loan Bank system and
at March 31, 1996, had the ability to borrow approximately $12 million by
pledging qualifying loans and securities as collateral.
The liquidity and capital resources of the Company and the Bank are
monitored on a periodic basis by federal regulatory authorities. In addition,
the Company and the Bank perform liquidity analyses in the same manner as the
federal regulatory agencies. As of March 31, 1996, the various liquidity
ratios were considered adequate by regulatory definitions. In management's
opinion, the Company and the Bank maintained liquidity that was adequate to
meet their respective needs.
The Company and the Bank continue to be well-capitalized by both industry
and regulatory definitions. At March 31, 1996, the Company's capital ratios
were as follows:
<TABLE>
<CAPTION>
MINIMUM REGULATORY
REQUIREMENT TO BE
MARCH 31, 1996 WELL-CAPITALIZED
-------------- ------------------
<S> <C> <C>
Leverage Capital Ratio 10.74% 5.00%
Risk Based Capital Ratios:
Tier #1 Capital 14.57% 6.00%
----- -----
Total Capital 15.84% 10.00%
</TABLE>
Management is not aware of any current recommendations of the regulatory
authorities which, if they were implemented, would have a material effect on
the Company's liquidity, capital resources or operations.
42
<PAGE>
The Company regularly evaluates business combination opportunities and
conducts due diligence activities in connection with possible business
combinations. As a result, business combination discussions and, in some
cases, negotiations take place, and future business combinations involving
cash, debt or equity securities may be expected. Any future business
combination or series of business combinations that the Company might
undertake may be material, in terms of assets acquired or liabilities assumed,
to the Company's financial condition.
ASSET/LIABILITY MANAGEMENT
At March 31, 1996, the Company, utilizing a "static gap" view of interest
sensitivity, was positioned in a slightly asset-sensitive position (4.87%) at
six months and a slightly liability sensitive position (3.47%) at one year.
This "static gap" view of interest sensitivity at a point in time looks at the
volumes of assets and liabilities that will mature or reprice within varying
time periods. Such a view does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive
pressures and the needs of the Bank's customers. It is also probable that
actual repricing may happen at different times than estimated and at different
rates than anticipated.
Management also utilizes a forecasting model which attempts to project the
Company's net interest margin in various rising, flat and falling interest
rate scenarios. The model assumes that the Company makes no material change in
the composition, maturity or interest sensitivity of its earning assets and
liabilities as a result of a change in interest rate cycles. The model
projects that in the next 12 months, the Company will earn approximately 5.18%
more net interest income in a 200 basis point rising rate environment and
approximately 3.86% less in a 200 basis point falling rate environment.
However, management will act to change the Company's asset or liability
composition and interest sensitivity in response to a definitive change in the
direction of interest rates. Specifically, the Company actively manages the
mix of asset and liability maturities to control the effects of changes in the
general level of interest rates on net interest income. Except for its effect
on the general level of interest rates, inflation does not have a material
impact on the Company due to the rate variability and short-term maturities of
its earning assets.
CHANGES IN FINANCIAL CONDITION
Total assets increased $10,355,000 since December 31, 1995. Non-earning cash
and due from banks increased $918,000 from year end 1995. This change is
representative of normal daily fluctuations in cash and check clearings.
Federal Funds sold increased $10,090,000 from year end as the Bank sold
approximately $10,000,000 in securities from the Available for Sale portfolio.
These sales represented the termination of an arbitrage transaction made up of
these assets and various floating rate deposits and borrowings. The Bank
recognized a gain of $143,000 on the sale of these securities. During the nine
months the transaction was in place, the Bank earned between $9,000 and
$13,000 in net interest income per month.
Loans grew $9,095,000 from year end 1995. This growth was primarily as
follows: construction loans grew $5,238,000, commercial real estate loans grew
$2,429,000 and commercial loans grew $1,838,000.
Total deposits grew $5,103,000 in first quarter 1996. Interest-bearing
demand deposits grew $3,438,000, other time deposits grew $852,000 and demand
deposits grew $658,000. The increase in interest-bearing demand deposits
represents increases in personal and corporate balances.
Other borrowings increased $5,503,000 as the Bank received a $6,000,000
repurchase agreement from a corporate customer. It is anticipated that this
balance will remain in the Bank for the foreseeable future.
43
<PAGE>
NON-PERFORMING ASSETS
Non-performing loans were $435,000 and other real estate owned was $272,000
at March 31, 1996. There was no material change from year end. At March 31,
1995, non-performing loans were $1,016,000. Management believes that the loan
loss allowance was adequate at March 31, 1996. First quarter 1996 had net
recoveries of $17,000 versus net recoveries of $101,000 in first quarter 1995.
RESULTS OF OPERATIONS
SUMMARY:
Net income for the first three months of 1996 was $548,000 as compared to
$432,000 for the first three months of 1995. There were two unusual items in
first quarter 1996. The first was the after-tax gain on the sale of securities
(discussed in detail in the "Changes in Financial Condition" section of this
report) of $94,000. The Company also incurred legal, accounting and other
expenses related to the on-going merger process with Premier of $71,000 after
tax. Without these items, first quarter 1996 net income would have been
$525,000, which is an increase over the same period in 1995 of $93,000. There
were no unusual items in first quarter 1995.
NET INTEREST INCOME:
The increase in earnings in first quarter 1996 was primarily the result of
an increase in net interest income of $271,000. This increase is the result of
an increase of $362,000 due to volume changes, and a decrease of $91,000 due
to rate changes.
The net interest spread was 4.67% which represents a decrease of .11% from
first quarter 1995.
PROVISION FOR LOAN LOSS:
The provision for loan losses was $79,000 in first quarter 1996 versus
$77,000 in first quarter 1995. There were no material changes in the loan loss
provision in either of the subsidiary companies.
NON-INTEREST INCOME:
Non-interest income increased $114,000 in the first quarter of 1996 over
first quarter 1995. As discussed above, gains on sale of securities from the
terminated arbitrage were $143,000. Deposit service charges decreased $13,000
and other commissions and fees were down $17,000.
NON-INTEREST EXPENSE:
Non-interest expense increased $164,000 in first quarter 1996 versus first
quarter 1995. The majority of this increase was the merger related expenses of
$108,000. In addition, the Company owned Alliance Finance for only one month
in the first quarter of 1995. As a result, the increase in Alliance Finance
expenses were $61,000. The FDIC insurance assessment paid by the Bank
decreased $66,000 in the first quarter 1996 versus first quarter 1995.
INCOME TAXES:
Consolidated income taxes increased $104,000 from first quarter 1995 to
first quarter 1996. The effective tax rate was 32% in 1995 and 36% in 1996.
The increase in the effective rate is the result of the non-deductibility of
the previously mentioned merger related expenses.
44
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
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 Bank to meet those needs. The Bank seeks to meet
liquidity requirements primarily through management of short-term investments
(principally Federal Funds sold), monthly amortizing loans, repayment of
single payment loans and periodic repayments of mortgage backed securities. In
addition, at December 31, 1995, the Bank had $6,000,000 in approved Federal
Funds lines with correspondent banks which could provide funds on an immediate
basis if the need arose. The Bank also held $45,811,000 in its Available for
Sale Securities Portfolio at December 31, 1995, and which, if sold, would have
no additional impact on the Bank's capital as, in accordance with FASB 115,
the Available for Sale portfolio is marked-to-market on a periodic basis.
Also, the Bank has access to various Certificate of Deposit ("CD") networks
which would allow it to raise deposits from credit unions and other small
banks for varying time periods at rates comparable to the short-term U.S.
Government Bond rate curve. These deposits are not brokered and no fee outside
of the market rate is paid.
Additionally, the Bank is a member of the Federal Home Loan Bank system and
at December 31, 1995, had the ability to borrow an additional $11 million by
pledging qualifying loans and securities as collateral.
The liquidity and capital resources of the Company and the Bank are
monitored on a periodic basis by federal regulatory authorities. In addition,
the Company and the Bank perform liquidity analyses in the same manner as the
federal regulatory agencies. As of December 31, 1995, the various liquidity
ratios were considered adequate by regulatory definitions. In management's
opinion, the Company and the Bank maintained liquidity that was adequate to
meet their respective needs.
The Company and the Bank continue to be well-capitalized by both industry
and regulatory definitions. At December 31, 1995, the Company's capital ratios
were as follows:
<TABLE>
<CAPTION>
MINIMUM REGULATORY
REQUIREMENT TO BE
WELL-CAPITALIZED
------------------
<S> <C> <C>
Leverage Capital Ratio............................ 11.01% 5.00%
Risk Based Capital Ratios:
Tier #1 Capital................................. 15.91% 6.00%
----- -----
Total Capital................................... 17.16% 10.00%
</TABLE>
Management is not aware of any current recommendations of the regulatory
authorities which, if they were implemented, would have a material effect on
the Company's liquidity, capital resources or operations.
The Company regularly evaluates business combination opportunities and
conducts due diligence activities in connection with possible business
combinations. As a result, business combination discussions and, in some
cases, negotiations take place, and future business combinations involving
cash, debt or equity securities may be expected. Any future business
combination or series of business combinations that the Company might
undertake may be material, in terms of assets acquired or liabilities assumed,
to the Company's financial condition.
ASSET/LIABILITY MANAGEMENT
The following table sets forth a distribution of the repricing of the
Company's earning assets and interest bearing liabilities as of December 31,
1995. Additionally, it shows the interest rate sensitivity gap (i.e., interest
rate sensitive assets less interest rate sensitive liabilities), the
cumulative interest rate sensitivity gap, the interest rate sensitivity gap
ratio (i.e., interest rate sensitive assets divided by interest rate sensitive
liabilities) and the
45
<PAGE>
cumulative interest rate sensitivity gap ratio. This "static gap" view of
interest sensitivity at a point in time looks at the volumes of assets and
liabilities that will mature or reprice within varying time periods. Such a
view does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
the Bank's customers. It is also probable that actual repricing may happen at
different times than estimated and at different rates than anticipated.
Management also utilizes a forecasting model which attempts to project the
Company's net interest margin in various rising, flat and falling interest
rate scenarios. The model assumes that the Company makes no material change in
the composition, maturity or interest sensitivity of its earning assets and
liabilities as a result of a change in interest rate cycles. The model
projects that in the next 12 months, the Company will earn approximately 2.9%
more net interest income in a 200 basis point rising rate environment and
approximately 3.4% less in a 200 basis point falling rate environment.
However, management will act to change the Company's asset or liability
composition and interest sensitivity in response to a definitive change in the
direction of interest rates. Specifically, the Company actively manages the
mix of asset and liability maturities to control the effects of changes in the
general level of interest rates on net interest income. Except for its effect
on the general level of interest rates, inflation does not have a material
impact on the Company due to the rate variability and short-term maturities of
its earning assets. In particular, approximately 72% of the loan portfolio and
51% of the investment portfolio are comprised of earning assets which have
variable rate terms or are short-term obligations.
<TABLE>
<CAPTION>
AFTER THREE AFTER
WITHIN MONTHS BUT ONE YEAR AFTER
THREE WITHIN BUT WITHIN FIVE
MONTHS ONE YEAR FIVE YEARS YEARS TOTAL
------- ----------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Interest-bearing deposits.. $ 291 $ -- $ 297 $ -- $ 588
Federal funds sold......... 2,530 -- -- -- 2,530
Investment securities...... 16,595 6,948 18,575 3,693 45,811
Loans...................... 58,640 10,806 21,907 4,601 95,954
------- --------- -------- -------- --------
78,056 17,754 40,779 8,294 144,883
------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES:
Interest-bearing demand de-
posits.................... 36,886 -- -- -- 36,886
Savings.................... 7,440 -- -- -- 7,440
Time deposits, less than
$100,000.................. 11,574 22,293 7,639 2 41,508
Time deposits, $100,000 and
over...................... 6,953 9,198 3,608 -- 19,759
Federal Home Loan Bank Ad-
vances.................... 6,000 -- -- -- 6,000
Other Borrowings........... 2,394 -- -- 1,254 3,648
------- --------- -------- -------- --------
71,247 31,491 11,247 1,256 115,241
------- --------- -------- -------- --------
Interest rate sensitivity
gap......................... $ 6,809 $ (13,737) $ 29,532 $ 7,038 $ 29,642
======= ========= ======== ======== ========
Cumulative interest rate
sensitivity gap............. $ 6,809 $ (6,928) $ 22,604 $ 29,642
======= ========= ======== ========
Interest rate sensitivity gap
ratio....................... 1.10 .56 3.63 6.60
======= ========= ======== ========
Cumulative interest rate
sensitivity gap ratio....... 1.10 .93 1.20 1.26
======= ========= ======== ========
</TABLE>
46
<PAGE>
AVERAGE BALANCE SHEETS
The condensed average balance sheets for the periods indicated are presented
below(1):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from Banks............................... $ 5,447 $ 5,609
Interest-bearing deposits in Banks.................... 298 123
Taxable investment securities......................... 41,641 33,729
Nontaxable investment securities...................... 292 291
Federal funds sold.................................... 8,981 9,977
Loans(2).............................................. 86,401 83,934
Allowance for loan losses............................. (1,490) (1,509)
Other assets.......................................... 7,086 7,283
----------- -----------
$ 148,656 $ 139,437
=========== ===========
Total interest-bearing assets..................... $ 137,613 $ 128,054
=========== ===========
LIABILITIES AND EQUITY
Deposits:
Non-interest bearing demand......................... $ 21,609 $ 21,652
Interest-bearing demand............................. 35,277 36,407
Savings............................................. 8,318 11,048
Time................................................ 57,405 53,551
----------- -----------
Total deposits...................................... 122,609 122,658
Repurchase agreements............................... 756 174
Borrowings.......................................... 7,489 242
Other liabilities................................... 1,061 976
----------- -----------
Total liabilities................................. 131,915 124,050
Stockholders' equity(3)............................. 16,741 15,387
----------- -----------
$ 148,656 $ 139,437
=========== ===========
Total interest-bearing liabilities................ $ 109,245 $ 101,422
=========== ===========
</TABLE>
- --------
(1) Average balances were determined using the daily average balances.
(2) Average loans include non-accrual loans and are stated net of unearned
income.
(3) Average stockholders' equity is net of unrealized losses on securities
available for sale, net of taxes, of $329,000 and $296,000, respectively.
The following is a detailed discussion of the various material segments of
the consolidated balance sheet.
CASH AND SHORT-TERM ASSETS
Total non-earning Cash and due from Banks was $5,945,000 at December 31,
1995. This balance represented an increase of $551,000 from year end 1994.
This change is representative of the normal daily fluctuations in cash and
checks that are processed for collection.
Short-term assets are comprised of interest-bearing deposits in other banks
and Federal Funds sold. At December 31, 1995, the Bank owned four $99,000
Certificates of Deposit of other FDIC-insured institutions. Additionally, the
Bank had a balance of $192,000 at year end 1995 and $16,000 at year end 1994
in its interest-bearing transaction account at the Federal Home Loan Bank.
Federal Funds sold decreased $16,580,000 from
47
<PAGE>
year end 1994 to year end 1995. This decrease is primarily the result of net
repayments in overnight securities sold under repurchase agreements of
$7,842,000, purchase of floating rate securities of $5,300,000 and purchases
of $2,000,000 in other securities equal to first quarter 1996 securities
maturities.
INVESTMENT PORTFOLIO
TYPES OF INVESTMENTS:
The carrying amounts of investment securities at the dates indicated are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Treasury and other U.S. Government agencies and
corporations......................................... $ 21,808 $ 12,092
Municipal securities.................................. 304 292
Collateralized mortgage obligations................... 18,647 10,640
Mortgage-backed passthroughs.......................... 3,120 8,393
Structured Notes...................................... 3,210 3,274
Other securities...................................... 1,932 1,089
----------- -----------
$ 45,811 $ 32,506
=========== ===========
</TABLE>
At December 31, 1995 the Bank's investments to issuers exceeding 10% of
stockholders' equity are as follows:
<TABLE>
<S> <C>
Federal Home Loan Mortgage Corporation.................................. $11,133
Federal National Mortgage Association................................... 16,912
Government National Mortgage Association................................ 2,108
Small Business Administration........................................... 3,442
-------
$33,595
=======
</TABLE>
MATURITIES:
The amounts of investment securities in each category as of December 31,
1995, are shown in the following table according to contractual maturity
classifications (1) one year or less (2) after one year through five years and
(3) after five years through ten years.
<TABLE>
<CAPTION>
U.S. TREASURY AND
OTHER U.S.
GOVERNMENT AGENCIES MUNICIPAL OTHER
AND CORPORATIONS(1) SECURITIES(2) SECURITIES
-------------------- ----------------- -------------------
AMOUNT YIELD(3) AMOUNT YIELD(3) AMOUNT YIELD(3)
----------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
One year or less........ $ 4,407,321 6.28% $ -- --% $ 900,000 8.23%
After one year through
five years............. 24,043,989 5.92% 303,841 4.46% -- --
After five years through
ten years.............. 5,066,377 6.65% -- -- -- --
After ten years......... 10,057,836 7.13% -- -- 1,031,819 7.60%
----------- -------- ----------
TOTAL................. $43,575,523 $303,841 $1,931,819
=========== ======== ==========
</TABLE>
- --------
(1) The above schedule includes mortgage-backed securities based on their
contractual maturity date.
(2) Due to the minimal balances, yields on municipal securities have not been
computed on a tax equivalent basis.
(3) 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 carrying value of each security in that
range.
48
<PAGE>
CHANGES IN POSITION:
Total investment securities increased $13,305,000 in 1995. Ten million
dollars of this increase was due to an arbitrage transaction funded by a
combination of Federal Home Loan Bank borrowings and the Bank's floating rate
deposits. The assets purchased in the arbitrage transaction maintain a spread
of approximately 120 basis points over the cost of the borrowings. This spread
is the result of the Bank's taking what is called "CAP" risk on the assets.
Although these assets are floating rate securities, they have rate ceilings or
"CAPS." These CAPS range from 10 to 12 percent. The securities are priced at
180 to 200 basis points over the CAPS. The risk of securities with these types
of CAPS is that if 30-day Labor were to reach a level of 11 to 12 percent, the
net spread to the Bank would be negative. In management's opinion, the risk of
rates moving to those levels is remote in the current economic environment.
There are no restrictions on unwinding this transaction at any time. However,
there would be losses in the securities if rates were at the level described
above. The balance of the increase in total securities was due to purchases of
securities to be funded in the longer term by first quarter 1996 securities
maturities.
The increase in the U.S. Agency portfolio is due primarily to the above-
mentioned arbitrage asset purchases.
The Company sold during the third quarter of 1995 securities classified as
held to maturity, with a carrying amount of $4,560,718, recognizing a loss of
$30,778, in response to changes in the bond market and management's evaluation
of the securities portfolio. The circumstances leading to the sale of these
securities were identified as an isolated instance based on prudent business
decisions. On December 15, 1995, the Company transferred its remaining held to
maturity portfolio totaling $20,103,806 to available for sale, resulting in a
net unrealized loss of $23,815 which was included in stockholders' equity at
$15,718 net of related taxes of $8,097.
LOAN PORTFOLIO
TYPES OF LOANS:
Management realizes that the Bank's loan portfolio is concentrated in real
estate loans which constituted 71% and 80% of the portfolio at December 31,
1995 and 1994, respectively. Real estate loans are loans secured by real
estate mortgages, real estate construction projects and consumer home equity
lines. The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan. Management is not aware of any
additional concentrations.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REAL ESTATE:
Secured by mortgages................................. $44,234 $44,517
Construction......................................... 21,694 18,163
Consumer home equity................................. 2,061 2,085
Consumer loans....................................... 12,854 9,628
Commercial and financial............................. 14,868 5,711
Other loans.......................................... 912 1,028
----------- -----------
96,623 81,132
Unearned fees, net................................... (222) (190)
Unearned discount.................................... (447) 0
Allowance for loan losses............................ (1,536) (1,302)
----------- -----------
Net loans........................................... $94,418 $79,640
=========== ===========
</TABLE>
49
<PAGE>
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES:
Total loans as of December 31, 1995, 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>
(DOLLARS IN THOUSANDS)
<S> <C>
MATURITY:
One year or less...................................... $69,448
After one year through five years..................... 18,575
After five years...................................... 7,931
-------
$95,954
=======
</TABLE>
The following summarizes loans at December 31, 1995 with due dates after one
year which have predetermined and floating or adjustable interest rates.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Predetermined interest rates.......................... $26,506
Floating or adjustable interest rates................. --
-------
$26,506
=======
</TABLE>
Records were not available to present the above information in each category
listed above (one year or less, after one through five years, and after five
years) and could not be extracted without undue burden to the Company.
CHANGES IN POSITION:
Total loans, net of unearned discount, grew $15,044,000 in 1995. The primary
source of growth was the commercial loan portfolio which grew $9,157,000. This
growth is the result of the Bank's effort to diversify the loan portfolio by
hiring two experienced commercial loan officers. In addition, the Bank had
growth in construction loans of $3,531,000 and consumer loans of $3,226,000.
The growth in the consumer portfolio is primarily the result of the
acquisition of Alliance Finance which had gross consumer loans of $2,601,000
at December 31, 1995.
DEPOSITS
Average balances of deposits and average rates paid thereon, classified as
to non-interest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the years indicated are presented below.(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994
---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Non-interest-bearing demand deposits......... $ 21,609 -- % $ 21,652 -- %
Interest-bearing demand deposits............. 35,277 3.38 36,407 2.97
Savings deposits............................. 8,318 2.96 11,048 2.96
Time deposits................................ 57,405 5.79 53,551 4.41
-------- --------
Total deposits.............................. $122,609 $122,658
======== ========
</TABLE>
- --------
(1) Average balances were determined using the daily average balances for the
year ended December 31, 1995 and December 31, 1994.
50
<PAGE>
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1995, 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>
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less.................................. $ 6,953
Over six months through twelve months................. 9,296
Over twelve months.................................... 3,510
--------
Total............................................. $ 19,759
========
</TABLE>
CHANGES IN POSITION:
Total deposits grew $9,593,000 from year end 1994 to year end 1995. Non-
interest-bearing demand deposits increased $825,000. Interest-bearing demand
deposits increased $1,668,000, however, within that category, public deposits
increased $5,028,000 while the balance in commercial money market accounts
decreased $8,155,000. The decrease in commercial money market balances was
primarily in one account which decreased $6,695,000. These funds had been
placed in the Bank on a temporary basis pending final investment. Savings
accounts decreased $2,791,000 from year end 1994 to year end 1995. The year
end 1994 savings balances were at higher levels than previous years. Customers
moved a substantial portion of these balances into various maturities of
certificates of deposit as interest rates declined throughout 1995. Growth in
1995 of $5,396,000 and $4,494,000 in certificates of deposit over and under
$100,000 is the result of movement of funds from the savings deposits, setting
rates in the upper middle of the Atlanta metropolitan market and acquisition
of financial institutions deposits through the CD Network. At year end 1995,
financial institutions certificates of deposit had a balance of $4,321,000. At
year end 1994, these balances were $2,778,000. The Bank is utilizing the
growth in these higher cost funding sources to fund the growth in its loan
portfolio.
OTHER BORROWINGS
The following table sets forth certain information regarding federal funds
purchased, securities sold under agreements to repurchase, and Federal Home
Loan Bank borrowings.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Month end balance for year ended December 31,......... $ 9,647,633 $ 9,150,000
Weighted average interest rate at December 31,........ 6.48% 4.75%
Maximum month end balance during year................. 14,250,850 9,150,000
Average amount outstanding during the year............ 8,245,041 416,163
Weighted average interest rate during the year........ 6.45% 5.53%
</TABLE>
At year end 1994, the Bank's other borrowings consisted of one overnight
repurchase agreement with a municipal entity. At year end 1995, the Bank had
$1,309,000 in cash management "sweep" repurchase agreements, and $6,000,000 in
floating rate Federal Home Loan borrowings used to fund the floating rate
securities. The floating rate borrowings and securities arbitrage are
described above under "Investment Portfolio--Changes in Position." The
remainder of the other borrowings at December 31, 1995 are in Alliance
Finance. These borrowings consist of $1,254,000 in subordinated debentures and
$1,085,000 in borrowings under a $3,000,000 line of credit with another
unaffiliated bank.
51
<PAGE>
CREDIT ANALYSIS
NON-PERFORMING LOANS:
Information with respect to nonaccrual, past due and restructured loans at
December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual Loans....................................... $ 268 $ 602
Loans contractually past due ninety days or more as to
interest or principal payments and still accruing..... 1 --
Loans, the terms 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.......................... -- --
Interest income that would have been recorded on
nonaccrual and restructured loans under original
terms................................................. 23 67
Interest income that was recorded on nonaccrual and
restructured loans.................................... 10 13
</TABLE>
Accrual of interest income is discontinued on loans when, in the opinion of
management, collection of such interest income becomes doubtful. When a loan
is placed on non-accrual status, all interest previously accrued but not
collected is reversed against current interest income. Accrual of interest on
such loans is resumed when, in management's judgment, the collection of
interest and principal becomes probable. In accordance with FASB 114 all
nonaccrual loans have been determined by management to be impaired loans at
December 31, 1995.
In the opinion of management, any loans classified by regulatory authorities
as doubtful, substandard, or special mention that have not been included in
the table above do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity or capital resources. These classified loans do not represent (i)
material credits about which management is aware or (ii) 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.
COMMITMENTS AND LINES OF CREDIT:
In the ordinary course of business, the Bank has 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 the Bank's Board of Directors. The Bank
has also granted commitments to approved customers for standby letters of
credit. These commitments are recorded in the financial statements when funds
are disbursed or the financial instruments become payable. The Bank uses the
same credit and collateral policies for these off balance sheet commitments as
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. Since 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, 1995
and 1994.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit............................ $18,606 $10,176
Standby letters of credit............................... 1,026 642
----------- -----------
$19,632 $10,818
=========== ===========
</TABLE>
52
<PAGE>
SUMMARY OF LOAN 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 loss experience, composition of the loan portfolio, evaluation
of possible future losses, current economic conditions and other relevant
factors. The Bank's allowance for loan losses was approximately $1,535,000 at
December 31, 1995, representing 1.60% of year end total loans outstanding,
compared with $1,301,000 at December 31, 1994, which represented 1.61% of year
end total loans outstanding. The allowance for loan losses is reviewed
continuously based on management's evaluation of current risk characteristics
of the loan portfolio, as well as the impact of prevailing and expected
economic business conditions. Management considers the allowance for loan loss
adequate to cover possible loan losses on the loans outstanding.
Management has not allocated the Bank's allowance for loan losses to
specific categories of loans. Based on management's best estimate,
approximately 45% of the allowance should be allocated to real estate loans,
40% to commercial and financial loans and 15% to consumer loans as of December
31, 1995.
The following table summarizes average loan balances for each year; changes
in the allowance for loan losses arising from loans charged off and recoveries
on loans previously charged off; additions to the reserve which have been
charged to operating expense and the rate of net charge offs during the period
to average loans.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average amount of loans outstanding................. $86,401 $83,934
=========== ===========
Balance of allowance for loan losses at beginning of
year............................................... $ 1,301 $ 1,581
Charge-offs
Commercial and financial.......................... (149) (204)
Real estate mortgage.............................. (181) (398)
Installment....................................... (56) (132)
----------- -----------
(386) (734)
----------- -----------
Recoveries
Commercial and financial.......................... 132 80
Real estate mortgage.............................. 83 32
Installment....................................... 35 57
----------- -----------
250 169
----------- -----------
Net charge-offs..................................... (136) (565)
----------- -----------
Allowance acquired in business combination.......... 52 --
----------- -----------
Additions to allowance charged to operating expense
during year........................................ 318 285
----------- -----------
Balance of allowance for loan losses at end of
year............................................... $ 1,535 $ 1,301
=========== ===========
Ratio of net loans charged off during the year to
average loans outstanding.......................... .16% .67%
=========== ===========
</TABLE>
53
<PAGE>
RESULTS OF OPERATIONS
The Company reported record earnings of $1,850,000 for the year ended
December 31, 1995. This amount represents an increase of $519,000 or 39
percent from the $1,331,000 earned in 1994. Earnings in 1995 included a net,
after tax, gain on the sale of foreclosed property of $183,000. Earnings in
1994 included an after-tax profit on the sale of a closed branch of $172,000.
Net income for Alliance Finance was $64,000 for the eleven months since its
acquisition by the Company.
INTEREST INCOME AND INTEREST EXPENSE:
The following table sets forth the amount of the Company's interest income
and interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total interest-
earning assets and total interest-bearing liabilities, net interest spread and
net yield on average interest-earning assets.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994
---------------- ----------------
AVERAGE AVERAGE
INTEREST RATE INTEREST RATE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans(1).............. $ 9,649 11.17% $ 8,090 9.64%
Interest on taxable securities............. 2,521 6.05 1,743 5.17
Interest on nontaxable securities(2)....... 11 3.77 11 3.78
Interest on Federal funds sold............. 558 6.21 451 4.52
Interest on deposits in banks.............. 18 6.04 6 4.88
------- -------
Total interest income...................... 12,757 9.27 10,301 8.04
------- -------
INTEREST EXPENSE
Interest on interest-bearing demand depos-
its....................................... 1,191 3.38 1,082 2.97
Interest on savings deposits............... 246 2.96 327 2.96
Interest on time deposits.................. 3,324 5.79 2,364 4.41
Interest on other borrowings............... 532 6.45 23 5.53
------- -------
Total interest expense..................... 5,293 4.85 3,796 3.74
------- -------
NET INTEREST INCOME.......................... $ 7,464 $ 6,505
======= =======
Net interest spread........................ 4.42% 4.30%
===== ====
Net yield on average interest.............. 5.42% 5.08%
===== ====
</TABLE>
- --------
(1) Interest and fees on loans include $718,898 and $685,034 of loan fee
income for the years ended December 31, 1995 and 1994, respectively. Also
included in interest and fees on loans is $10,155 and $12,760 of income
recognized on non-accrual loans for the years ended December 31, 1995 and
1994, respectively.
(2) Yields on nontaxable securities have not been computed on a tax equivalent
basis as tax-free interest income is not material.
The increase in net interest income of $959,000 is the primary reason for
the increase in net income. The following tables reflect the changes in net
interest income resulting from changes in interest rates and from asset and
liability volumes. The change in interest attributable to rate has been
determined by applying the change in rate between years to average balances
outstanding in the earlier year. The change in interest due to volume has been
determined by applying the rate from the earlier year to change in average
balances outstanding between years. Thus, changes that are not solely due to
rate or volume have been consistently allocated between rate and volume.
54
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 VS. 1994
CHANGES DUE TO:
------------------------
INCREASE
RATE VOLUME (DECREASE)
------ ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans............................ $1,315 $244 $1,559
Interest on taxable securities........................ 327 451 778
Interest on nontaxable securities..................... -- -- --
Interest on Federal Funds sold........................ 156 (49) 107
Interest on deposits in banks......................... 1 11 12
------ ---- ------
Total interest income................................ 1,799 657 2,456
------ ---- ------
Expense from interest-bearing liabilities:
Interest on interest-bearing deposits................. 144 (35) 109
Interest on savings deposits.......................... -- (81) (81)
Interest on time deposits............................. 780 180 960
Interest on other borrowings.......................... 504 5 509
------ ---- ------
Total interest expense............................... 1,428 69 1,497
------ ---- ------
Net interest income.................................. $ 371 $588 $ 959
====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 VS. 1993
CHANGES DUE TO:
-------------------------------
INCREASE
RATE VOLUME (DECREASE)
------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans.................... $ 51 $(274) $(223)
Interest on taxable securities................ (32) 416 384
Interest on nontaxable securities............. -- -- --
Interest on Federal Funds sold................ 133 (17) 116
Interest on deposits in banks................. (12) (50) (62)
------- -------- --------
Total interest income........................ 140 75 215
------- -------- --------
Expense from interest-bearing liabilities:
Interest on interest-bearing deposits......... 113 77 190
Interest on savings deposits.................. 3 34 37
Interest on time deposits..................... (75) (100) (175)
Interest on other borrowings.................. 28 (79) (51)
------- -------- --------
Total interest expense....................... 69 (68) 1
------- -------- --------
Net interest income.......................... $ 71 $ 143 $ 214
======= ======== ========
</TABLE>
PROVISION FOR LOAN LOSS:
The provision for loan loss in 1995 was $318,000 which was an increase of
$33,000 over the 1994 provision. A lesser provision was taken in the first
quarter of 1994 due to the special $650,000 provision taken in the fourth
quarter of 1993. The provision for loan loss in the Finance Company was
$18,000 in 1995.
55
<PAGE>
NON-INTEREST INCOME:
Total non-interest income was down $212,000 in 1995 versus 1994. Mortgage
origination fees were down $178,000. Mortgage origination commissions were
also down $74,000. This decrease in income is the result of the higher
interest rate environment in 1995 versus early 1994 and four fewer originators
on the Bank's staff. Service charges on deposit accounts were down $155,000 in
1995 versus 1994. This decrease is partially a function of the higher 1995
earnings credit given to the Bank's commercial customers which offsets their
activity charges and results in lower service charges for the bank. Non-
interest income in the Finance Company year-to-date 1995 was $50,000 for
eleven months of 1995.
NON-INTEREST EXPENSE:
Consolidated non-interest expense was down $124,000 in 1995 versus 1994.
Non-interest expense was down $448,000 in the Bank and the Company. Operating
expenses were $339,000 in the Finance Company. Personnel expenses in the Bank
were down $282,000 due to reduction in staffing levels, and consisted of
$223,000 in the Finance Company. Mortgage origination commissions were down
$74,000 due to the decreased income noted above. Directors expenses were up
$48,000 due to a full year of expense related to the directors defined benefit
plans (explained in greater detail in the notes to the Company's financial
statements included elsewhere in this report. FDIC deposit insurance premiums
were down $111,000 in 1995 and are expected to be nearly zero for 1996.
Collection attorney expense was $145,000 in 1995 which was essentially
unchanged from 1994. This level of expense relates directly to the 1995 loan
recoveries of $250,000 and the 1995 gains on sale of other real estate of
$278,000.
INCOME TAXES:
Consolidated income taxes increased $306,000 in 1995 versus 1994. The
effective tax rate was 32% in 1995 and 30% in 1994. The difference in
effective tax rates between the years was the utilization of a deferred
$33,000 alternative minimum tax credit in third quarter 1994.
RETURN ON EQUITY AND ASSETS
The following rate of return information for the years indicated is
presented below. First Alliance paid a 5% common stock dividend in May 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1995 1994
------ ------
<S> <C> <C>
Return on assets(1)............................................. 1.24% .95%
Return on equity(2)............................................. 11.05 8.65
Cash dividend payout ratio(3)................................... -- 22.99
Equity to assets ratio(4)....................................... 11.26 11.04
</TABLE>
- --------
(1) Net income divided by average total assets
(2) Net income divided by average equity
(3) Cash dividends declared divided by net income
(4) Average equity divided by average total assets
56
<PAGE>
BUSINESS OF PREMIER
GENERAL
Premier was organized in 1993 to engage principally in the business of
originating, processing, funding, and selling single family residential
mortgage loans. On April 28, 1995, Premier acquired all of the outstanding
capital stock of Allatoona Federal Savings Bank for a purchase price of
$5,496,458. As a result of the acquisition, Premier (i) changed its original
corporate name of "Premier Lending Corporation" to "Premier Bancshares, Inc."
and (ii) changed the name of Allatoona Federal Savings Bank to "Premier Bank,
FSB" (referred to in this section of the Joint Proxy Statement/Prospectus as
the "Bank"). Contemporaneously with the acquisition of the Bank, the Company
organized an additional subsidiary under the corporate name "Premier Lending
Corporation" to engage in the business of originating residential mortgage and
construction loans and commercial finance loans.
At March 31, 1996, Premier had total consolidated assets of approximately
$96.2 million, total consolidated deposits of approximately $60.2 million and
total consolidated shareholders' equity of approximately $6.5 million.
Premier's principal executive offices are located at 2180 Atlanta Plaza, 950
East Paces Ferry Road, Atlanta, Georgia 30326, and its telephone number at
such address is (404) 814-3090.
PREMIER BANK
General. The Bank had approximately $72.3 million in total assets, deposits
of approximately $60.8 million and net worth of approximately $6.0 million at
March 31, 1996. Real estate mortgage loans and commercial finance lending
transactions are primarily originated by Premier Lending rather than by the
Bank, while the branching powers of the federally-chartered Bank, which are
broader than a commercial bank, will enhance the ability to expand in Fulton
County, DeKalb County, Gwinnett County, Henry County and other counties within
the State of Georgia. The Bank's primary service area is currently Cobb
County, Cherokee County, Bartow County, Gwinnett County and Paulding County,
and the northern part of Fulton County, Georgia. The Bank's main office is
located at 4900 Ross Road in Acworth, Cobb County, Georgia.
The Bank received its charter as a federal stock savings bank from the
Federal Home Loan Bank Board, the predecessor of the Office of Thrift
Supervision ("OTS"), on November 21, 1986. The Bank commenced operations on
March 29, 1988. The primary business of the Bank is to attract deposits from
the general public and invest those funds in residential real estate loans,
commercial real estate loans, commercial loans and consumer loans. Customer
deposits with the Bank are insured to the maximum extent provided by law
through the Savings Association Insurance Fund, a unit of the Federal Deposit
Insurance Corporation. The Bank is also a member of the Federal Home Loan Bank
System.
Operations. The Bank's income is primarily derived from interest and fees
collected on loans and interest on investment securities and gains received on
sales of loans. The principal expenses of the Bank are interest paid on
deposits, interest paid on other borrowings by the Bank, employee
compensation, office expenses and other overhead expenses.
The Bank offers a full range of savings banking services to individuals,
professional and business customers in its primary service area. These
services include personal and business checking accounts and savings and other
time certificates of deposit. The Bank acts as a merchant depository for
cardholder drafts under both VISA and Mastercard. The Bank offers night
depository and bank-by-mail services and sells official checks and travellers
checks (issued by an independent entity).
The Bank's residential real estate lending activities are directed primarily
toward individuals requiring a 15- to 30-year mortgage loan. Commercial real
estate lending activities are directed primarily toward builders
57
<PAGE>
and developers and are generally short- and medium-term loans. Commercial
lending activities are primarily directed toward current customers for such
purposes as business equipment, working capital, lines of credit and letters
of credit secured by certificates of deposit. Consumer lending is oriented
primarily to the needs of the Bank's customers for such purposes as
automobiles and personal needs. The Bank also originates a limited number of
variable rate and fixed rate mortgage loans for its own account and both
variable and fixed rate mortgage loans for resale.
The Bank has primarily operated as a mortgage banker by selling most of its
residential loans to other financial institutions and secondary market
investors. The Bank is an approved Veterans Administration and Federal Housing
Administration lender and employs a direct endorsement underwriter on staff to
facilitate the loan approval process for Federal Housing Administration loans.
Such mortgage banking activities permit the Bank to generate fee income to
supplement its traditional source of income, i.e., the interest margin between
the interest earned on interest-earning assets (primarily loans) and the
interest paid on interest-bearing liabilities (primarily savings and time
certificates of deposit). The Bank does not retain the servicing of mortgage
loans sold in the secondary market.
Properties. The Bank conducts its business from its main office location at
4900 Ross Road, Acworth, Georgia 30101 and from two full service branch
offices. The Bank owns its main office building, which contains approximately
4,880 square feet of space. The Bank purchased the main office building from a
corporation owned by certain of the organizers of the Bank in December 1993.
The Bank leases (i) a branch office at 2390 Mt. Vernon Road, Suite 100,
Dunwoody, Georgia 30338 (which lease expires in July 2000) and (ii) a branch
office at 875 Oak Road, Suite 101, Lawrenceville, Georgia 30244 (which lease
expires in March 2001).
Employees. As of March 31, 1996, the Bank employed 30 full-time equivalent
employees. The Bank is not a party to any collective bargaining agreement and
management believes the Bank enjoys satisfactory relations with its employees.
Competition. The Bank experiences competition in attracting and retaining
business and personal checking and savings accounts and in making residential
real estate, commercial real estate and consumer loans in its primary service
area. The principal factors in competing for such accounts are interest rates,
the range of financial services offered, convenience of office and branch
locations and flexible office hours. Direct competition for such accounts
comes from other savings institutions, commercial banks, credit unions,
brokerage firms and money market funds. The primary factors in competing for
loans are interest rates, loan origination fees and the range of lending
services offered. The competition for origination of loans normally comes from
other savings institutions, commercial banks, credit unions and mortgage
banking firms. Such entities may have competitive advantages as a result of
greater resources and higher lending limits (by virtue of greater
capitalization) and may offer their customers certain services which the Bank
may not presently provide.
Legal Proceedings. There are no material pending proceedings to which
Premier is a party or of which any of its properties are subject; nor are
there material proceedings known to Premier to be contemplated by any
governmental authority; nor are there material proceedings known to Premier,
pending or contemplated, in which any director, officer or affiliate or any
principal security holder of Premier, or any associate of any of the
foregoing, is a party or has an interest adverse to Premier. Many of the loans
made by the Bank are subject to the provisions of 15 USC, et seq., otherwise
known as the Truth-in-Lending Act ("Truth-in-Lending") and regulations
promulgated thereunder by the Federal Reserve Board ("Regulation Z"). Truth-
in-Lending and Regulation Z are subject to continuing interpretation by the
courts.
PREMIER LENDING CORPORATION
General. As a mortgage banker, Premier Lending Corporation ("Premier
Lending") acts as an intermediary between purchasers of residential real
estate or homeowners refinancing their residences and correspondent or
institutional investors seeking to purchase mortgage loan investments. Premier
Lending is a retail originator of residential mortgage loans, which loans are
then sold to correspondent mortgage investors.
58
<PAGE>
Premier Lending is an approved Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") seller-servicer
of mortgage loans. Premier Lending is also an approved Department of Housing
and Urban Development ("HUD") and Veterans Administration ("VA") mortgage
originator. The approval process under these federal programs requires, among
other matters, evidence of industry experience, character references and
credit reports of principals, financial statements, corporate net worth or
bonding capacity, and a business plan.
Premier Lending's administrative offices are located at 2180 Atlanta Plaza,
950 East Paces Ferry Road, Atlanta, Georgia 30326 and its telephone number is
(404) 814-3090.
Residential Loan Originations. Premier Lending principally originates
conventional residential first mortgage loans (not insured or guaranteed by
agencies of the federal government). Management emphasizes the origination of
conventional loans with principal amounts within the maximum amounts eligible
for sale to FHLMC which currently is $207,000 for a one-unit property. All of
such loans are secured by one-to-four family residential properties. Premier
Lending originates residential mortgage loans insured by the FHA or partially
guaranteed by the VA. Mortgage loans which comply with FNMA and FHLMC
requirements, including FHA-insured and VA-guaranteed loans, are referred to
herein as "conforming loans."
Premier Lending also originates conventional mortgage loans which exceed the
maximum amounts qualified for sale to FNMA or FHLMC, but which otherwise
generally comply with FNMA or FHLMC requirements ("jumbo loans"). The loans
originated or purchased by Premier Lending are first mortgage loans, although
Premier Lending may originate or purchase some conforming second mortgage
loans. Premier Lending intends to limit its origination of second mortgage
loans to those which comply with FNMA and FHLMC criteria and which management
believes will not entail greater risk than conforming first mortgage loans.
The level of revenues per loan from Premier Lending's loan originations are
primarily a function of the spread between the yield (interest rate and fees)
required by correspondent or institutional investors and the interest rates
and fees Premier Lending can charge.
Operations. Premier Lending's primary service area for its residential loan
originations and its mortgage banking operations is the greater Atlanta,
Georgia metropolitan area. Premier Lending operates from its administrative
offices in Atlanta (Fulton County), and has loan production offices in
Gwinnett County, Fulton County, Henry County, DeKalb County and Cobb County.
Premier Lending's loan officers originate residential mortgage loans through
referrals from real estate agents and brokers, builders, developers, and other
relationships developed over the past years by management, as well as through
direct solicitation of borrowers.
The level of Premier Lending's loan originations is subject to seasonal
variations with the heaviest demand occurring in the spring, summer and fall
and with the lightest demand occurring in the winter.
Loan Funding Arrangements. Premier Lending will generally hold mortgage
loans for a period ranging from one to twenty days after closing. Pending
sales in the secondary market to correspondent or institutional mortgage
investors, Premier Lending will fund these mortgage loans principally through
its mortgage warehouse lines of credit, through wholesale loan sales to
Premier Bank and, to a lesser extent, from its own working capital. The funds
borrowed by Premier Lending to fund or purchase such mortgage loans are repaid
upon receipt of payment from the sale of such loans in the secondary market.
Loan Servicing. Premier Lending does not generally retain servicing of the
permanent mortgage loans which it originates and funds. However, Premier does
service construction and commercial finance loans for other investors. The
servicing rights on all of Premier Lending's payment mortgage loans are sold
for a fee along with the loans to correspondent or institutional mortgage
investors.
59
<PAGE>
Permanent Loan Market. Premier Lending's operations depend on the ability of
its prospective borrowers to qualify and obtain permanent loans through
Premier Lending from correspondent or institutional mortgage investors.
Accordingly, any significant change in the permanent loan market which reduces
the ability of Premier Lending's borrowers to obtain permanent financing on a
timely and acceptable basis, including a change in the operations, level of
activity, or underwriting criteria of such correspondent or institutional
investors or other permanent lenders, could have a material adverse effect on
Premier Lending's business and the results of operations.
Sale of Residential Loans. Premier Lending sells the mortgage loans which it
originates or purchases directly to correspondent or institutional mortgage
investors. These loans are sold on a loan-by-loan basis, and the sales are
made without recourse.
Economic Conditions. The results of operations of Premier Lending depend
primarily upon its ability to originate, fund and sell residential mortgage
loans. This ability, in turn, depends substantially upon current interest rate
levels and national economic conditions, which affect the degree to which
prospective purchasers of residential real estate and homeowners considering
refinancing their existing mortgage loans seek such mortgage financing. For
example, mortgage loan origination activity is generally greater in a period
of declining interest rates and favorable economic conditions. Economic
conditions in Premier Lending's service area will also have a significant
effect on the residential housing market and, therefore, on Premier Lending's
mortgage loan origination activities.
Competition. The mortgage banking business is highly competitive and
fragmented. Premier Lending competes with other mortgage bankers, state and
national banks, thrift institutions and insurance companies for loan
originations. Many of its competitors have substantially greater resources
than Premier Lending.
Regulation. Premier Lending's business operations are subject to the
applicable rules and regulations promulgated by FNMA, FHLMC, the Department of
Housing and Urban Development ("HUD"), and certain state laws with respect to
originating, processing, selling and servicing mortgage loans.
These rules and regulations, among other things, prohibit discrimination;
provide for inspection and appraisals of properties; require credit reports on
prospective borrowers and fix types of mortgage loan programs, including loan
amounts; provide examination and audit, disclosure, advertising and other
requirements; and in some cases, fix maximum interest rates, fees and loan
amounts.
Mortgage loan origination activities are subject to the Equal Credit
Opportunity Act, the Federal Truth-in-Lending Act, the Real Estate Settlement
Procedures Act, and other state and federal laws, and the regulations
promulgated thereunder which prohibit discrimination and require the
disclosure of certain information to borrowers concerning credit and
settlement costs. Certain conventional mortgage loans are also subject to
state usury statutes.
Premier Lending sells mortgage loans to programs administered by FNMA and
FHLMC. As an approved FHLMC seller/servicer of mortgage loans, Premier Lending
is required, among other requirements, to maintain a minimum net worth
according to generally accepted accounting principles of $1,000,000. Although
Premier Lending is not aware of any proposed actions to discontinue or curtail
the operations of these government-sponsored enterprises, such developments
would have an adverse effect on Premier Lending's operations. Premier Lending
expects that it will continue to remain eligible to participate in such
programs but a significant impairment of such eligibility would also adversely
affect its operations.
Construction Loan Originations. Premier Lending also originates and funds
(for resale on an arms-length basis to secondary market investors or to
Premier Bank) residential construction loans which are intended to be repaid
upon maturity (usually within six to twelve months from initial funding) when
a borrower closes a permanent loan. The proceeds of the construction loan are
utilized by the borrower for the purpose of acquiring
60
<PAGE>
and constructing improvements on the underlying real property. Each
construction loan generally will be secured by the underlying real property,
as well as any improvements constructed thereon.
Commercial Finance Lending. Premier Lending seeks to originate commercial
finance loans which focus on revolving lines of credit secured primarily by
receivables and, to a lesser extent, inventory. These loans are funded through
loan participations from other financial institutions (including Premier Bank)
and lines of credit. Management will consider term loans secured by machinery,
equipment or real estate based on traditional underwriting criteria, as well
as prior experience of management with the borrower. Management focuses its
commercial finance lending toward small and medium sized businesses that
generally are not being served by banks or finance companies in the market
area, especially as a result of the bank consolidation in Premier Lending's
market area.
Properties. Premier Lending leases its administrative and loan production
offices and does not own any real estate. The following is a summary of the
offices leased by Premier Lending:
<TABLE>
<CAPTION>
LOCATION PRIMARY USE LEASE EXPIRATION DATE
-------- ----------- ---------------------
<S> <C> <C>
2180 Atlanta Plaza Administrative office December 1998
950 East Paces Ferry Road and loan production
Atlanta, Georgia 30326 -- Fulton County
2019 Scenic Highway Loan production May 2001
Snellville, Georgia 30278 -- Gwinnett County
205 Market Place Loan production September 1996
Suite 102 -- Fulton County
Roswell, Georgia 30075
1235 Eagle's Landing Loan production May 1997
Parkway, Suite A -- Henry County
Stockbridge, Georgia
30281
3075 Breckenridge Blvd. Loan production January 1999
Suite 425 -- Gwinnett County
Duluth, Georgia 30136
2390 Mt. Vernon Road Loan production July 2000
Suite 200 -- DeKalb County
Dunwoody, Georgia 30338
2759 Delk Road Mortgage Division December 1999
Suite 201 and Loan production
Marietta, Georgia 30067 -- Cobb County
</TABLE>
Employees. At March 31, 1996, Premier Lending employed 110 persons, of which
8 were executive and administrative personnel and 102 were engaged in loan
originations, loan processing and marketing.
Litigation. Premier Lending is not a defendant in any litigation arising out
of the conduct of its business.
61
<PAGE>
MANAGEMENT OF PREMIER
DIRECTORS
The following table sets forth for each director of Premier (i) the person's
name, (ii) his or her age at December 31, 1995, (iii) the year he or she was
first elected as a director of Premier, and (iv) his or her positions with
Premier other than as a director and his or her other business experience for
the past five years.
<TABLE>
<CAPTION>
NAME AGE YEAR FIRST ELECTED BUSINESS EXPERIENCE
---- --- ------------------ -------------------
<C> <C> <C> <S>
N. Michael Anderson.... 48 1993 President, Michael Anderson,
Inc. (secondary marketing and
whole loan brokerage)
Candler M. Broom....... 55 1993 President and Partner, Austin
Brown, Inc. (representation of
various manufacturers in the
industrial motor control
industry)
Edwin T. Elliott....... 53 1993 Partner, Cam-el, Inc. (real
estate development)
William M. Evans, Jr... 44 1993 Founder, William Evans and
Associates, Inc. (real estate
development of single-family
dwellings and industrial
buildings)
Jo S. Hill............. 46 1993 Human Resources Consultant
Darrell D. Pittard..... 47 1993 Chairman of the Board,
President and Chief Executive
Officer of Premier(1)
</TABLE>
- --------
(1) See "Executive Officers" below for Mr. Pittard's prior business
experience.
EXECUTIVE OFFICERS
The table below sets forth for each executive officer of Premier (i) the
person's name, (ii) his or her age at December 31, 1995, (iii) the year he or
she was first elected as an officer of Premier, and (iv) his or her positions
with Premier and his or her other business experience for the past five years.
<TABLE>
<CAPTION>
NAME AGE YEAR FIRST ELECTED BUSINESS EXPERIENCE
---- --- ------------------ -------------------
<C> <C> <C> <S>
Darrell D. Pittard.. 47 1993 Chairman of the Board, President
and
Chief Executive Officer of
Premier(1)
Michael W. Lane..... 46 1994 Executive Vice President of
Premier Lending(2)
George S. Phelps.... 43 1995 President of Premier Lending(3)
</TABLE>
- --------
(1) Mr. Pittard co-founded Premier in March 1993. From August 1988 to February
1993, Mr. Pittard was employed by Prime Bank, FSB and its holding company,
Prime Bancshares, Inc., as President and Chief Executive Officer (March
1990 to February 1993) and as Chief Operating Officer (August 1988 to
March 1990). Prime Bank, FSB and its holding company were acquired in
February 1993 by SouthTrust Corporation, Birmingham, Alabama, at which
time Prime Bancshares' stock was traded on the American Stock Exchange.
(2) Mr. Lane has served as Executive Vice President of Premier Lending since
February 1994. From 1993 to February 1994, Mr. Lane was employed by
Millennium Healthcare Funding, Inc. as Manager, Vice President--Financing
Healthcare Claims. From 1992 to March 1993, he was employed by Prime Bank,
FSB, as Manager, Vice President, Commercial Banking Group--Commercial
Lending, Asset-Based Lending and Private Banking. Mr. Lane was employed
from May 1983 to March 1992 by First American Bank as Manager, Group Vice
President of Asset-Based Lending and Account Officer, Vice President of
Asset-Based Lending.
(3) Mr. Phelps has served as President of Premier Lending since April 1995
when Premier acquired Allatoona Federal Savings Bank. Mr. Phelps was
Senior Vice President at Allatoona Federal Savings Bank, where he was
responsible for mortgage lending, from 1991 to April 1995.
62
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by Premier and its subsidiaries to or on behalf
of its Chief Executive Officer and the two executive officers of Premier who
earned over $100,000 in salary and bonus during fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
NAME SECURITIES
AND OTHER UNDERLYING
PRINCIPAL FISCAL ANNUAL OPTIONS
POSITION YEAR(1) SALARY BONUS COMPENSATION(2) GRANTED (#)
--------- ------- -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Darrell D. Pittard...... 1996 $139,583 $84,488 $ 0 10,000
Chairman, President and 1995 $126,000 $ 0 $ 0 0
Chief Executive Officer 1994 $90,000(3) $ 0 $ 0 0
of Premier
Michael W. Lane......... 1996 $100,000 $32,808 $ 0 5,500
Executive Vice President
of Premier Lending
George S. Phelps........ 1996 $ 82,680 $44,279 $ 0 3,500
President of
Premier Lending
</TABLE>
- --------
(1) Represents the year ended on March 31 of the year listed.
(2) Does not reflect non-cash compensation in the form of personal benefits,
the value of which did not exceed the lesser of $50,000 or 10% of salary
and bonus for any fiscal year to which such benefits pertain.
(3) Represents salary for nine months of fiscal 1994, as Mr. Pittard did not
draw a salary during the first quarter of fiscal 1994.
The following table sets forth information regarding the grant of stock
options to the executive officers listed in the Summary Compensation Table
(the "Named Executive Officers") during fiscal 1996. Premier did not award any
stock appreciation rights ("SARs") during fiscal 1996 and no SARs are
outstanding.
OPTION GRANTS DURING THE FISCAL YEAR ENDED MARCH 31, 1996
(Individual Grants)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE
---- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Darrell D. Pittard................ 10,000 25.00% $10.00 10/19/2005
Michael W. Lane................... 5,500 13.75% $10.00 08/17/2005
George S. Phelps.................. 3,500 8.75% $10.00 10/19/2005
</TABLE>
- --------
(1) The option was granted with an exercise price equal to the fair market
value on the date of grant as determined in accordance with the terms of
the Premier Stock Option Plan. The options vest in one-third increments
annually beginning on August 17, 1996 (for Mr. Lane) and October 19, 1996
(for Messrs. Pittard and Phelps), the first anniversary of the respective
dates of grant.
63
<PAGE>
The following table sets forth information concerning the options held by
the Named Executive Officers at March 31, 1996. The Named Executive Officers
did not exercise any stock options during the year ended March 31, 1996.
FISCAL 1996 YEAR-END OPTION HOLDINGS AND VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT MARCH 31, 1996 OPTIONS AT MARCH 31, 1996(1)
------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- -----------------------------
<S> <C> <C> <C> <C>
Darrell D. Pittard...... 0 10,000 $ 0 $ 0
Michael W. Lane......... 0 5,500 $ 0 $ 0
George S. Phelps........ 0 3,500 $ 0 $ 0
</TABLE>
- --------
(1) None of the Named Executive Officers held unexercised in-the-money options
at March 31, 1996, as the exercise price of their options ($10.00) was
equal to the market value of the Premier Common Stock on that date.
COMPENSATION OF DIRECTORS
Directors of Premier are paid $1,000 per meeting attended and $250 per
committee meeting attended.
EMPLOYMENT AGREEMENT
As of September 1, 1995, Premier entered into an employment agreement with
Darrell D. Pittard, with regard to Mr. Pittard's continued service as
President, Chairman of the Board and Chief Executive Officer of Premier. The
term of the agreement extends through December 31, 1997, subject to an
additional 12-month extension upon written notice to Mr. Pittard from Premier
of its intent to extend the term and Mr. Pittard's written acceptance of such
offer. Mr. Pittard's annual base salary is $150,000 for the first 12-month
period under the agreement, $175,000 for the second 12-month period and
$175,000 for the third 12-month period. Mr. Pittard is also entitled to such
additional incentive compensation as may be awarded from time to time by the
Board of Directors of Premier or any committee designated thereby in their
discretion. Mr. Pittard's base salary and incentive compensation will be
reviewed and approved at least annually by the Board of Directors of Premier
or any committee designated thereby, and Mr. Pittard's base salary may be
increased in their discretion to reflect his performance. The agreement also
entitles Mr. Pittard to participate in employee benefit programs generally,
including health and life insurance, grants him the use of an automobile and
entitles him to reimbursement for country club and other professional
association dues. In the event of disability, Mr. Pittard will be entitled to
receive 100% of his then current base salary during the first 12 months of his
disability. If he is disabled for a continuous period exceeding 12 months,
however, Premier may terminate the agreement, in which event payment of Mr.
Pittard's base salary will cease. If Mr. Pittard is terminated for "cause" (as
defined in the agreement), he will have no right to compensation or other
benefits. If his employment is terminated by Premier or its successor for any
reason other than cause or disability, Mr. Pittard will receive a severance
payment equal to twice his then current annual base salary. In the event of a
"change of control" (defined as any transaction resulting in control of more
than 25% of any class of Premier voting securities or the sale, transfer,
consolidation or merger of Premier with a corporation that is not a majority
owned subsidiary of Premier), and within six months preceding or one year
after the change of control Mr. Pittard's employment is terminated for any
reason other than for cause, Mr. Pittard will receive a severance payment
equal to twice his then current annual base salary as liquidated damages in
lieu of all other claims. In addition, if within six months preceding or one
year after the change of control, the status and character of Mr. Pittard's
employment as described in the agreement are materially altered and Mr.
Pittard voluntarily terminates his employment, Mr. Pittard will receive the
same severance payment as liquidated damages in lieu of all other claims. The
agreement also prohibits Mr. Pittard from disclosing any confidential
information regarding Premier during his employment and for a period of one
year beginning upon termination of his employment.
64
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Premier
Common Stock owned, as of the Record Date and on a pro forma basis giving
effect to the Merger and the conversion of all then outstanding shares of
First Alliance Preferred Stock, (i) by each person who beneficially owned more
than 5% of the shares of Premier Common Stock outstanding, (ii) by each
Premier director, (iii) by the Named Executive Officer and (iv) by all Premier
directors and executive officers as a group.
<TABLE>
<CAPTION>
PRO FORMA
NUMBER OF PERCENT OF CLASS PERCENT OF CLASS
NAME OF BENEFICIAL OWNER(1) SHARES PRIOR TO MERGER(2) FOLLOWING MERGER(3)
- --------------------------- --------- ------------------ -------------------
<S> <C> <C> <C>
N. Michael Anderson........ 44,748(4) 10.08 1.90
Candler M. Broom........... 20,500(5) 4.66 *
Edwin T. Elliott........... 25,000(6) 5.69 1.06
William M. Evans, Jr....... 34,870(7) 7.74 1.48
Jo S. Hill................. 14,625(8) 3.33 *
Darrell D. Pittard......... 120,871(9) 24.34 5.14
J. Stephen Vasen........... 55,696(10) 12.42 2.36
Michael W. Lane............ 7,473(11) 1.70 *
George S. Phelps........... 6,250(12) 1.43 *
W. D. Everitt, Jr.......... 86,957(13) 16.64 3.70
Marinecrew and Company..... 43,479(14) 9.07 1.85
Robert McMahan............. 24,348(15) 5.29 1.04
All directors and executive
officers as a group
(8 persons)............... 274,337(16) 51.17 11.57
</TABLE>
- --------
* Represents less than one percent of the shares outstanding.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. The information shown above is based upon
information furnished by the named persons and based upon "beneficial
ownership" concepts set forth in rules promulgated under the Exchange Act.
Under such rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within 60 days. More than one person may be deemed to be a
beneficial owner of the same securities.
(2) Calculated giving effect to the conversion of the listed person's shares
of Premier Preferred Stock and the exercise of his or her options to
purchase Premier Common Stock.
(3) Calculated giving effect to the Conversion, the Merger and the exercise of
the listed individual's options to purchase First Alliance Common Stock
that will be issued in the Merger.
(4) Consists of (i) 36,400 shares of Premier Common Stock, (ii) 4,000 shares
subject to currently exercisable options and (iii) 4,348 shares of Premier
Preferred Stock, which are convertible, at the option of the holder, into
4,348 shares of Premier Common Stock. Mr. Anderson's address is 1296 West
Wesley Road, Atlanta, Georgia 30327.
(5) Consists of (i) 16,500 shares of Premier Common Stock and (ii) 4,000
shares subject to currently exercisable options. Mr. Broom's address is
813 West Ponce de Leon Avenue, Decatur, Georgia 30030.
(6) Consists of (i) 21,000 shares of Premier Common Stock and (ii) 4,000
shares subject to currently exercisable options. Mr. Elliott's address is
P. O. Box 1046, Lawrenceville, Georgia 30246.
(7) Consists of 20,000 shares of Premier Common Stock, (ii) 4,000 shares
subject to currently exercisable options and (iii) 10,870 shares of
Premier Preferred Stock, which are convertible, at the option of the
holder,
65
<PAGE>
into 10,870 shares of Premier Common Stock. Mr. Evans' address is 5450 East
Mountain Street, Stone Mountain, Georgia 30083.
(8) Consists of (i) 10,625 shares of Premier Common Stock and (ii) 4,000
shares subject to currently exercisable options. Ms. Hill's address is
1013 Lenox Valley, Atlanta, Georgia 30324.
(9) Consists of (i) 60,000 shares of Premier Common Stock and (ii) 60,871
shares of Premier Preferred Stock, which are convertible, at the option of
the holder, into 60,781 shares of Premier Common Stock. Mr. Pittard's
address is 3475 Oak Valley Road, Atlanta, Georgia 30326.
(10) Consists of (i) 29,000 shares of Premier Common Stock held by Mr. Vasen,
(ii) 14,000 shares of Premier Common Stock held by Mr. Vasen's spouse, as
to which beneficial ownership is shared, (iii) 4,000 shares subject to
presently exercisable options and (iv) 8,696 shares of Premier Preferred
Stock, which are convertible, at the option of the holder, into 8,696
shares of Premier Common Stock. Mr. Vasen is not a director of Premier.
His address is 460 Ansley Walk Terrace, N.E., Atlanta, Georgia 30309.
(11) Consists of (i) 3,125 shares of Premier Common Stock and (ii) 4,348
shares of Premier Preferred Stock, which are convertible, at the option
of the holder, into 4,348 shares of Premier Common Stock. Mr. Lane is not
a director of Premier. His address is 659 Peachtree Street, N.E., Suite
1502, Atlanta, Georgia 30308.
(12) Mr. Phelps is not a director of Premier. His address is 741 Foxcroft
Circle, Marietta, Georgia 30067.
(13) Consists of 86,957 shares of Premier Preferred Stock, which are
convertible, at the option of the holder, into 86,957 shares of Premier
Common Stock. Mr. Everitt is not a director or executive officer of
Premier. His address is 509 Forest Trail, Griffin, Georgia 30223.
(14) Consists of 43,479 shares of Premier Preferred Stock, which are
convertible, at the option of the holder, into 43,479 shares of Premier
Common Stock. The company's address is 1303 Hightower Trail, Suite 130,
Atlanta, Georgia 30350.
(15) Consists of (i) 20,000 shares of Premier Common Stock and (ii) 4,348
shares of Premier Preferred Stock, which are convertible, at the option
of the holder, into 4,348 shares of Premier Common Stock and are held in
an IRA for Mr. McMahan's benefit. Mr. McMahan is not a director or
executive officer of Premier. His address is 1691 Grove Park Way,
Decatur, Georgia 30033.
(16) Includes (i) 20,000 shares subject to currently exercisable options, and
(ii) 80,437 shares of Premier Preferred Stock, which are convertible, at
the option of the holder, into 80,437 shares of Premier Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1995, First Alliance purchased 78,261 shares (representing 20.11%
of the currently outstanding shares) of Premier Preferred Stock for an
aggregate purchase price of $900,000. The per share purchase price paid by
First Alliance was the same as that paid by other investors for shares of
Premier Preferred Stock. To fulfill regulatory requirements, First Alliance
agreed to relinquish its right to voluntarily convert its Premier Preferred
Stock into Premier Common Stock, and therefore its right to vote on matters
presented to common shareholders, but retained all other rights and privileges
of a holder of Premier Preferred Stock. Immediately prior to the consummation
of the Merger, First Alliance's shares of Premier Preferred Stock will be
cancelled in lieu of conversion into Premier Common Stock.
Premier's directors and executive officers, their immediate family members
and certain companies and other entities associated with them, have been
customers of and have had banking transactions with Premier Bank and are
expected to continue such relationships with Premier Bank in the future. As of
March 31, 1996, the aggregate outstanding balance of all such loans was
$32,500, or .5% of shareholders' equity. In the opinion of Premier's
management, the extensions of credit made by Premier Bank to such individuals,
companies and entities since January 1, 1993 (i) were made in the ordinary
course of business, (ii) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and (iii) did not involve more than a normal
risk of collectibility or present other unfavorable features.
66
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PREMIER
The following selected financial data is derived from the financial
statements of Premier. The financial data for the year ended March 31, 1996
and 1995 is derived from the consolidated financial statements. The following
data should be read in conjunction with Premier's consolidated financial
statements and the related notes contained elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
BALANCE SHEET:
Total assets.......................................... $ 96,199 $ 8,281
Loans, net............................................ 79,441 7,029
Investment securities................................. 501 --
Federal funds sold.................................... -- --
Interest-bearing deposits............................. -- --
Deposits.............................................. 60,218 --
Borrowings............................................ 26,905 4,039
Stockholders' equity.................................. 6,545 3,921
OPERATING DATA:
Interest income....................................... 7,380 553
Interest expense...................................... 1,976 --
Interest expense on borrowings........................ 2,254 409
Net interest income................................. 3,150 144
Provision for losses on loans......................... 85 --
Net interest income after provision for losses on
loans................................................ 3,065 144
Mortgage banking income............................... 6,001 919
Other income.......................................... 260 450
Other expenses........................................ 8,199 2,755
Income tax expense.................................... 263 --
Net income (loss)................................... 864 (1,242)
Earnings (loss) per common share and common stock
equivalent........................................... 1.35 (2.85)
Earnings (loss) per share assuming full dilution...... 1.05 (-)
</TABLE>
67
<PAGE>
PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
The following is management's discussion and analysis of certain significant
factors which have affected Premier's financial position and operating results
for the years ended March 31, 1996 and 1995. This discussion should be read
with the financial statements presented elsewhere in this Joint Proxy
Statement/Prospectus.
On May 1, 1995, Premier acquired Allatoona Federal Savings Bank (now known
as Premier Bank) in a business combination accounted for as a purchase
transaction. The financial statements as of and for the year ended March 31,
1996 include the results of operations of Allatoona since the date of
acquisition. Simultaneously with the acquisition of Allatoona, Premier
Bancshares, Inc. (formerly Premier Lending Corporation) was formed as a thrift
holding company and Premier Lending Corporation ("Premier Lending") became a
mortgage banking subsidiary of Premier Bancshares, Inc. Prior to the
acquisition, Allatoona operated a mortgage banking department in addition to
the normal operations of a savings bank. Subsequent to the acquisition,
Premier Lending has originated substantially all of the mortgage loans as well
as the commercial finance lending transactions in which Premier Bank has held
an interest either for its own portfolio or for sale in the secondary market.
FINANCIAL CONDITION
As of March 31, 1996, Premier had increased portfolio loans by $43,446,000
and loans held for sale by $29,301,000, for a total increase of $72,747,000,
since March 31, 1995. Included in this growth was $7,829,000 of loans held for
sale and $35,658,000 of portfolio loans acquired in the acquisition of Premier
Bank. The increase by Premier Bank for the period since acquisition was
$8,041,000 of loans held for sale and $8,117,000 of portfolio loans, or an
increase of 37.2%. The growth in loans held for sale generated by Premier
Lending for the year ended March 31, 1996 was $13,698,000 while portfolio
loans decreased slightly by $329,000. The growth in portfolio loans and loans
held for sale was funded primarily with the net increase in deposits generated
by Premier Bank of $29,737,000 and net increases in borrowing under lines of
credit and advances from the Federal Home Loan Bank of $6,681,000. The
remaining $6,891,000 of increase in deposits and borrowings combined with the
liquidation of approximately $1,063,000 of securities available for sale
contributed to the increase in interest-bearing deposits and cash and due from
banks at March 31, 1996.
Total assets have increased from March 31, 1995 by $87,918,000. In the
acquisition of Premier Bank, Premier acquired approximately $48,243,589 of
assets consisting of the following:
<TABLE>
<S> <C>
Cash and due from banks......................................... $ 617,746
Securities...................................................... 1,563,926
Loans held for sale............................................. 7,829,133
Net loans....................................................... 35,658,085
Premises and equipment.......................................... 1,360,579
Other assets.................................................... 1,214,120
-----------
$48,243,589
===========
</TABLE>
Premier paid $5,578,178 in cash for Premier Bank including goodwill at
approximately $2,536,000 which has been recorded on Premier Bank's books.
The net increase in total assets of Premier, excluding the acquisition of
Premier Bank, was $39,674,000, of which the majority was included in the
increase in loans and loans held for sale. The significant other increase in
assets was in cash and due from banks and interest-bearing deposits, which
increased $10,086,000.
68
<PAGE>
The amounts of loans outstanding at March 31, 1996 and 1995 are shown in the
following table according to type of loan. Management is not aware of any
other concentrations.
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Real estate--construction............................ $26,981 $1,725
Real estate--mortgage................................ 13,605 311
Commercial........................................... 3,883 1,278
Consumer............................................. 2,459 --
Loans held for sale.................................. 32,890 3,518
----------- ----------
79,818 6,832
Deferred fees and costs, net......................... (42) 198
Allowance for loan losses............................ (336) --
----------- ----------
Net loans.......................................... $79,440 $7,030
=========== ==========
</TABLE>
Information with respect to nonaccrual, past due and renegotiated loans at
March 31, 1996 are shown below. There were no loans at March 31, 1995 meeting
these criteria.
<TABLE>
<CAPTION>
MARCH 31,
1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Nonaccrual loans..................................... $590
Loans contractually past due ninety days or more as
to interest or principal payments and still accru-
ing................................................. --
Loans, the terms of which have been renegotiated to
provide a reduction or deferral of interest or prin-
cipal because of deterioration in the financial po-
sition 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>
There was no significant reduction in interest income associated with
nonaccrual and renegotiated loans for the year ended March 31, 1996.
In the opinion of management, any loans classified by regulatory authorities
as doubtful, substandard or special mention that have not been disclosed above
do not (i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Any loans classified by regulatory authorities as loss have been
charged off.
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, Premier has granted commitments to
extend credit to approved customers. These commitments are recorded in the
financial statements when funds are disbursed or the financial instruments
become payable. Premier uses the same credit policies for these off balance
sheet commitments as it does for financial instruments that are recorded in
the consolidated financial statements. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Some of the commitment amounts expire without being drawn upon, and
therefore, the total commitment amounts do not necessarily represent future
cash requirements.
69
<PAGE>
The following is a summary of the commitments to fund loans at March 31,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Unfunded mortgage loan commitments................. $33,046 $21,113
Residential construction and commercial loan com-
mitments.......................................... 11,486 1,700
Standby letters of credit.......................... 82 --
----------- -----------
$44,614 $22,813
=========== ===========
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is charged directly 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. Premier's
allowance for loan losses was approximately $336,000 at March 31, 1996,
representing .72% of the March 31, 1996 total loans held for investment. The
allowance for loan losses is reviewed continuously and, based on management's
evaluation of current risk characteristics of the loan portfolio, as well as
the impact of prevailing and expected economic business conditions. Management
considers the allowance for loan losses adequate to cover possible loan losses
on the loans outstanding.
Due to the short-term nature of construction and mortgage loans held for
sale and Premier's history related to those types of loans, management
believes that an allowance of only $15,000 is necessary for those loans as of
March 31, 1996. Additionally, the Company monitors the commercial finance
loans with daily, weekly and monthly reporting of information by the
borrowers, and quarterly field examinations conducted by the Company's staff.
Management has discovered a weakness in only one loan. This loan has a current
balance of approximately $28,000. There have been no losses on these loans to
date. Management will continue to monitor the credit quality of these loans on
a continuous basis and will consider the adequacy of the loan loss reserve on
a quarterly basis.
Management has not allocated Premier's allowance for loan losses to specific
categories of loans. Based on management's best estimate, approximately 34% of
the allowance should be allocated to permanent mortgage loans, 35% to
commercial and consumer loans and 31% to construction loans as of March 31,
1996.
The following table summarizes average loan balances for the year ended
March 31, 1996 determined using the daily average balances during the year,
changes in the allowance for possible loan losses arising from loans charged
off and recoveries on loans previously charged off, additions to the allowance
which have been charged to operating expense and the ratio of net charge-offs
during the year to average loans. There were no charge-offs, recoveries,
provisions or allowances for the year ended March 31, 1995.
70
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1996
-----------
(DOLLARS IN
THOUSANDS)
<S> <C>
Average amount of loans outstanding............................ $43,828
Balance of allowance for loan losses acquired in business com-
bination...................................................... 242
-------
Charge-offs
Real estate--mortgage......................................... (1)
Real estate--construction..................................... --
Consumer...................................................... (2)
-------
(3)
-------
Recoveries
Real estate--mortgage......................................... --
Real estate--construction..................................... --
Consumer...................................................... 12
-------
12
-------
Net charge-offs................................................ 9
-------
Additions to allowance charged to operating expense during
year.......................................................... 85
-------
Balance of allowance for loan losses at end of year............ $ 336
=======
Ratio of net loans charged off during the year to average loans
outstanding................................................... .02%
=======
</TABLE>
LIQUIDITY
Liquidity remained strong at March 31, 1996 in comparison with industry
standards and provided Premier with adequate cash flows to fund current
operations and expected loan growth. Management of Premier continually
monitors liquidity to insure adequate resources are available to meet the
needs of the Bank's depositors and Premier Lending and Premier Bank loan
customers. In addition to sources of funds through repayment of loans,
maturing investments and generation of deposits by Premier Bank, Premier
Lending has available lines of credit with third-party institutions totaling
approximately $45.5 million. The original funding facility was a warehouse
line of credit in the amount of $12,000,000 with The Prudential Home Mortgage
Company. This line was increased, resulting in a funding facility in the
amount of $30,000,000, and was subsequently replaced by a $40,000,000
warehouse line of credit extended by Residential Funding Corporation on
November 1, 1995. Also in November 1995, a pre-existing line of credit
relating to Premier Lending's commercial finance lending was increased to
$3,500,000; and in January 1996 a working capital line of credit in the amount
of $2,000,000 was extended to Premier Lending.
CAPITAL
At March 31, 1996, the capital of Premier was considered adequate as
compared to industry standards. Total capital of Premier increased by
$2,624,000 from March 31, 1995. The increase results from preferred stock
issued totaling $2,036,000, plus net income for the year ended March 31, 1996
of $864,000, less dividends paid to preferred stockholders of $278,000.
Premier issued 389,122 shares of convertible preferred stock as a funding
vehicle for the acquisition of Premier Bank along with obtaining a $3 million
loan from a third party institution. The holders of the preferred stock are
entitled to a non-cumulative preferred dividend at an annual rate equal to the
one year U.S. Treasury bill interest rate plus 2.5%. The $3 million loan is
due in ten annual installments of $300,000 beginning October 31, 1997 and
bears interest at prime plus 1%.
Banking regulations require Premier Bank to maintain minimum capital levels
in relation to its assets. At March 31, 1996, Premier Bank's capital ratios
were considered adequate based on regulatory minimum capital
71
<PAGE>
requirements. The minimum capital requirements and the actual capital ratios
for Premier Bank at March 31, 1996 are as follows:
<TABLE>
<CAPTION>
REGULATORY
ACTUAL REQUIREMENTS
------ ------------
<S> <C> <C>
Tangible capital......................................... 6.71% 1.50%
Core capital............................................. 6.71% 3.00%
Risk-based capital....................................... 10.01% 8.00%
</TABLE>
RESULTS OF OPERATIONS
Net income for the year ended March 31, 1996, including operations of
Premier Bank since acquisition (May 1, 1995), has increased by $2,107,000 as
compared to the year ended March 31, 1995. There are several key contributing
factors explaining the significant change from the prior year. First, mortgage
rates in 1995 have declined, therefore triggering an increase in the mortgage
banking activity. Second, the acquisition of Premier Bank has provided Premier
with access to an established mortgage banking entity and a deposit generating
financial institution. These three elements have enhanced Premier's
profitability and are expected to further enhance its results of operations.
During the year ended March 31, 1996, Premier originated approximately $288
million of loans available for sale and generated a net increase in portfolio
loans of $7,373,000. The loan volume has continued to increase over the year.
Total loans held for sale closings have increased from $64 million for the
year ended March 31, 1995 to $288 million for the year ended March 31, 1996.
The substantial increase is due to the combined efforts of management of each
entity and the combined resources and established markets which were acquired
in the business combination. Premier Bank purchases loans originated by
Premier Lending in order to utilize excess funds which would otherwise be
invested in lower earning investments. The combined entities bring together
two management groups with extensive knowledge and experience in the mortgage
banking industry.
The 30-year fixed mortgage rate is the key indicator in the mortgage banking
industry, and it decreased from 8.5% at March 31, 1995 to 8% at March 31,
1996. The decrease in rates has a direct correlation with the increase in
mortgage lending activity. This improvement in rates, combined with the
combination of Premier and Premier Bank, resulted in an increase in mortgage
banking income of $5,082,000 as compared to March 31, 1995.
Net interest income as of March 31, 1996 was $3,150,000 as compared to
$525,000 for the year ended March 31, 1995. Net interest income consists of
interest income and fees on earning assets less interest expense. The
significant increase in interest income on loans and interest-bearing deposits
is primarily related to the operation of Premier Bank. In addition,
construction loans and commercial finance loans increased $15,463,000 and
$5,820,000, respectively, for the year ended March 31, 1996. Included in this
increase is $15,431,000 and $4,135,000 of construction loans and commercial
finance loans, respectively, which have been participated to Premier Bank
without recourse. The increase in interest on borrowings consists of interest
expense incurred on lines of credit facilitating the funding of mortgage loans
held for sale, interest incurred on long-term debt used to fund the purchase
of Premier Bank and other short-term borrowings.
The non-mortgage banking income, consisting of service charges on deposit
accounts and other income continued to show strong improvement for the year
ended March 31, 1996, increasing in total by $192,000, or 279.67% as compared
to March 31, 1995. The most significant increase was in service charges on
deposit accounts, which increased $161,000. The increase in service charge
income is solely a result of acquiring Premier Bank.
Included in gains on sale of loans held for sale are gains recognized by
Premier Bank of approximately $721,000 resulting from purchase discounts
recorded at the date of acquisition. The subsequent recovery of purchase
discounts reflects the sensitivity to market fluctuations in the financial
institution industries.
72
<PAGE>
Operating expenses increased for the year ended March 31, 1996 by 197.5%, or
$5,443,000 as compared to March 31, 1995. The two most significant increases
are the other operating expenses related to the operations of Premier Bank and
the increased activity of Premier Lending. Increases due to the acquisition of
Premier Bank total $2,202,000 and increases in total other operating expenses
of Premier Lending were $5,506,000. The significant increase in other
operating expenses of Premier is attributable to the acquisition of Premier
Bank and increased mortgage banking activities. A summary of operating
expenses for Premier Bancshares, Inc. and Premier Lending for the year ended
March 31, 1996 and Premier Bank for the period from acquisition to March 31,
1996 is provided below:
<TABLE>
<CAPTION>
PREMIER PREMIER PREMIER
BANCSHARES LENDING BANK
---------- ---------- ----------
<S> <C> <C> <C>
Salaries, commissions and benefits............. $385,857 $4,283,029 $1,070,301
Occupancy and equipment........................ 24,694 581,851 266,520
Legal and accounting........................... 103,685 135,537 74,766
Other operating expenses....................... 35,782 506,048 790,433
-------- ---------- ----------
$550,018 $5,506,465 $2,202,020
======== ========== ==========
</TABLE>
Premier Bancshares includes the lending operations from the date of the
acquisition of Premier Bank, at which time the mortgage lending activities of
Premier and the mortgage operations of Premier Bank were combined. Salaries,
commissions and benefits increased by $3,728,000 for Premier as compared to
March 31, 1995. The increase includes the additional expenses incurred related
to the growth in mortgage loan originations and the expenses related to the
already established mortgage operations of Premier Bank. As of March 31, 1996,
Premier employed 140 staff located in nine locations consisting of 96
employees in mortgage origination and construction lending, 6 employees in
commercial finance, 8 employees in administration and 30 in Premier Bank.
Occupancy and equipment expenses related to mortgage banking of Premier have
been included in Premier Lending since the acquisition of Premier Bank. As of
March 31, 1996, Premier Lending operated one administrative office and five
loan production offices. Premier Bank currently has three locations.
Professional expenses have increased in total by $223,000 at March 31, 1996
as compared to March 31, 1995. In addition to normal legal and accounting
expenses incurred by each entity, Premier and Premier Bank have incurred
additional expenses related to the business combination.
As of March 31, 1996 Premier has recognized income tax expenses of $263,000
related to recognition of gains on sale of loans discounted in the acquisition
of Premier Bank and the amortization of goodwill which is nondeductible for
tax purposes. Premier has available net operating loss carryforwards of
approximately $1,986,000 which can be used to offset future taxable income of
the consolidated group. These carryforwards expire in fiscal years 2009
through 2011. A valuation allowance has been provided against these
carryforwards.
FOR THE YEARS ENDED MARCH 31, 1995 AND 1994
The following is management's discussion and analysis of certain significant
factors which have affected Premier's financial position and operating results
for the years ended March 31, 1995 and 1994. This discussion should be read
with the financial statements presented elsewhere in this Proxy
Statement/Prospectus.
Premier Bancshares, Inc., formerly Premier Lending Corporation, was
organized in March 1993 to engage in the business of originating, processing,
funding and selling single family residential mortgage loans, origination of
residential construction loans and commercial finance loans in the Atlanta
Metropolitan area. On May 1, 1995, Premier acquired Allatoona Federal Savings
Bank (now known as Premier Bank) for $5,338,334 in cash. The acquisition was
accounted for as a purchase and, accordingly, the results of Allatoona are
included with the results of Premier since the acquisition date.
FINANCIAL CONDITION
As of March 31, 1995, Premier had increased its loan portfolio and loans
held for sale by $1,835,000 or 35.3% as compared to March 31, 1994. The growth
in loans and loans held for sale was funded primarily from the proceeds from
the preferred stock offering and advances on available lines of credit. The
net proceeds
73
<PAGE>
received through March 31, 1995 from the preferred stock offering then in
process of $2,285,000 combined with the net loss for the year ended March 31,
1995 of $1,242,000 provided an increase of capital of $1,043,000.
Since inception, Premier has not incurred any losses within its loan
portfolio. Management continually evaluates its customer relationships and
concentrations with individual borrowers. This process enables management to
(i) detect early characteristics of deteriorating financial condition and (ii)
monitor levels of concentration within borrowers and specific industries.
The amount of loans outstanding at March 31, 1995 and 1994 are shown in the
following table according to type of loan.
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Real estate--construction.............................. $ 1,725 $ 918
Acquisition and development............................ 311 513
Commercial finance loans............................... 1,278 377
Loans held for sale.................................... 3,518 3,379
----------- -----------
6,832 5,187
Deferred fees and costs, net........................... 198 8
Allowance for loan losses.............................. -- --
----------- -----------
Net loans............................................ $ 7,030 $ 5,195
=========== ===========
</TABLE>
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, Premier has granted commitments to
extend credit to approved customers. These commitments are recorded in the
financial statements when funds are disbursed or the financial instruments
become payable. Premier uses the same credit policies for these off balance
sheet commitments as it does for financial instruments that are recorded in
the consolidated financial statements. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Some of the commitment amounts expire without being drawn upon,
therefore, the total commitment amounts do not necessarily represent future
cash requirements.
Following is a summary of the commitments outstanding at March 31, 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Construction and commercial commitments................ $ 1,700 $ 2,000
Mortgage commitments................................... 21,113 18,268
----------- -----------
$ 22,813 $ 20,268
=========== ===========
</TABLE>
LIQUIDITY
Prior to the acquisition of Premier Bank, Premier financed its operations
through the initial capital contributions from Premier's chief executive
officer and directors, the common stock offering completed in January 1994,
the preferred stock offering completed in June 1995, and various lines of
credit. At March 31, 1995, Premier had lines of credit with three non-
affiliated institutions aggregating $13,853,500, which were secured by
mortgage loans held for sale and commercial loans.
74
<PAGE>
Premier's liquidity is affected by its ability to sell its mortgage loans
held for sale in the secondary market and the repayment of construction and
commercial finance loans in accordance with the contractual terms of the
loans. The most significant risk associated with originating loans for sale is
a sudden upward movement in the long-term mortgage interest rates which would
result in a decrease in value of those loans held for sale. As a means of
minimizing this risk, Premier enters into various binding and nonbinding
commitments with third party investors who agree to purchase loans originated
which meet defined criteria. This process ensures that, provided Premier
originates loans in accordance with the defined criteria, the loans will be
purchased at agreed-upon prices by the third party investors.
CAPITAL
The accumulated deficit through March 31, 1995 reflected a net loss of
$536,000 incurred for the period from inception to March 31, 1994 and the net
loss of $1,242,000 for the year ended March 31, 1995. The net loss for the
period from inception to March 31, 1994 was primarily attributable to various
start-up and organizational costs. These costs included staffing the corporate
office and three loan production offices, costs associated with organizing
Premier and normal operational costs. For the year ended March 31, 1995,
Premier continued to incur net operating losses due to costs incurred in
expanding into new market areas in the metro Atlanta area, combined with the
decline in the mortgage origination activity caused by the continued rise in
interest rates. During this period, the 30-year fixed mortgage rate increased
from 8.125 % at March 31, 1994 to 8.5% at March 31, 1995. The rising interest
rate environment resulted in lower than anticipated loan demand which directly
affected the operating results of Premier.
RESULTS OF OPERATIONS
Premier incurred net losses of $1,242,000 and $536,189 for the years ended
March 31, 1995 and 1994, respectively. For the year ended March 31, 1995 total
income increased 30.0% to $1,922,000 as compared to the period ended March 31,
1994. This increase included less than expected performance as mortgage
banking income actually decreased by $141,000 or 13.3% for the same period.
Mortgage banking income included income from the loan origination process and
net gains on sales of mortgage loans, which had been negatively impacted by
the continued increase in mortgage rates in 1994 and the first quarter of
1995. During the year ended March 1995 Premier originated $64.2 million of
loans compared to $58.4 million in 1994. This volume of loan originations was
below management's expectations as Premier was staffed and capable of
originating and processing loan volumes significantly greater than actual
activity.
The non-mortgage banking income, consisting of other loan fees, interest
income and other income showed strong improvement for the year ended March 31,
1995 increasing in total by $585,000, or 140.0%. The most significant increase
was in the construction loan origination fees and commercial finance lending
fees which increased from $155,000 to $381,000. Construction loans and
commercial finance loans increased $806,000 and $900,000, respectively, for
the year ended March 31, 1995. This area of lending is not as sensitive to the
changes in interest rates and provides a stable base of loan fee income.
Interest income represents the net interest income earned on all loans
including mortgage, construction, commercial finance lending and miscellaneous
other interest income on deposit accounts. Interest income for the year ended
March 31, 1995 increased $293,000 over the previous year, which includes
increases in interest on mortgage loans of $118,000, interest net of
participation interest on construction loans of $157,000, interest on
commercial finance loans of $29,000 and a decrease in interest on savings of
$11,000. Other income consists of servicing fee income which increased $66,000
during the same period.
Operating expenses increased for the year ended March 31, 1995 by 57.1%, or
$1,150,000 as compared to 1994. The operating expenses consist primarily of
personnel expenses, equipment and occupancy, and expenses related to operating
the corporate office and various branch locations. As of March 31, 1995,
Premier employed 36 staff located in four locations consisting of 26 employees
in mortgage origination and construction lending, 4 employees in commercial
finance lending and 6 employees in administration. The increase in salaries,
commissions and benefits of $638,000 represents a full year of salaries, and
commissions related to operating
75
<PAGE>
three loan production offices which fluctuate with the volume of loan
originations. Other expenses, less salaries, commissions and benefits,
increased $283,000 during the same period and also represents the expenses
related to a full year of operating three loan production offices and a
partial year on a fourth loan production office, marketing and advertising
related to a start-up company and normal operating expenses which also
fluctuate with the volume of loan originations. The increase in interest
expense in 1995 represents the fees associated with the various lines of
credit which Premier uses to fund its loan demand and interest expense on its
warehouse line of credit.
As of March 31, 1995 Premier had not recognized any income tax expense
because Premier had no pre-tax income. Net loss carryforwards of approximately
$1,931,000 expire in 2009 and 2010. A valuation allowance has been provided
against the deferred tax benefit related to these carryforwards because there
exists no established earnings history.
76
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
FIRST ALLIANCE PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1996
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1996 for First Alliance has been prepared based upon the historical
consolidated balance sheet, which gives effect to the Merger of Premier with
First Alliance accounted for as a pooling-of-interests, based on the
conversion of one share of First Alliance for each outstanding common share of
Premier. The pro forma balance sheet includes all adjustments necessary to
reflect the acquisition on a "pooling-of-interests" basis. The pro forma
condensed combined balance sheet should be read in conjunction with the
accompanying notes and the historical consolidated financial statements of
First Alliance and Premier and notes thereto included elsewhere in this Joint
Proxy Statement/Prospectus.
FIRST ALLIANCE PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
The following unaudited pro forma condensed combined statements of income of
First Alliance for the year ended December 31, 1995 and the three months ended
March 31, 1996 have been prepared based upon the historical consolidated
statements of income and present the combined income and expense of the
merging parties on a pooling-of-interests basis assuming the companies have
been combined as of January 1, 1995. The historical condensed statements of
income presented for First Alliance are for the year ended December 31, 1995
and the three months ended March 31, 1996, while those presented for Premier
are for the year ended March 31, 1996 and the three months ended March 31,
1996. The three month period ended March 31, 1996 for Premier is included in
both the year ended December 31, 1995 and the three months ended March 31,
1996 presentations. The pro forma condensed combined statements of income
should be read in conjunction with the accompanying notes and the historical
consolidated financial statements of First Alliance and Premier and notes
thereto included elsewhere in this Joint Proxy Statement/Prospectus. The pro
forma condensed combined statements of income are not necessarily indicative
of the results of First Alliance that actually would have been achieved had
the Merger with Premier been consummated on the date indicated or that may
result in the future.
77
<PAGE>
FIRST ALLIANCE
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FIRST DEBIT PRO FORMA
ASSETS ALLIANCE PREMIER (CREDIT) COMBINED
------ -------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Cash and due from banks ........ $ 6,864 $ 4,346 $ $ 11,210
Interest bearing deposits in
banks.......................... 622 6,029 6,651
Federal funds sold.............. 12,620 12,620
Investment securities available
for sale....................... 36,071 501 (900)(a) 35,672
Mortgages held for resale....... 32,890 32,890
Loans........................... 105,049 46,887 (1,212)(b) 150,724
Less allowance for loan losses.. 1,631 336 1,967
-------- ------- ------- --------
Loans, net..................... 103,418 46,551 (1,212) 148,757
-------- ------- ------- --------
Premises and equipment.......... 3,643 2,149 5,792
Excess cost over net assets ac-
quired......................... 2,376 2,376
Other assets.................... 3,472 1,357 (23)(c)(d) 4,806
-------- ------- ------- --------
$166,710 $96,199 $(2,135) $260,774
======== ======= ======= ========
Deposits
Non-interest bearing demand.... $ 22,823 $ 9,305 $ $ 32,128
Interest bearing demand........ 40,325 5,536 45,861
Savings........................ 7,329 1,437 8,766
Time deposits.................. 62,385 43,939 106,324
-------- ------- ------- --------
Total deposits................ 132,862 60,217 193,079
Other borrowings................ 15,150 23,905 1,212 (b) 37,843
Long-term debt.................. 3,000 3,000
Other liabilities............... 1,476 2,531 (129)(c)(h) 4,136
-------- ------- ------- --------
Total liabilities............. 149,488 89,653 1,083 238,058
-------- ------- ------- --------
Minority interest in subsidi-
ary............................ 5 5
Preferred stock................. 4,322 900 (a) 3,422
Common stock.................... 8,025 3,415 9,399 (e) 2,041
Capital surplus................. 7,919 (9,399)(e) 17,318
Retained earnings (deficit)..... 1,538 (1,192) 152 (f)(h) 194
-------- ------- ------- --------
Unrealized gains on securities
available
for sale, net of tax........... (265) 1 (264)
-------- ------- ------- --------
17,217 6,546 1,052 22,711
-------- ------- ------- --------
Total liabilities and stockhold-
ers' equity.................... $166,710 $96,199 $ 2,135 $260,774
======== ======= ======= ========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
78
<PAGE>
FIRST ALLIANCE BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
FIRST ADJUSTMENTS PRO FORMA
ALLIANCE PREMIER DEBIT (CREDIT) COMBINED
--------- ------- -------------- ---------
<S> <C> <C> <C> <C>
Interest income................ $12,757 $7,380 $178(d)(f)(g) $19,959
Interest expense............... 5,293 4,230 (127)(d)(g) 9,396
--------- ------- ---- ---------
Net interest income........... 7,464 3,150 51 10,563
Provision for loan losses...... 318 85 403
--------- ------- ---- ---------
Net interest income after loan
losses........................ 7,146 3,065 51 10,160
--------- ------- ---- ---------
Other income
Service charges on deposit ac-
counts....................... 755 161 916
Other service charges, commis-
sions and fees............... 271 271
Gain on sale of loans......... 3,219 3,219
Security transactions, net.... 12 10 22
Mortgage loan origination
fees......................... 72 2,782 2,854
Gain on sale of other real es-
tate......................... 278 278
Other......................... 99 89 188
--------- ------- ---- ---------
1,487 6,261 7,748
--------- ------- ---- ---------
Other expenses
Salaries and employee bene-
fits......................... 3,122 5,772 8,894
Occupancy and equipment ex-
pense........................ 931 873 1,804
Other operating expenses...... 1,843 1,554 150(h) 3,547
--------- ------- ---- ---------
5,896 8,199 150 14,245
--------- ------- ---- ---------
Income before income taxes..... 2,737 1,127 201 3,663
Income taxes................... 874 263 1,137
--------- ------- ---- ---------
Income before minority interest
in net income of subsidiary... 1,863 864 201 2,526
--------- ------- ---- ---------
Minority interest in net income
of subsidiary................. 13 13
--------- ------- ---- ---------
Net income..................... $ 1,850 $ 864 $201 $ 2,513
========= ======= ==== =========
Earnings per common share and
common stock equivalent....... $ 1.15 $ 1.35 $ 1.12
========= ======= =========
Earnings per share assuming
full dilution................. $ 1.15 $ 1.05 $ 1.07
========= ======= =========
Average shares outstanding..... 1,605,592 435,669 2,035,568
========= ======= =========
Fully diluted shares outstand-
ing........................... 1,605,592 824,791 2,351,529
========= ======= =========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
79
<PAGE>
FIRST ALLIANCE BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
FIRST ADJUSTMENTS PRO FORMA
ALLIANCE PREMIER DEBIT (CREDIT) COMBINED
--------- ------- -------------- ---------
<S> <C> <C> <C> <C>
Interest income................. $ 3,523 $ 2,089 $ 54(g) $ 5,558
Interest expense................ 1,461 1,175 (28)(d)(g) 2,608
--------- ------- ---- ---------
Net interest income........... 2,062 914 26 2,950
Provision for loan losses....... 79 65 144
--------- ------- ---- ---------
Net interest income after loan
losses......................... 1,983 849 26 2,806
--------- ------- ---- ---------
Other income
Service charges on deposit ac-
counts....................... 189 44 233
Other service charges, commis-
sions and fees............... 61 61
Gain on sale of loans......... 919 919
Security transactions, net.... 143 143
Mortgage loan origination
fees......................... 19 728 747
Other......................... 23 8 31
--------- ------- ---- ---------
435 1,699 2,134
--------- ------- ---- ---------
Other expenses
Salaries and employee bene-
fits......................... 814 1,544 2,358
Occupancy and equipment ex-
pense........................ 227 246 473
Other operating expenses...... 516 539 1,055
--------- ------- ---- ---------
1,557 2,329 0 3,886
--------- ------- ---- ---------
Income before income taxes...... 861 219 26 1,054
Income taxes.................... 310 310
--------- ------- ---- ---------
Income before minority interest
in net income of subsidiary.... 551 219 744
--------- ------- ---------
Minority interest in net income
of subsidiary.................. 3 3
--------- ------- ---------
Net income...................... $ 548 $ 219 $ 26 $ 741
========= ======= ==== =========
Earnings per common share and
common stock equivalent........ $ 0.34 $ (0.11) $ 0.28
========= ======= =========
Earnings per share assuming full
dilution....................... $ 0.34 $ 0.27 $ 0.32
========= ======= =========
Average shares outstanding...... 1,605,592 435,669 2,040,668
========= ======= =========
Fully diluted shares outstand-
ing............................ 1,605,592 824,791 2,351,529
========= ======= =========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
80
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
The fiscal year end of First Alliance is December 31. The fiscal year end of
Premier is March 31. For purposes of the pro forma financial statements it has
been assumed that the March 31 consolidated financial statements of Premier
will not be recast to conform to a December 31 year end. Accordingly, the pro
forma statement of income for the year ended December 31, 1995 includes year-
end information for Premier three months later than for First Alliance. The
pro forma statement of income for the three months ended March 31, 1996
includes actual results for the three months ended March 31, 1996 for First
Alliance and Premier.
Provided below are the pro forma adjustments necessary to reflect the
business combination of First Alliance and Premier accounted as a pooling of
interests. These adjustments are recorded as of December 31, 1995 and
subsequent period presented.
Earnings per common and common equivalent share were computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding during each year. Earnings per share assuming
full dilution includes the outstanding shares of Premier Preferred Stock for
all periods presented. The 32,500 and 25,500 outstanding stock options of
Premier had an anti-dilutive effect as of December 31, 1995 and March 31,
1996, and were therefore excluded from the earnings per share calculation.
FIRST ALLIANCE
PRO FORMA ADJUSTMENTS
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
(DOLLARS IN THOUSANDS)
<C> <S> <C> <C>
a Preferred Stock................................... $ 900
Investment Securities Available for Sale.......... $ 900
(Elimination of Preferred Stock)
b Other Borrowings.................................. 1,212
Loans............................................. 1,212
(Elimination of Line of Credit)
c Other Liabilities................................. 21
Other Assets...................................... 21
(Elimination of Interest Payable on Participation
Loans)
d Interest Income................................... 33
Interest Expense.................................. 31
Other Assets...................................... 2
(Elimination of Loan Fees on Line of Credit)
e Common Stock...................................... 9,399
Capital Surplus................................... 9,399
(Adjustment of Common Stock for New Shares
Issued)
f Interest Income................................... 49
Retained Earnings (Deficit) ...................... 49
(Elimination of Preferred Stock Dividends to
First Alliance)
g Interest Income................................... 96
Interest Expense.................................. 96
(Elimination of Interest on Line of Credit)
h Other Expenses.................................... 150
Other Liabilities................................. 150
(Combined Merger Expenses not Included in Current
Earnings)
</TABLE>
81
<PAGE>
DESCRIPTION OF FIRST ALLIANCE COMMON STOCK
First Alliance is currently authorized to issue 2,000,000 shares of First
Alliance Common Stock, of which 1,604,999 shares were issued and outstanding
at March 31, 1996. No other class of stock is currently authorized. If the
shareholders of First Alliance approve the proposal to amend First Alliance's
Articles of Incorporation to increase the number of authorized shares of
common stock from 2,000,000 to 20,000,000, First Alliance's Articles of
Incorporation will be so amended prior to the consummation of the Merger or,
if the Merger is not approved, as soon after the First Alliance Meeting as is
practicable. Similarly, if the First Alliance shareholders approve the
proposal to authorize 2,000,000 shares of preferred stock, the First Alliance
Articles of Incorporation will be so amended effective prior to the
consummation of the Merger or, if the Merger is not approved, as soon after
the First Alliance Meeting as is practicable.
Holders of First Alliance Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. The ability of First Alliance to pay dividends is affected
by the ability of First Alliance Bank to pay dividends, which is limited by
applicable regulatory requirements and capital guidelines. At December 31,
1995, under such requirements and guidelines, First Alliance Bank had $915,000
of undivided profits legally available for the payment of dividends without
regulatory approval. See "Certain Regulatory Considerations--Payment of
Dividends."
Upon the effectiveness of the proposed amendment to the First Alliance
Articles of Incorporation authorizing the shares of preferred stock, the Board
of Directors will be authorized, without further shareholder action, to issue
shares of preferred stock in one or more series, and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
amounts payable upon liquidation and the number of shares constituting any
series or the designation of such series. If such stock is issued, it will
rank senior to First Alliance Common Stock in respect of rights to receive
dividends and to participate in distributions or payments in the event of any
liquidation, dissolution or winding up of the corporation.
82
<PAGE>
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
On the Effective Date, Premier shareholders will become shareholders of
First Alliance, and their rights as shareholders will be determined by First
Alliance's Articles of Incorporation (as then amended) and Bylaws. The
following is a summary of the material differences in the rights of
shareholders of First Alliance and Premier. Both First Alliance and Premier
are Georgia corporations governed by the Georgia Code. Accordingly, there are
no material differences between the rights of a First Alliance shareholder and
the rights of a Premier shareholder solely under the Georgia Code. This
summary does not purport to be a complete discussion of, and is qualified in
its entirety by reference to, the Georgia Code and the Articles of
Incorporation and Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
First Alliance. First Alliance is currently authorized to issue 2,000,000
shares of common stock, $1.00 par value, of which 1,604,999 shares were
outstanding as of the Record Date. No other class of stock is currently
authorized. If the shareholders of First Alliance approve the proposal to
amend First Alliance's Articles of Incorporation to increase the number of
authorized shares of common stock from 2,000,000 to 20,000,000, First
Alliance's Articles of Incorporation will be so amended prior to the
consummation of the Merger or, if the Merger is not approved, as soon after
the First Alliance Meeting as is practicable. Similarly, if the First Alliance
shareholders approve the proposal to authorize 2,000,000 shares of preferred
stock, the First Alliance Articles of Incorporation will be so amended
effective prior to the consummation of the Merger or, if the Merger is not
approved, as soon after the First Alliance Meeting as is practicable.
Upon the effectiveness of the proposed amendment to the First Alliance
Articles of Incorporation authorizing the shares of preferred stock, First
Alliance's Articles of Incorporation will provide for the issuance of
preferred stock by the Board of Directors without further shareholder action
in one or more series, with such rights, preferences, privileges and
restrictions, including dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, amounts payable upon liquidation and
the number of shares constituting any series or the designation of such
series, as may be determined by the Board of Directors. If such stock is
issued in the future, it will rank senior to First Alliance Common Stock with
respect to rights to receive dividends and to participate in distributions or
payments in the event of any liquidation, dissolution or winding up of the
corporation. The issuance of preferred stock may have the effect of delaying,
deferring, discouraging or preventing a third party from acquiring a majority
of the outstanding voting stock of First Alliance or other change of control
of First Alliance without further action by the shareholders and may adversely
affect voting and other rights of the holders of the common stock, including
the loss of voting control to others.
Premier. Premier is authorized to issue 10,000,000 shares of Premier Common
Stock, no par value, and 2,000,000 shares of preferred stock, no par value, of
which 435,669 shares of Premier Common Stock and 389,122 shares of Premier
Preferred Stock were issued and outstanding as of the Record Date. The
Certificate of Designation of the Premier Preferred Stock provides for
dividend payments to be paid on a non-cumulative basis by Premier on January
31 and July 31 of each year at a rate based upon the one-year United States
Treasury Bill interest rate (bond equivalent yield) plus 250 basis points to
be determined semi-annually as of 30 days prior to the payment date. The
payment of cash dividends is subject to authorization by the Board of
Directors. Cash dividends payable on the Premier Preferred Stock take priority
over any cash dividends payable on the Premier Common Stock. The Premier
Preferred Stock is convertible into Premier Common Stock on the basis of one
share of Premier Preferred Stock for one share of Premier Common Stock at the
option of the holder; provided, however, that the shares of Premier Preferred
Stock are automatically convertible in the event of: (i) the closing of a
public offering of shares of Premier Common Stock; (ii) shareholder approval
of a merger or other acquisition of Premier; or (iii) a change of control in
management (i.e., removal or resignation of both the chief executive officer
and the president of Premier). The right of a holder of shares of Premier
Preferred Stock to receive a preferred cash dividend will be eliminated upon
such a conversion event. The Premier Preferred Stock is not entitled to vote
on any matter, except that the affirmative vote of two-thirds of the
outstanding shares of Premier Preferred Stock is required in order to change
or repeal any of the rights or preferences of the Premier
83
<PAGE>
Preferred Stock. Under certain circumstances, such shares will be otherwise
required to vote as a class under the Georgia Code. The holders of shares of
Premier Preferred Stock are entitled to receive a preferential payment of
$11.50 per share in the event of any liquidation, dissolution, or winding up
of Premier before any payment is made to the holders of Premier Common Stock.
As in the case of First Alliance, the Premier Board of Directors is
authorized, without further shareholder action, to issue shares of preferred
stock in one or more series, and to fix the rights, preferences, privileges
and restrictions thereof, including dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, amounts payable upon
liquidation and the number of shares constituting any series or the
designation of such series. The issuance of preferred stock may have the
effect of delaying, deferring, discouraging or preventing a third party from
acquiring a majority of the outstanding voting stock of Premier or other
change in control of Premier without further action by the shareholders and
may adversely affect the voting and other rights of the holders of the common
stock, including the loss of voting control to others.
REMOVAL OF DIRECTORS
First Alliance. First Alliance's Bylaws provide that any director may be
removed at a meeting with respect to which notice of such purpose is given:
(i) without cause, only upon the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of First Alliance Common
Stock; and (ii) for cause only upon the affirmative vote of the holders of a
majority of the issued and outstanding shares of First Alliance Common Stock.
Premier. Under Premier's Bylaws, a director may be removed only for cause at
a meeting of shareholders with respect to which notice of the purpose to
remove one or more directors has been given, by the affirmative vote of the
holders of at least 51% of the outstanding shares of Premier voting stock,
voting as a single class.
VOTE REQUIRED FOR SHAREHOLDER APPROVAL
First Alliance. First Alliance's Bylaws state that the affirmative vote of a
majority of the shares of First Alliance Common Stock represented at the
meeting and entitled to vote on the subject matter will represent the act of
the shareholders, except as otherwise provided by law or First Alliance's
Articles of Incorporation or Bylaws.
Premier. Premier's Bylaws state that the affirmative vote of the holders of
a plurality of the shares of capital stock entitled to vote and present, in
person or represented by proxy, voting together as a single class, will
constitute shareholder approval of a matter, except as otherwise required by
statute or Premier's Articles of Incorporation.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
First Alliance. First Alliance's Bylaws provide that action required or
permitted to be taken at a shareholders' meeting may be taken without a
meeting by consent in writing setting forth the action to be taken and signed
by those persons who would be entitled to vote at a meeting those shares
having the voting power to cast not less than the minimum number (or numbers,
in the case of voting by class) of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote were
present and voted.
Premier. Premier's Articles of Incorporation and Bylaws provide that any
action required or permitted to be taken by Premier shareholders must be
effected at a duly called meeting of shareholders and may not be effected by
any written consent of the shareholders. These provisions would prevent the
shareholders from taking action, including action on a business combination,
except at an annual or special meeting called in accordance with Premier's
Articles of Incorporation and Bylaws.
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SPECIAL MEETING OF SHAREHOLDERS
First Alliance. First Alliance's Bylaws state that special meetings of the
shareholders may be called at any time by the Board of Directors or President
of First Alliance or upon the request of any one or more shareholders owning
an aggregate of not less than 25% of the outstanding capital stock. Notice
must be given in writing not less than 10 or more than 50 days before the date
of the meeting and must state the purpose for which the meeting is called.
Premier. Premier's Articles of Incorporation and Bylaws state that special
meetings of shareholders may be called at anytime by the Chairman of the
Board, by a majority of the directors then in office or by the written request
of the holders of at least 51% of the outstanding shares of capital stock
entitled to vote, voting together as a single class. Written notice of the
meeting must be given not less than 10 or more than 60 days before the date of
the meeting and must state the purpose for which the meeting is called.
SHAREHOLDER NOMINATIONS
First Alliance. First Alliance's Articles of Incorporation and Bylaws do not
specify any mechanism for nominating directors for election or for presenting
any matter for consideration at a shareholders' meeting.
Premier. Premier's Bylaws provide that any nomination by shareholders of
individuals for election to the Board of Directors must be made by delivering
written notice of such nomination (the "Nomination Notice") to the Premier's
principal executive offices not less than 30 days before any meeting of the
shareholders called for the election of directors; provided, however, that if
less than 40 days' notice of the meeting is given to shareholders, the
Nomination Notice must be delivered to Premier's principal executive offices
not later than the tenth day following the day on which notice of the meeting
was mailed to shareholders. The Nomination Notice must set forth certain
background information about the persons to be nominated as required by
Regulation 14A promulgated under the Exchange Act. The Board of Directors is
not required to nominate in the annual proxy statement any person so proposed;
however, compliance with this procedure would permit a stockholder to nominate
the individual at the shareholders' meeting, and any stockholder may vote such
holder's shares in person or by proxy for any individual such holder desires.
NUMBER OF DIRECTORS
First Alliance. First Alliance's Bylaws state that the Board of Directors
shall consist of not less than four nor more than 18 directors. The number of
directors may be fixed or changed from time to time within this range by the
shareholders or the Board of Directors. The First Alliance Board of Directors
presently consists of 12 members.
Premier. Premier's Articles of Incorporation and Bylaws state that the Board
of Directors shall consist of not less than two nor more than 12 directors.
The number of directors within this range may be fixed from time to time only
by the Board of Directors. The Board of Directors has fixed the number of
directors at six.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth the material elements of the regulatory
framework applicable to banks, thrifts, and bank and thrift holding companies
and provides certain specific information related to First Alliance and
Premier.
GENERAL
First Alliance is a bank holding company registered with the Federal Reserve
under the BHC Act. As such, First Alliance and its non-bank subsidiaries are
subject to the supervision, examination, and reporting requirements of the BHC
Act and the regulations of the Federal Reserve. As a savings and loan holding
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company, Premier is registered with the OTS and is subject to regulation,
supervision, examination, and reporting requirements of the OTS.
The BHC Act requires every bank holding company to obtain the prior approval
of the Federal Reserve before: (i) it may acquire direct or indirect ownership
or control of any voting shares of any bank if, after such acquisition, the
bank holding company will directly or indirectly own or control more than 5%
of the voting shares of the bank; (ii) it or any of its subsidiaries, other
than a bank, may acquire all or substantially all of the assets of any bank;
or (iii) it may merge or consolidate with any other bank holding company.
Similar federal statutes require savings and loan holding companies and other
companies to obtain the prior approval of the OTS before acquiring direct or
indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of
the community to be served. Consideration of financial resources generally
focuses on capital adequacy, which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Banking Act"), which became effective on September 29, 1995, repealed the
prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that First Alliance, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether.
In response to the Interstate Banking Act, the Georgia Legislature adopted
the Georgia Interstate Banking Act, effective July 1, 1995. The Georgia
Interstate Banking Act provides that (i) interstate acquisitions by
institutions located in Georgia will be permitted in states which also allow
national interstate acquisitions, and (ii) interstate acquisitions of
institutions located in Georgia will be permitted by institutions located in
states which allow national interstate acquisitions; provided, however, that
if the board of directors of a Georgia or bank holding company adopt a
resolution to except such bank or bank holding company from being acquired
pursuant to the provisions of the Georgia Interstate Banking Act and properly
files a certified copy of such resolutions with the Georgia Department, such
bank or bank holding company may not be acquired by an institution located
outside the State of Georgia.
Additionally, in February 1996, the Georgia Legislature adopted the "Georgia
Interstate Branching Act" which, when signed by the Governor, will permit
Georgia-based banks and bank holding companies owning or acquiring banks
outside of Georgia and all non-Georgia banks and bank holding companies owning
or acquiring banks in Georgia the right to merge any lawfully acquired bank
into an interstate branch network. The Georgia Interstate Branching Act also
allows banks to establish de novo branches on a limited basis beginning July
1, 1996. Beginning July 1, 1998, the number of de novo branches which may be
established will no longer be limited.
The BHC Act generally prohibits First Alliance from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by
the Federal Reserve to be so
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closely related to banking or managing or controlling banks as to be a proper
incident thereto. In determining whether a particular activity is permissible,
the Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased
or unfair competition, conflicts of interest, or unsound banking practices.
For example, factoring accounts receivable, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance
in connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible non-banking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order
a holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
Each of the bank and thrift subsidiaries of First Alliance and Premier is a
member of the Federal Deposit Insurance Corporation (the "FDIC"), and as such,
its deposits are insured by the FDIC to the maximum extent provided by law.
Each such subsidiary is also subject to numerous state and federal statutes
and regulations that affect its business, activities, and operations, and each
is supervised and examined by one or more state or federal bank regulatory
agencies.
First Alliance Bank is subject to regulation, supervision, and examination
by the FDIC and the Georgia Department. Premier Bank is subject to regulation,
supervision, and examination by the OTS and the FDIC. The federal banking
regulator for each of the bank and thrift subsidiaries of First Alliance and
Premier, as well as the Georgia Department in the case of First Alliance Bank,
regularly examine the operations of First Alliance Bank and Premier Bank and
are given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. The federal banking
regulators and the Georgia Department also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
PAYMENT OF DIVIDENDS
First Alliance and Premier are legal entities separate and distinct from
their banking and other subsidiaries. The principal sources of cash flow of
First Alliance, including cash flow to pay dividends to its shareholders, are
dividends from First Alliance Bank, Premier Lending, Alliance Finance and
Premier Bank. There are statutory and regulatory limitations on the payment of
dividends by First Alliance Bank and Premier Bank to First Alliance and
Premier, respectively, as well as by First Alliance and Premier to their
shareholders.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
authority may require, after notice and hearing, that such institution cease
and desist from such practice. The federal banking agencies have indicated
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a
depository institution may not pay any dividend if payment would cause it to
become undercapitalized or if it already is undercapitalized. See "--Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At December 31, 1995, under dividend restrictions imposed under federal and
state laws, First Alliance Bank and Premier Bank, without obtaining
governmental approvals, could declare aggregate dividends to First Alliance
and Premier of approximately $915,000 and $291,230, respectively.
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The payment of dividends by First Alliance and First Alliance Bank may also
be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
First Alliance and Premier and their respective bank and thrift subsidiaries
are required to comply with the capital adequacy standards established by the
Federal Reserve in the case of First Alliance, the OTS in the case of Premier,
and the appropriate federal banking regulator in the case of their banking and
thrift subsidiaries. There are two basic measures of capital adequacy for bank
holding companies that have been promulgated by the Federal Reserve: a risk-
based measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total risk-
weighted assets and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least
half of Total Capital must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At March 31, 1996,
First Alliance's consolidated Total Risk-Based Capital Ratio and its Tier 1
Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted
assets) were 15.84% and 14.57%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis
points. First Alliance's Leverage Ratio at March 31, 1996 was 10.74%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve
has indicated that it will consider a "tangible Tier 1 Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
First Alliance Bank is subject to risk-based and leverage capital
requirements adopted by its federal banking regulator, which are substantially
similar to those adopted by the Federal Reserve for bank holding companies.
Similarly, OTS' regulatory capital regulations specify capital standards for
thrifts and thrift holding companies consisting of three components: a "core
capital" requirement, a "tangible capital" requirement, and a "risk-based
capital" requirement. These regulations require thrifts to maintain core
capital in an amount not less than 3% of adjusted total assets and to maintain
tangible capital in an amount not less than 1.5% of adjusted total assets.
Under the OTS' regulatory capital regulations, thrifts are required to
maintain capital equal to 8% of risk-weighted assets. The OTS requires assets
to be weighed on the basis of risk and assigns a weighing factor of between 0%
and 100%. Approximately one-half of risk-based capital must consist of core
capital and one-half may consist of other preferred stock, a portion of
general loan loss reserves and other hybrid capital instruments such as
convertible and subordinated debentures.
In determining compliance with the capital standards, all of a thrift's
investments in and extensions of credit to any subsidiary engaged in activity
not permissible for a national bank are deducted from the savings
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association capital. The required deduction from capital for investments in
subsidiaries engaged in activities not permitted for a national bank is phased
in through July 1, 1996.
Each of the subsidiary depository institutions was in compliance with
applicable minimum capital requirements as of March 31, 1996. Neither First
Alliance nor Premier has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it or its subsidiary
depository institution.
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on the taking
of brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon FDIC-
insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, proposed an amendment to the risk-based capital standards that would
calculate the change in an institution's net economic value attributable to
increases and decreases in market interest rates and would require banks with
excessive interest rate risk exposure to hold additional amounts of capital
against such exposures. The OTS has already included an interest-rate risk
component in its risk-based capital guidelines for savings associations that
it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, First Alliance is expected to act as a source
of financial strength for, and to commit resources to support, each of its
banking subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, First Alliance may not be inclined to provide it. In
addition, any capital loans by a bank holding company to any of its banking
subsidiaries are subordinate in right of payment to deposits and to certain
other indebtedness of such banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution
or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-
insured depository institution "in danger of default." "Default" is defined
generally as the appointment of a conservator or receiver, and "in danger of
default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is
subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. Upon consummation of the Merger, First Alliance Bank
and Premier Bank will be subject to these cross-guarantee provisions. As a
result, any loss suffered by the FDIC in respect of either of these
subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, and a potential loss of the
Surviving Corporation's investment in such other subsidiary depository
institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions
in the three undercapitalized
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categories, the severity of which will depend upon the capital category in
which the institution is placed. Generally, subject to a narrow exception,
FDICIA requires the banking regulator to appoint a receiver or conservator for
an institution that is critically undercapitalized. The federal banking
agencies have specified by regulation the relevant capital level for each
category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of
10% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. A
depository institution that has a Total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio
of less than 4.0% is considered to be undercapitalized. A depository
institution that has a Total Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage Ratio of less
than 3.0% is considered to be significantly undercapitalized, and an
institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. For purposes of
the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards,
plus the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus all intangible assets with certain exceptions. A
depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations. The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking agency is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions: (i) sell enough shares, including voting
shares, to become adequately capitalized; (ii) merge with (or be sold to)
another institution (or holding company), but only if grounds exist for
appointing a conservator or receiver; (iii) restrict certain transactions with
banking affiliates as if the "sister bank" exception to the requirements of
Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict
transactions with bank or non-bank affiliates; (v) restrict interest rates
that the institution pays on deposits to "prevailing rates" in the
institution's "region;" (vi) restrict asset growth or reduce total assets;
(vii) alter, reduce, or terminate activities; (viii) hold a new election of
directors; (ix) dismiss any director or senior executive officer who held
office for more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or senior
officer, the agency must comply with certain procedural requirements,
including the opportunity for an appeal in which the director or officer will
have the burden of proving his or her value to the institution; (x) employ
"qualified" senior executive officers; (xi) cease accepting deposits from
correspondent depository institutions; (xii) divest certain nondepository
affiliates which pose a danger to the institution; or (xiii) be divested by a
parent holding company. In addition, without the prior approval of the
appropriate federal banking agency,
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a significantly undercapitalized institution may not pay any bonus to any
senior executive officer or increase the rate of compensation for such an
officer without regulatory approval.
At March 31, 1996, First Alliance Bank and Premier Bank had the requisite
capital levels to qualify as well capitalized.
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaced a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to
which it is assigned. Under the final risk-based assessment system, as well as
the prior transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates for members of both
the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
(SAIF) for the first half of 1995, as they had during 1994, ranged from 23
basis points (0.23% of deposits) for an institution in the highest category
(i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of
deposits) for an institution in the lowest category (i.e., "undercapitalized"
and "substantial supervisory concern"). These rates were established for both
funds to achieve a designated ratio of reserves to insured deposits (i.e.,
1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC was
authorized to reduce the minimum assessment rate below the 23 basis points and
to set future assessment rates at such levels that would maintain the fund's
reserve ratio at the designated level. In August 1995, the FDIC adopted
regulations reducing the assessment rates for BIF-member banks. Under the
revised schedule, BIF-member banks, starting with the second half of 1995, pay
assessments ranging from 4 basis points to 31 basis points, with an average
assessment rate of 4.5 basis points. Refunds with interest were paid for
assessments for the month(s) after the month in which the designated reserve
ratio for the BIF was reached. Subsequently, on November 14, 1995, the FDIC
announced that, beginning in 1996, it would further reduce the deposit
insurance premiums for 92% of all BIF members that are in the highest capital
and supervisory categories to $2,000 per year, regardless of deposit size. At
the same time, the FDIC elected to retain the existing assessment rate range
of 23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates had
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department, and the OTS released statements outlining a proposed
plan (the "Proposed Plan") to recapitalize the SAIF, certain features of which
were subsequently approved by the Banking Committees of the House of
Representatives and the Senate of the United States in bills that provided for
different resolutions of the BIF-SAIF disparity. Under the Proposed Plan, as
approved by members of the Banking Committees of the House and Senate, all
SAIF-member institutions were to pay a special assessment to recapitalize the
SAIF, and the assessment base for the payments on the FICO bonds would have
been expanded to include the deposits of both BIF and SAIF-insured
institutions. As a result of the SAIF becoming fully capitalized, it was
anticipated that
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insurance premium rates for SAIF members shortly thereafter would have been
reduced to the same levels as those currently paid by BIF members.
The amount of the special assessment required to recapitalize the SAIF was
estimated to be approximately 78 to 85 basis points. Under the latest version
of the Proposed Plan, banks that had acquired SAIF-insured deposits would have
paid a special assessment of approximately 64 basis points--20% less than
SAIF-member institutions. The special assessment would have been payable
sometime in 1996 based on deposits held on March 31, 1995.
Congress adopted the Proposed Plan as part of a budget bill. However, in
December 1995, the President vetoed the balanced budget legislation passed by
Congress which included the provisions of the Proposed Plan. With no prospect
of a budget agreement between the Administration and Congress, as well as
significant opposition to the Proposed Plan now coming from many BIF-insured
banks, the fate of the SAIF special assessment provisions of the legislation
is uncertain, and it now appears possible that a significant disparity between
SAIF and BIF insurance premium rates could continue to exist for some time.
In view of the legislative uncertainty that currently exists, it cannot be
predicted whether the Proposed Plan or any other legislative proposal will be
enacted as described above or, if enacted, the amount of any special SAIF
assessment, whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums, or whether such legislation, if enacted, may contain
other provisions, such as requiring all federally-chartered thrifts to convert
to bank charters. A significant increase in SAIF insurance premiums, either
absolutely relative to BIF premiums, a significant one-time fee to
recapitalize the SAIF, or a significant tax liability associated with the
recapture of the bad debt reserve could have a potentially adverse effect on
the operating expenses and results of operations of the Surviving Corporation.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
The FDIA, as amended by the FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation and fees and benefits. In general, the guidelines require,
among other things, appropriate systems and practices to identify and manage
the risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal shareholders. The federal banking agencies determined
that stock valuation standards were not appropriate. In addition, the agencies
adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an acceptable
compliance plan, the agency must issue an order directing action to correct
the deficiency and may issue an order directing other actions of the types to
which an undercapitalized institution is subject under the "prompt corrective
action" provisions of FDICIA. See "--Prompt Corrective Action." If an
institution fails to comply with such an order, the agency may seek to enforce
such order in judicial proceedings
92
<PAGE>
and to impose civil money penalties. The federal bank regulatory agencies also
proposed guidelines for asset quality and earnings standards.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against
an insured depository institution would be afforded a priority over other
general unsecured claims against such an institution in the "liquidation or
other resolution" of such an institution by any receiver.
CERTAIN APPLICABLE THRIFT REGULATIONS
Premier Bank, as a thrift institution, is subject to extensive regulation by
the OTS. The lending activities and other investments of thrift institutions
must comply with various regulatory requirements.
Qualified Thrift Lender Test. One such set of requirements relates to an
institution's status as a "Qualified Thrift Lender." Unless an institution so
qualifies, its borrowing privileges from a Federal Home Loan Bank may be
restricted, and it may be subject to other operating limitations. To meet the
Qualified Thrift Lender test, an institution must maintain at least 65% of its
assets in "Qualified Thrift Investments," which under the regulations consist
of (i) loans made to purchase, refinance, construct, improve or repair
domestic residential or manufactured housing, (ii) home equity loans, (iii)
securities backed by or representing an interest in mortgages on domestic,
residential, or manufactured housing, and (iv) obligations issued by federal
deposit insurance agencies. Subject to a 15%-of-assets limitation, "Qualified
Thrift Investments" may also include consumer loans, investments in certain
subsidiaries, loans for construction of schools, churches, nursing homes and
hospitals, and 200% of investments in loans for low-to-moderate-income housing
and certain other community oriented investments. At December 31, 1995,
approximately 75.5% of Premier Bank's assets were invested in Qualified Thrift
Investments as currently defined. While Premier Bank expects to continue to
qualify as a Qualified Thrift Lender under applicable regulations, there can
be no assurance that it will do so.
Liquidity Requirements. Thrift institutions, including Premier Bank, are
required to maintain average daily balances of liquid assets sufficient to
meet the institution's foreseeable cash needs. Specifically, Premier Bank must
maintain liquid assets (consisting of cash, certain time deposits, bankers
acceptance, highly rated corporate debt and commercial paper, securities of
certain mutual funds, and specific U.S. government, state or federal agency
obligations) of not less than 5% of the total amount of the institution's net
withdrawable savings deposits plus short-term borrowings, and to maintain
average daily balances of short-term liquid assets of not less than 1% of such
total amount. The liquidity ratio of Premier Bank at December 31, 1995, was
34.9%.
EXPERTS
The consolidated financial statements of First Alliance appearing in this
Joint Proxy Statement/Prospectus have been audited by Mauldin & Jenkins,
independent accountants, to the extent and for the years indicated in their
report appearing elsewhere herein, and are included in reliance upon such
report and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Premier as of March 31, 1995 and for the year
then ended included in this Joint Proxy Statement/Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
Premier did not retain Price Waterhouse LLP as its independent accounting
firm for the fiscal year ended March 31, 1996 and retained Mauldin & Jenkins
as its independent accounting firm in December 1995. Price Waterhouse LLP's
report on Premier's financial statements for the year ended March 31, 1995 did
not contain an adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
The change of accountants was approved by Premier's Board of Directors.
Premier had
93
<PAGE>
no disagreements with Price Waterhouse LLP during the year ended March 31,
1995 on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure that would have caused that firm to
make reference to the subject disagreement if it had not been resolved to
Price Waterhouse LLP's satisfaction.
The consolidated financial statements of Premier appearing in this Joint
Proxy Statement/Prospectus have been audited by Mauldin & Jenkins, independent
accountants, to the extent and for the years indicated in their report
appearing elsewhere herein, and are included in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.
OPINIONS
The legality of the shares of the First Alliance Common Stock and First
Alliance Preferred Stock to be issued in the Merger and certain income tax
consequences of the Merger will be passed upon by Powell, Goldstein, Frazer &
Murphy, Atlanta, Georgia.
94
<PAGE>
PROPOSALS PRESENTED TO THE
FIRST ALLIANCE SHAREHOLDERS ONLY
PROPOSAL TO AMEND THE FIRST ALLIANCE ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
First Alliance's Articles of Incorporation presently provide that First
Alliance is authorized to issue 2,000,000 shares of common stock having a par
value of $1.00 per share. The Board of Directors has recommended that the
number of authorized shares of common stock be increased from 2,000,000 to
20,000,000 shares. The additional shares of common stock for which
authorization is sought would be a part of the existing class of common stock
and, if and when issued, would have the same rights and privileges as the
shares of common stock now outstanding.
As of March 31, 1996, there were 1,604,999 shares of First Alliance Common
Stock issued and outstanding. An aggregate of 150,000 shares are subject to
issuance under the First Alliance 1995 Stock Option Plan
The Board recommends the increase in authorized common stock to enable First
Alliance to have a sufficient number of shares of common stock available for
issuance to Premier shareholders in the Merger and to the current holders of
Premier Preferred Stock upon conversion of the First Alliance Preferred Stock
received by them in the Merger. The Board of Directors anticipates that
435,669 shares of First Alliance Common Stock will be issued in the Merger and
that an additional 20,000 shares will be required to be reserved for issuance
upon the exercise of options to purchase First Alliance Common Stock issued in
exchange for options to purchase Premier Common Stock in the Merger. The Board
also recommends the increase to enable First Alliance to have additional
shares available for possible issuance in connection with such general
corporate purposes as stock splits and stock dividends, the issuance of shares
for cash to raise equity capital or conversions of convertible securities or
in connection with future business acquisitions or other employee benefit
plans that may be adopted in the future. The Board believes that additional
authorized common stock will give First Alliance greater flexibility and allow
shares of common stock to be issued without the expense and delay of a
shareholders' meeting to authorize additional shares if and when the need
arises.
If the proposed amendment is adopted, First Alliance would be permitted to
issue the authorized shares without further shareholder approval, except to
the extent otherwise required by law, by a securities exchange on which the
common stock is listed at the time, or by the Articles of Incorporation.
Shareholders do not have preemptive rights to subscribe for or purchase
additional shares of common stock.
Except as described in this Joint Proxy Statement/Prospectus, First Alliance
has no current plans, agreements or arrangements for the issuance of
additional common stock. The additional authorized shares would be available
for issuance (subject to further shareholder approval only as noted above) at
such times and for such proper corporate purposes as the Board of Directors
may approve, including possible future financing and acquisition transactions.
Depending upon the nature and terms thereof, such transactions could enable
the Board to render more difficult or discourage an attempt to obtain control
of First Alliance. For example, the issuance of shares of common stock in a
public or private sale, merger or similar transaction would increase the
number of First Alliance's outstanding shares, thereby diluting the interest
of a party seeking to take over the company. Furthermore, while First Alliance
has no plans to implement such a program, other companies have issued warrants
or other rights to acquire additional shares to holders of common stock to
discourage or defeat unsolicited stock accumulation programs and acquisition
proposals. If this proposal is adopted, more First Alliance Common Stock would
be available for such purposes than is currently available. Management
currently knows of no intent or plan on the part of any persons or entity to
gain control of First Alliance and this proposal is not being recommended in
response to any such intent or plan or for the purpose of inhibiting any
action by any third party.
Issuances of additional shares of common stock, depending upon their timing
and circumstances, may dilute or increase earnings per share and may decrease
or increase the book value per share of shares theretofore
95
<PAGE>
outstanding, and the percentage ownership of First Alliance by each
shareholder may be proportionately reduced as a result of a larger number of
outstanding shares.
If the proposal to amend the Articles of Incorporation to authorize
2,000,000 shares of preferred stock is also adopted, the Articles of
Incorporation of First Alliance, as in force and effect on the date hereof,
will be amended as described in the next section of this Joint Proxy
Statement/Prospectus under "--Proposal to Amend the First Alliance Articles of
Incorporation to Authorize 2,000,000 Shares of Preferred Stock." If the First
Alliance shareholders approve only the proposal to amend the Articles of
Incorporation to increase the number of authorized shares of common stock,
however, the Articles of Incorporation of First Alliance, as in force and
effect on the date hereof, will be amended by deleting Article 5 thereof in
its entirety and by substituting in lieu thereof the following:
"5.
The Corporation shall have the authority to issue 20,000,000
shares of common stock, $1.00 par value per share."
THE FIRST ALLIANCE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED IN THE
FIRST ALLIANCE ARTICLES OF INCORPORATION.
96
<PAGE>
PROPOSAL TO AMEND OF THE FIRST ALLIANCE ARTICLES OF INCORPORATION
TO AUTHORIZE 2,000,000 SHARES OF PREFERRED STOCK
The First Alliance Articles of Incorporation do not presently authorize the
issuance of preferred stock. The Board of Directors has recommended that the
Articles of Incorporation be amended to authorize the issuance of up to
2,000,000 shares of preferred stock with such designations, relative rights
and preferences as the Board of Directors may from time to time assign. Upon
the effectiveness of the proposed amendment, the Board of Directors will be
authorized, without further shareholder action, to issue shares of preferred
stock in one or more series, and to fix the rights, preferences, privileges
and restrictions thereof, including dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, amounts payable upon
liquidation and the number of shares constituting any series or the
designation of such series. If such preferred stock is issued, it will rank
senior to First Alliance Common Stock in respect of rights to receive
dividends and to participate in distributions or payments in the event of any
liquidation, dissolution or winding up of the corporation.
The proposed amendment is recommended in order to give the First Alliance
Board of Directors additional flexibility in raising capital by enabling it to
structure the terms of preferred stock to meet changing capital requirements
and market conditions without the expense and delay of obtaining a shareholder
vote. Except as described in this Joint Proxy Statement/Prospectus, First
Alliance has no current plans, agreements or arrangements for the issuance of
any preferred stock. The authorized shares of preferred stock would be
available for issuance (without further shareholder approval except as
required by law) at such times and for such proper corporate purposes as the
Board of Directors may approve, including future possible financing and
acquisition transactions. The issuance of preferred stock may have the effect
of delaying, deferring, discouraging or preventing a third party from
acquiring a majority of the outstanding voting stock of First Alliance or
other change in control of First Alliance without further action by the
shareholders and may adversely affect the voting and other rights of the
holders of the common stock, including the loss of voting control to others.
The Board of Directors does not at present intend to seek shareholder approval
prior to issuing any such preferred stock unless otherwise required to do so
by law.
If the First Alliance shareholders approve this proposal and the proposal to
amend the Articles of Incorporation to authorize additional shares of common
stock, the Articles of Incorporation of First Alliance, as in force and effect
on the date hereof, will be amended by deleting Article 5 thereof in its
entirety and by substituting in lieu thereof the following:
"5.
(a) The Corporation shall be authorized to issue twenty million
(20,000,000) shares of common stock (the "Common Stock"), $1.00 par value,
and two million (2,000,000) shares of preferred stock (the "Preferred
Stock").
(b) The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this Article, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Georgia
to establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences, and relative
rights of the shares of each such series and the qualifications, or
restrictions thereof. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, determination of the
following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payments of dividends
on shares of that series;
(iii) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting
rights;
97
<PAGE>
(iv) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provisions
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption rates;
(vi) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount
of such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(viii) Any other relative rights, preferences and limitations of that
series."
If the First Alliance shareholders approve only the proposal to amend the
Articles of Incorporation to authorize 2,000,000 shares of preferred stock,
however, the Articles of Incorporation of First Alliance, as in force and
effect on the date hereof, will be amended as described in the preceding
section of this Joint Proxy Statement/Prospectus under "--Proposal to Amend
the First Alliance Articles of Incorporation to Increase the Number of Shares
of Authorized Common Stock."
THE FIRST ALLIANCE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT TO THE FIRST ALLIANCE ARTICLES OF INCORPORATION AUTHORIZING
2,000,000 SHARES OF PREFERRED STOCK.
98
<PAGE>
FIRST ALLIANCE BANCORP, INC. FINANCIAL STATEMENTS
F-1
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks........................................... $ 6,863,853
Interest-bearing deposits in banks................................ 622,573
Federal funds sold................................................ 12,620,000
Securities available for sale, at fair value...................... 36,071,561
Loans............................................................. 105,048,805
Less allowance for loan losses.................................... 1,631,265
------------
Loans, net.................................................... 103,417,540
------------
Premises and equipment, net....................................... 3,642,608
Other assets...................................................... 3,472,024
------------
$166,710,159
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand...................................... $ 22,823,437
Interest-bearing demand......................................... 40,324,999
Savings......................................................... 7,328,796
Time, $100,000 and over......................................... 20,025,266
Other time...................................................... 42,359,998
------------
Total deposits................................................ 132,862,496
Other borrowings................................................ 15,150,361
Other liabilities............................................... 1,476,239
------------
Total liabilities............................................. 149,489,096
------------
Minority interest in subsidiary................................... 4,782
------------
STOCKHOLDERS' EQUITY
Common stock, par value $5; 2,000,000 shares authorized;
1,604,999 issued and outstanding............................... 8,024,995
Capital surplus................................................. 7,919,320
Retained earnings............................................... 1,537,689
Unrealized loss on securities (net of tax)...................... (265,723)
------------
Total stockholders' equity.................................... 17,216,281
------------
$166,710,159
============
</TABLE>
See Note to Consolidated Financial Statements
F-2
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans.............................. $2,753,426 $2,199,967
Interest on investment securities:
Taxable................................................ 684,617 487,583
Nontaxable............................................. 2,817 2,817
Interest on deposits in banks........................... 9,499 280
Interest on federal funds sold.......................... 72,154 200,070
---------- ----------
Total interest and fees............................... 3,522,513 2,890,717
---------- ----------
INTEREST EXPENSE:
Interest on deposits.................................... 1,265,097 1,064,764
Interest on other borrowings............................ 195,598 34,718
---------- ----------
Total interest expense................................ 1,460,695 1,099,482
---------- ----------
Net interest income................................... 2,061,818 1,791,235
PROVISION FOR LOAN LOSSES: 78,899 77,104
---------- ----------
Net interest income after provision for loan losses..... 1,982,919 1,714,131
---------- ----------
NON-INTEREST INCOME:
Service charges on deposit accounts..................... 189,062 201,443
Other charges, commissions, and fees.................... 60,711 78,020
Security transactions, net.............................. 143,328 0
Gain on sale of other real estate....................... 0 6,085
Mortgage origination fees............................... 19,081 11,387
Other................................................... 22,959 24,391
---------- ----------
Total non-interest income............................. 435,141 321,326
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits.......................... 814,397 717,268
Occupancy expense, net.................................. 111,161 103,551
Equipment expense....................................... 116,205 115,030
Other real estate expenses.............................. 3,055 10,619
Directors expense....................................... 51,874 23,400
Deposit insurance premiums.............................. 500 66,322
Legal expenses.......................................... 13,424 33,008
Collection attorney expense............................. 20,202 41,376
Merger related expenses................................. 107,975 0
Other operating expenses................................ 318,999 282,806
---------- ----------
Total non-interest expense............................ 1,557,792 1,393,380
---------- ----------
Income before income taxes............................ 860,268 642,077
Applicable income taxes................................. 309,697 206,101
Minority interest....................................... 3,014 4,033
---------- ----------
Net income............................................ $ 547,557 $ 431,943
========== ==========
Net Income per share of common stock...................... $ 0.34 $ 0.27
========== ==========
Dividends per share of common stock....................... $ 0.50 $ 0.00
========== ==========
Average shares outstanding................................ 1,604,999 1,604,999
========== ==========
</TABLE>
See Note to Consolidated Financial Statements
F-3
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income before minority interest in net income of
subsidiary......................................... $ 550,571 $ 435,976
----------- -----------
Adjustments to reconcile net income before minority
interest in net income of subsidiary to net cash
provided by operating activities:
Depreciation and amortization....................... 100,040 95,602
Provision for loan losses........................... 78,899 77,104
Gain on sale of premises and equipment.............. -- (2,500)
Gain on sale of securities available for sale....... (143,328) --
Increase in interest receivable..................... (27,834) (109,702)
Increase (decrease) in interest payable............. (26,623) 31,125
Increase in taxes payable........................... 363,912 --
Other prepaids, deferrals and accruals, net......... 280,513 (262,931)
----------- -----------
Total adjustments................................. 625,579 (171,302)
----------- -----------
Net cash provided by operating activities............ 1,176,150 264,674
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale.......... (2,211,476) (2,615,853)
Proceeds from maturities of securities available for
sale............................................... 1,480,046 840,572
Proceeds from sales of securities available for
sale............................................... 10,045,058 --
Net increase in interest-bearing deposit in banks... (34,223) --
(Increase) decrease in Federal funds sold, net...... (10,090,000) 4,500,000
Increase in loans, net.............................. (9,098,501) (139,541)
Purchases of premises and equipment................. (134,888) (50,364)
Proceeds from sale of premises and equipment........ -- 2,500
Investment in Subsidiary............................ -- (28,000)
-----------
Net cash acquired in business combination........... -- 88,684
----------- -----------
Net cash (used in) provided by investing activi-
ties............................................. (10,043,984) 2,597,998
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits, net........................... 5,103,149 6,405,931
Increase (decrease) in repurchase agreements........ 6,399,727 (9,150,000)
Decrease in borrowings from FHLB, net............... (1,000,000) --
Repayment of short-term borrowings.................. (475,000) --
Repayment of short-term debt........................ (2,059) (1,373)
Increase in short-term subordinated debt, net....... 578,000 --
Cash dividends paid................................. (802,499) --
Minority interest dividends paid.................... (14,986) --
----------- -----------
Net cash provided by (used in) financing activi-
ties............................................. 9,786,332 (2,745,442)
----------- -----------
Net increase in cash and due from banks.............. 918,498 117,230
Cash and due from banks, beginning of period......... 5,945,355 5,410,710
----------- -----------
Cash and due from banks, end of period............... $ 6,863,853 $ 5,527,942
=========== ===========
Cash paid during the period for:
Interest............................................ $ 1,487,318 $ 1,068,357
Income Taxes........................................ $ 52,194 $ 312,280
NONCASH TRANSACTIONS:
Unrealized (losses) gains on securities available
for sale........................................... $ (569,322) $ 402,602
Principal balances on loans transferred to other
real estate........................................ $ 20,000 $ --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FI-
NANCING ACTIVITIES:
Detail of subsidiary finance company acquisition
Cash................................................ $ -- $ 88,684
Loans............................................... -- $ 1,859,435
Premises and equipment.............................. -- $ 41,131
Goodwill............................................ -- $ 11,830
Other assets........................................ -- $ 26,725
Short-term debt..................................... -- $(1,986,063)
Other liabilities................................... -- $ (13,742)
-----------
Net assets acquired................................. -- $ 28,000
=========== ===========
</TABLE>
See Note to Consolidated Financial Statements.
F-4
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of result for the interim periods.
The results of operations for the three-month period ended March 31, 1996
are not necessarily indicative of the results to be expected for the full
year.
F-5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS
To the Board of Directors
First Alliance Bancorp, Inc.
and Subsidiaries
Marietta, Georgia
We have audited the accompanying consolidated balance sheets of First
Alliance Bancorp, Inc. and subsidiaries as of December 31, 1995 and 1994, 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 First
Alliance Bancorp, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
Mauldin & Jenkins
Atlanta, Georgia
January 19, 1996
F-6
<PAGE>
FIRST ALLIANCE BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks............................. $ 5,945,355 $ 5,394,623
Interest-bearing deposits in banks.................. 588,350 16,089
Federal funds sold.................................. 2,530,000 19,110,000
Securities available for sale, at fair value........ 45,811,183 11,584,272
Securities held to maturity, at cost (fair value
1994; $19,900,053)................................. -- 20,921,756
Loans............................................... 95,953,638 80,941,714
Less allowance for loan losses...................... 1,535,700 1,301,582
------------ ------------
Loans, net.......................................... 94,417,938 79,640,132
------------ ------------
Premises and equipment, net......................... 3,600,447 3,555,765
Other assets........................................ 3,461,736 3,382,522
------------ ------------
$156,355,009 $143,605,159
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand.......................... $ 22,165,568 $ 21,340,290
Interest-bearing demand............................. 36,886,484 35,218,418
Savings............................................. 7,440,435 10,231,422
Time, $100,000 and over............................. 19,758,923 14,362,352
Other time.......................................... 41,507,937 37,013,604
------------ ------------
Total deposits...................................... 127,759,347 118,166,086
Other borrowings.................................... 3,647,634 9,150,000
Federal Home Loan Bank advances..................... 6,000,000 -
Other liabilities................................... 1,090,837 1,115,672
------------ ------------
Total liabilities................................... 138,497,818 128,431,758
------------ ------------
Minority interest in subsidiary..................... 16,754 --
------------ ------------
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Common stock, par value $5; 2,000,000 shares
authorized; 1,604,999 and 1,528,793 issued and
outstanding...................................... 8,024,995 7,643,965
Capital surplus................................... 7,919,320 7,290,621
Retained earnings................................. 1,792,631 955,062
Unrealized gains (losses) on securities available
for sale, net of taxes........................... 103,491 (716,247)
------------ ------------
Total stockholders' equity...................... 17,840,437 15,173,401
------------ ------------
$156,355,009 $143,605,159
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
FIRST ALLIANCE BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans......................... $ 9,649,277 $ 8,090,025
Interest on securities:
Taxable.......................................... 2,521,084 1,731,311
Nontaxable....................................... 11,261 11,265
Interest on deposits in other banks................ 17,451 17,616
Interest on Federal funds sold..................... 557,738 450,891
----------- -----------
12,756,811 10,301,108
----------- -----------
INTEREST EXPENSE
Interest on deposits............................... 4,761,444 3,772,280
Interest on other borrowings....................... 531,954 23,480
----------- -----------
5,293,398 3,795,760
----------- -----------
Net interest income.............................. 7,463,413 6,505,348
PROVISION FOR LOAN LOSSES............................ 317,659 285,000
----------- -----------
Net interest income after provision for loan
losses.......................................... 7,145,754 6,220,348
----------- -----------
OTHER INCOME
Service charges on deposit accounts................ 754,665 909,660
Other service charges, commissions and fees........ 271,159 222,786
Net realized (losses) on securities held to
maturity.......................................... (30,778) --
Net realized gains (losses) on securities available
for sale.......................................... 42,464 (28,568)
Gain on sale of premises and equipment............. 2,500 259,565
Gain (loss) on sale of other real estate........... 278,416 (2,636)
Mortgage loan origination fees..................... 72,642 250,435
Other.............................................. 96,263 88,567
----------- -----------
1,487,331 1,699,809
----------- -----------
OTHER EXPENSE
Salaries and employee benefits..................... $ 3,121,841 $ 3,070,896
Equipment expense.................................. 489,467 524,967
Occupancy expense.................................. 441,943 406,350
Mortgage loan origination commissions.............. 35,089 109,414
Directors fees and expenses........................ 198,409 150,349
Deposit insurance premiums......................... 136,548 247,874
Advertising........................................ 138,231 93,060
Legal expenses..................................... 102,709 118,659
Collection attorney expenses....................... 144,763 146,073
Other operating expense............................ 1,086,894 1,152,716
----------- -----------
5,895,897 6,020,331
----------- -----------
Income before income taxes and minority interest
in net income of subsidiary..................... 2,737,188 1,899,826
APPLICABLE INCOME TAXES.............................. 874,088 568,581
----------- -----------
Income before minority interest in net income of
subsidiary...................................... 1,863,100 1,331,245
MINORITY INTEREST IN NET INCOME OF SUBSIDIARY........ 12,709 --
----------- -----------
Net income....................................... $ 1,850,391 $ 1,331,245
=========== ===========
PER COMMON AND COMMON EQUIVALENT SHARE............... $ 1.15 $ 0.83
=========== ===========
Net income
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON STOCK RETAINED AVAILABLE TOTAL
-------------------- CAPITAL EARNINGS FOR SALE, STOCKHOLDERS'
SHARES PAR VALUE SURPLUS (DEFICIT) NET OF TAXES EQUITY
--------- ---------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993................... 1,528,793 $7,643,965 $7,290,621 $ (120,908) $ -- $14,813,678
Net income............. -- -- -- 1,331,245 -- 1,331,245
Transfer unrealized
loss on mutual funds.. -- -- -- 50,483 (50,483) --
Cash dividends paid,
$.20 per share........ -- -- -- (305,758) -- (305,758)
Net change in
unrealized losses on
securities available
for sale, net of
taxes................. -- -- -- -- (665,764) (665,764)
--------- ---------- ---------- ----------- --------- -----------
BALANCE, DECEMBER 31,
1994................... 1,528,793 7,643,965 $7,290,621 955,062 (716,247) 15,173,401
Net income............. -- -- -- 1,850,391 -- 1,850,391
5% stock dividend...... 76,206 381,030 628,699 (1,012,822) -- (3,093)
Net change in
unrealized gains on
securities available
for sale, net of
taxes................. -- -- -- -- 819,738 819,738
--------- ---------- ---------- ----------- --------- -----------
BALANCE, DECEMBER 31,
1995................... 1,604,999 $8,024,995 $7,919,320 $ 1,792,631 $ 103,491 $17,840,437
========= ========== ========== =========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income before minority interest in net income
of subsidiary.................................... $ 1,863,100 $ 1,331,245
Adjustments to reconcile net income before
minority interest in net income of subsidiary to
net cash provided by operating activities:
Provision for loan losses......................... 317,659 285,000
Depreciation and amortization..................... 416,244 457,779
Deferred taxes (benefits)......................... (157,783) 111,771
Gain on sale of premises and equipment............ (2,500) (259,565)
(Gain) loss on sale of other real estate.......... (278,416) 2,636
Net realized losses on securities held to
maturity......................................... 30,778 --
Net realized (gains) losses on securities
available for sale............................... (42,464) 28,568
(Increase) decrease in interest receivable........ (383,064) 121,525
Increase (decrease) in taxes payable.............. (242,133) 358,488
Increase (decrease) in interest payable........... 253,506 (116,986)
Other prepaids, deferrals and accruals, net....... (115,756) (421,233)
------------ -----------
Total adjustments............................... (158,929) 567,993
------------ -----------
Net cash provided by operating activities....... 1,704,171 1,899,238
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale........ (23,218,105) (5,794,542)
Proceeds from sales of securities available for
sale............................................. 7,778,040 2,702,013
Proceeds from maturities of securities available
for sale......................................... 2,587,002 429,038
Proceeds from maturities of securities held to
maturity......................................... 2,817,235 4,823,195
Proceeds from sales of securities held to
maturity......................................... 4,560,718 --
Purchases of securities held to maturity.......... (6,590,781) (9,302,235)
Net increase in interest-bearing deposit in
banks............................................ (572,261) (16,089)
Net (increase) decrease in Federal funds sold..... 16,580,000 (8,230,000)
Net (increase) decrease in loans.................. (13,893,220) 29,957,567
Purchases of premises and equipment............... (390,931) (199,382)
Proceeds from sale of premises and equipment...... 2,500 927,299
Proceeds from sale of other real estate........... 1,012,272 426,229
Net cash acquired in business combination......... 60,684 --
------------ -----------
Net cash used in investing activities........... (9,266,847) (11,276,907)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.......................... $ 9,593,261 $ 843,283
Increase (decrease) in other borrowings........... (7,476,760) 9,150,000
Net increase in Federal Home Loan Bank advances... 6,000,000 --
Repayment of long-term debt....................... -- (1,500,000)
Dividends paid.................................... (3,093) (305,758)
------------ -----------
Net cash provided by financing activities....... 8,113,408 8,187,525
------------ -----------
Net increase (decrease) in cash and due from
banks............................................ 550,732 (1,190,144)
Cash and due from banks at beginning of year...... 5,394,623 6,584,767
------------ -----------
Cash and due from banks at end of year............ $ 5,945,355 $ 5,394,623
============ ===========
</TABLE>
F-10
<PAGE>
FIRST ALLIANCE BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest.......................................... $ 5,039,892 $3,912,746
Income taxes...................................... $ 1,274,003 $ 98,322
NONCASH TRANSACTIONS
Unrealized (gains) losses on securities available
for sale........................................... $ (1,227,578) $1,085,222
Principal balances on loans transferred to other
real estate........................................ $ 657,190 $ 309,578
Securities held to maturity transferred to
securities available for sale...................... $ 20,103,806 $ --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Detail of subsidiary finance company acquisition:
Cash.............................................. $ 88,684 $ --
Loans............................................. 1,859,435 --
Premises and equipment............................ 41,131 --
Goodwill.......................................... 11,830 --
Other assets...................................... 26,725 --
Subordinated debentures........................... (1,974,394) --
Other liabilities................................. (25,411) --
------------ ----------
Net assets acquired............................. $ 28,000 $ --
============ ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
First Alliance Bancorp, Inc. (the Company) is a one-bank holding company
whose business is presently conducted by its wholly-owned subsidiary First
Alliance Bank, Marietta, Georgia. The Company also owns an 80% interest in
Interim Alliance Corporation, d/b/a Alliance Finance, Smyrna, Georgia. The
Company is not engaged in any substantial business other than the normal
financial services provided by its subsidiaries. However, the Company incurs
operating expenses related to business acquisitions.
First Alliance Bank (the Bank) is a commercial bank with operations in
Marietta and Kennesaw, Georgia. The Bank provides a full range of banking
services to individual and corporate customers in its primary market area of
Cobb County and surrounding counties. The Bank is subject to competition from
other financial institutions and the regulations of certain Federal and state
agencies. The Bank is periodically examined by certain regulatory authorities.
Alliance Finance (the Finance Company) provides lending and financing
services to consumer and business enterprises. The Finance Company's primary
activities consist of direct consumer loans including mortgage loans and
retail sales financing and a variety of insurance services to their customers.
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 consolidated 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.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany transactions and accounts are
eliminated in consolidation.
The principles which significantly affect the determination of financial
position, results of operations and cash flows are summarized below.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in process of
clearing). Cash flows from loans originated by the Bank, deposits, interest-
bearing deposits and Federal funds purchased and sold are reported net.
The Bank maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Bank has not experienced any losses in such
accounts.
SECURITIES AVAILABLE FOR SALE
Securities classified as available for sale are those debt and equity
securities that the Bank intends to hold for an indefinite period of time, but
not necessarily to maturity. Any decision to sell a security classified as
available for sale would be based on various factors, including significant
movements in interest rates, changes in the maturity mix of the Bank's assets
and liabilities, liquidity needs, regulatory capital considerations and other
similar factors. Securities available for sale are carried at fair value.
Unrealized gains and losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized gains
and losses, determined on the basis of the cost of specific securities sold,
are included in earnings.
F-12
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SECURITIES HELD TO MATURITY
Securities classified as held to maturity are those debt securities the Bank
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives. The sale of a security within three months of its maturity date or
after collection of at least 85 percent of the principal outstanding at the
time the security was acquired is considered a maturity for purposes of
classification and disclosure.
A decline in the carrying amount of any available for sale or held to
maturity security, that is deemed other than temporary, is charged to earnings
resulting in the establishment of a new cost basis for the security.
LOANS AND INTEREST INCOME
Loans are stated at 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 at the respective rate of interest
except for add on interest on certain instalment loans for which interest is
recognized on the sum-of-the-months method, the results of which are not
materially different from generally accepted accounting principles.
Accrual of interest income is discontinued on loans when, in the opinion of
management, collection of such interest income becomes doubtful. When a loan
is placed on nonaccrual status, all interest previously accrued but not
collected is reversed against current interest income. Accrual of interest on
such loans is resumed when, in management's judgment, the collection of
interest and principal becomes probable.
Fees on loans and costs incurred in origination of most loans are deferred
and recognized as income over the life of the loan. Fees and costs incurred in
origination of other loans are recognized at the time the loan is recorded on
the books. Because the majority of loans have maturities of one year or less,
the results on 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 established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans that may become uncollectible,
based on evaluation of the collectibility of loans and prior loss experience.
This evaluation also takes into consideration such factors as changes in the
nature and volume of the loan portfolios, overall portfolio quality, review of
specific problem loans and current economic conditions that may affect the
borrower's ability to pay. While management uses the best information
available to make its evaluation, future adjustments to the allowance may be
necessary if there are significant changes in economic conditions. In
addition, regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses, and may
require the Bank to record additions to the allowance based on their judgment
about information available to them at the time of their examinations.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments due in
accordance with the terms of the original loan agreement. Accrual of interest
on an impaired loan is discontinued when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Collections on impaired loans are credited to the loan receivable balance, and
no interest income is recognized on those loans until the principal balance
has been collected.
F-13
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.......................................... 3-40
Furniture and equipment............................................. 3-7
</TABLE>
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents properties acquired through
foreclosure or other proceedings. OREO is held for sale and is recorded at the
lower of the recorded amount of the loan or fair value of the properties less
estimated costs of disposal. Any write-down to fair value at the time of
transfer to OREO is charged to the allowance for loan losses. OREO is
evaluated regularly to insure the carrying amount is supported by its current
fair value and any valuation allowances to reduce the carrying amount to fair
value less estimated costs to dispose are recorded as necessary. Subsequent
decreases in fair value and increases in fair value, up to the value
established at foreclosure, are recognized as charges or credits to
noninterest expense. OREO is reported net of valuation allowances in the
Company's consolidated financial statements.
EMPLOYEE BENEFIT PLAN
Profit-sharing plan costs are funded as accrued and are based on a
percentage of individual employees' salary, not to exceed the amount that can
be deducted for Federal income tax purposes.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax return. The
subsidiaries provide for income taxes based on their contribution to income
taxes (benefits) of the consolidated group.
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effect of changes in tax laws on the date of enactment.
EARNINGS PER SHARE
Earnings per common and common equivalent share are computed by dividing net
income by the weighted average number of shares of common stock and common
stock equivalents outstanding during each year. Common stock equivalents
include stock options.
NOTE 2. INVESTMENTS
Effective January 1, 1994, the Company adopted Financial Accounting
Standards Board Statement ("FASB") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Upon adoption, the Company
transferred $9,534,571 from securities being held to maturity to securities
available for sale. The securities available for sale were marked to fair
value resulting in a net unrealized loss of $85,946 which was included in
stockholders' equity at $56,724 net of related taxes of $29,222.
F-14
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company sold during the third quarter of 1995 securities classified as
held to maturity, with a carrying amount of $4,560,718, recognizing a loss of
$30,778, in response to changes in the bond market and management's evaluation
of the securities portfolio. The circumstances leading to the sale of these
securities were identified as an isolated instance based on prudent business
decisions. On December 15, 1995, the Company transferred its remaining held to
maturity portfolio totaling $20,103,806 to available for sale, resulting in a
net unrealized loss of $23,815 which was included in stockholders' equity at
$15,718 net of related taxes of $8,097.
The carrying amounts of investments as shown in the consolidated balance
sheets and their approximate fair values were 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, 1995:
U. S. Government and agency
securities.................. $21,726,156 $234,115 $ (151,542) $21,808,729
State and municipal
securities.................. 291,803 12,038 -- 303,841
Mortgage-backed securities... 21,691,002 260,327 (184,535) 21,766,794
Equity securities............ 449,956 -- (28,047) 421,909
Other securities............. 1,509,910 -- -- 1,509,910
----------- -------- ----------- -----------
$45,668,827 $506,480 $ (364,124) $45,811,183
=========== ======== =========== ===========
DECEMBER 31, 1994:
U. S. Government and agency
securities.................. $ 1,521,937 $ -- $ (109,257) $ 1,412,680
Mortgage-backed securities... 10,249,992 -- (917,749) 9,332,243
Equity securities............ 449,955 -- (58,216) 391,739
Other securities............. 447,610 -- -- 447,610
----------- -------- ----------- -----------
$12,669,494 $ -- $(1,085,222) $11,584,272
=========== ======== =========== ===========
SECURITIES HELD TO MATURITY
DECEMBER 31, 1994:
U. S. Government and agency
securities.................. $10,679,460 $ 1,029 $ (386,551) $10,293,938
State and municipal
securities.................. 291,817 7,268 -- 299,085
Mortgage-backed securities... 9,700,559 -- (638,854) 9,061,705
Other securities............. 249,920 -- (4,595) 245,325
----------- -------- ----------- -----------
$20,921,756 $ 8,297 $(1,030,000) $19,900,053
=========== ======== =========== ===========
</TABLE>
Gross realized gains and losses on sales of securities available for sale
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Gross realized gains..................................... $119,906 $ 1,431
Gross realized losses.................................... (77,442) (29,999)
-------- --------
Net realized losses...................................... $ 42,464 $(28,568)
======== ========
</TABLE>
F-15
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Gross realized gains and losses on sales of securities held to maturity were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
-------- ----
<S> <C> <C>
Gross realized gains.......................................... $ 725 $--
Gross realized losses......................................... (31,503) --
-------- ----
Net realized gains............................................ $(30,778) $--
======== ====
</TABLE>
The amortized cost and fair value of securities as of December 31,1995 by
contractual maturity are shown below. Maturities may differ from contractual
maturities of 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
summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
-----------------------------
AMORTIZED FAIR
COST VALUE
-----------------------------
<S> <C> <C>
Due in one year or less...................... $ 3,612,851 $ 3,603,119
Due from one year to five years.............. 13,990,982 14,022,832
Due from five to ten years................... 1,043,928 1,044,690
Due after ten years.......................... 4,880,108 4,951,839
Mortgage-backed securities and equity
securities.................................. 22,140,958 22,188,703
-------------- --------------
$ 45,668,827 $ 45,811,183
============== ==============
</TABLE>
Securities with a carrying value of $37,720,000 and $25,092,000 at December
31, 1995 and 1994, respectively, were pledged to secure public deposits,
securities sold under repurchase agreements and Federal Home Loan Bank
advances.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Commercial and financial........................... $14,868,000 $ 5,711,000
Real estate--construction.......................... 21,694,000 18,163,000
Real estate--mortgage.............................. 46,295,000 46,602,000
Consumer........................................... 12,854,000 9,628,000
Other.............................................. 912,432 1,027,747
----------- -----------
96,623,432 81,131,747
Unearned fees, net................................. (222,488) (190,033)
Unearned discount.................................. (447,306) --
Allowance for loan losses.......................... (1,535,700) (1,301,582)
----------- -----------
Loans, net......................................... $94,417,938 $79,640,132
=========== ===========
</TABLE>
F-16
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1995, executive officers and directors, and companies in
which they have a 10 percent or more beneficial ownership, were indebted to
the Bank in the aggregate amount of $1,337,488. 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.
Following is a summary of transactions:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance, beginning of year........................... $1,603,339 $2,433,701
Advances............................................ 109,392 140,722
Repayments.......................................... (375,243) (971,084)
---------- ----------
Balance, end of year................................. $1,337,488 $1,603,339
========== ==========
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance, beginning of year........................... $1,301,582 $1,581,532
Reserve for finance company acquired................ 52,580 --
Provision charged to operations..................... 317,659 285,000
Loans charged off................................... (386,415) (735,324)
Recoveries.......................................... 250,294 170,374
---------- ----------
Balance, end of year................................. $1,535,700 $1,301,582
========== ==========
</TABLE>
Information with respect to impaired loans as of and for the year ended
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Loans receivable for which there is a related allowance for credit
losses........................................................... $268,463
Loans receivable for which there is no related allowance for
credit losses.................................................... --
--------
Total impaired loans............................................ $268,463
========
Allowance for loan losses related to impaired loans............... $ 69,764
========
Average balance for all impaired loans during the year (based on
month-end balances).............................................. $692,500
========
Interest income recognized on all impaired loans.................. $ 10,155
========
</TABLE>
Loans on which the accrual of interest had been discontinued or reduced
amounted to $268,463 and $602,575 at December 31, 1995 and 1994, respectively.
For the year ended December 31, 1994, the Company recognized $12,760 of
interest income related to nonaccrual loans.
NOTE 4. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land............................................... $ 697,414 $ 672,415
Buildings.......................................... 2,643,895 2,459,264
Equipment.......................................... 2,892,994 2,677,534
----------- -----------
6,234,303 5,809,213
Accumulated depreciation........................... (2,633,856) (2,253,448)
----------- -----------
$ 3,600,447 $ 3,555,765
=========== ===========
</TABLE>
F-17
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation expense for the years ended December 31, 1995 and 1994 was
$387,380 and $437,194, respectively.
NOTE 5. OTHER BORROWINGS
LINE OF CREDIT
The Finance Company has an available line of credit of $3,000,000 with a
bank, bearing interest at prime rate (8.5% at December 31, 1995). As of
December 31, 1995, the Finance Company had an outstanding balance of
$1,085,000. This line of credit is guaranteed by First Alliance Bancorp, Inc.
Interest is payable monthly and all interest accrued plus outstanding
principal is due on February 15, 1996.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Securities sold under repurchase agreements consisted of $1,308,634 and
$9,150,000 at December 31, 1995 and 1994, respectively.
SUBORDINATED DEBENTURES
Subordinated debt of the Finance Company consists of fixed rate debentures
which are payable on demand or mature at three, six, twelve, eighteen, twenty-
four or thirty-six months after date of issue. The debentures have various
principal amounts and interest is payable monthly. The Company may repay the
debentures for a price equal to 100% of the principal plus any unpaid interest
to date of the redemption without penalty. A summary of the outstanding
debentures by interest rate and maturity are as follows:
<TABLE>
<S> <C>
8% due in 1996 or on demand..................................... $ 1,194,000
10% due in 1996................................................. 25,000
8% due in 1998.................................................. 35,000
-----------
$ 1,254,000
===========
</TABLE>
NOTE 6. FEDERAL HOME LOAN ADVANCES
Federal Home Loan advances consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Advance from Federal Home Loan Bank with interest at the one
month LIBOR rate plus 20 basis points (6.17% at December 31,
1995) due on May 31, 2005. Interest is payable monthly....... $ 5,000,000
Advance from Federal Home Loan Bank with interest based on the
Federal Home Loan Bank's cost of funds plus .25% (5.85% at
December 31, 1995) due on January 2, 1996.................... 1,000,000
-----------
$ 6,000,000
===========
</TABLE>
The advances from the Federal Home Loan Bank are collateralized by a blanket
floating lien on qualifying first mortgages and pledges of certain investment
securities having an aggregate market value at December 31, 1995 of
$14,706,650.
NOTE 7. DEFERRED COMPENSATION PLANS
First Alliance Bank has three deferred compensation plans providing for the
deferral of director meeting fees and certain retirement benefits for the
directors.
F-18
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The retirement benefit plan was put in place in January, 1994. The Bank
accrues an amount equal to the present value of the estimated benefit to be
paid out under the plan in subsequent years. The accrual recorded for the year
ended December 31, 1995 and 1994 was $89,303 and $50,601, respectively.
The Bank also maintains two plans to allow the directors to defer up to $500
per month of their monthly meeting fees. The first plan covers one current and
one former director. Under that plan, the monthly amount deferred is utilized
to purchase life insurance on those directors. The Bank's liability under that
plan is equal to the cash value of those policies. The second deferred fee
plan, originated in January, 1994, is similar to the first except those
deferred fees are recorded in a liability account and are credited annually
with an interest payment tied to a current market rate. During 1995 and 1994,
an amount of $31,322 and $21,200, respectively, was deferred by the directors
and recorded as a liability by the Bank.
In conjunction with these plans, several universal life insurance policies
were purchased by the Bank in December, 1994. The Bank is the owner of the
policies which insure the lives of the directors. These policies may be used
by the Bank as funding vehicles for the plan obligations but the directors
stand as general creditors of the Bank and have no specific claims on these
assets. The cash surrender values of these plans recorded in other assets was
$1,736,153 and $1,673,203 at December 31, 1995 and 1994, respectively.
NOTE 8. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Bank has a 401(K) retirement plan covering all employees, subject to
certain minimum age requirements. Contributions to the plan charged to expense
were $38,933 and $39,975 for the years ended December 31, 1995 and 1994,
respectively.
INCENTIVE STOCK OPTION PLAN
In 1995, the Company adopted an Employee Incentive Stock Option Plan. Under
the Plan, the Company can grant to key personnel options to purchase an
aggregate of 150,000 shares of the Company's common stock at a price not less
than the fair market value of such shares on the date the option is granted.
The option period will not exceed five years from date of grant. When options
are exercised, the proceeds will be credited to common stock and surplus
accounts. Changes in outstanding options were as follows:
<TABLE>
<CAPTION>
PRICE RANGE SHARES
----------- ------
<S> <C> <C>
Options granted........................................... $ 14.50 5,000
-----
Outstanding, December 31, 1995............................ 5,000
=====
</TABLE>
NOTE 9. INCOME TAXES
The total income taxes in the consolidated statements of income are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
----------- ---------
<S> <C> <C>
Currently payable..................................... $ 1,031,871 $ 456,810
Deferred.............................................. (157,783) 111,771
----------- ---------
$ 874,088 $ 568,581
=========== =========
</TABLE>
F-19
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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, 1995 DECEMBER 31, 1994
------------------ ----------------------
AMOUNT PERCENT AMOUNT PERCENT
--------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Tax provision at statutory rate...... $ 930,644 34% $ 645,941 34%
Increase (decrease) resulting from:
Tax-exempt interest................ (30,921) (1) (31,650) (2)
Life insurance...................... (20 589) (1) (16,608) (1)
Alternative minimum tax credit...... -- -- (37,135) (2)
Dividend income exclusion........... (12,846) -- -- --
Other items, net.................... 7,800 -- 8,033 1
--------- --- ----------- ------
Provision for income taxes........... $ 874,088 32% $ 568,581 30%
========= === =========== ======
</TABLE>
Net deferred income tax assets of $76,210 and $312,744 at December 31, 1995
and 1994, respectively, are included in other assets. The components of
deferred income taxes at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves.................................... $ 226,969 $ 114,823
Deferred compensation................................. 97,215 40,749
Other real estate..................................... 10,377 4,760
Securities available for sale......................... -- 346,771
Write-down on mutual fund............................. 18,885 17,015
Georgia net operating loss............................ -- 122,290
Georgia credits....................................... 139,722 161,286
Valuation allowance................................... (175,466) (340,811)
--------- ---------
317,702 466,883
--------- ---------
Deferred tax liabilities:
Depreciation and amortization......................... 193,092 154,139
Securities available for sale......................... 48,400 --
--------- ---------
241,492 154,139
--------- ---------
Net deferred tax assets................................ $ 76,210) $ 312,744
========= =========
</TABLE>
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank has entered into off-balance-
sheet financial instruments which are not reflected in the consolidated
financial statements. These financial instruments include commitments to
extend credit and standby letters of credit. Such financial instruments are
included in the consolidated 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 consolidated
balance sheet.
F-20
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Bank'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 Bank's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
<S> <C> <C>
Commitments to extend credit........................ $18,606,000 $10,176,000
Standby letters of credit........................... 1,025,532 641,764
----------- -----------
$19,631,532 $10,817,764
=========== ===========
</TABLE>
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 Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based
on management's credit evaluation of the customer. Collateral held varies but
may include real estate and improvements, marketable securities, accounts
receivable, inventory, equipment and personal property.
Standby letters of credit are conditional commitments issued by the Bank 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 Bank 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 consolidated financial statements.
The Bank leases the land on which its main office is located for $5,717 per
month for five years with renewal options up to forty years. Escalation
features include a 5% increase every five years plus an additional amount
added which shall be the average yearly amount for the Consumer Price Index
(CPI) for metropolitan Atlanta for the previous five years, not to exceed 8%
per year. At any time after the first five years, the Bank may exercise an
option to purchase the property for $1,000,000. The total minimum rental
commitment at December 31, 1995 under this lease is $369,245. The rental
expense applicable to the land lease included in the consolidated statements
of income for the years ended December 31, 1995 and 1994 was $65,772 and
$58,577, respectively.
The Bank also leases various other equipment under short-term leases.
NOTE 11. CONCENTRATIONS OF CREDIT
The subsidiaries originate primarily commercial, residential and consumer
loans to customers in the Cobb County, metro Atlanta area and surrounding
counties. The ability of the majority of the Company's customers to honor
their contractual loan obligations is dependent on the economy in the metro
Atlanta area. The Company's market area has experienced substantial growth in
recent years.
Seventy-one percent (71%) of the Company's loan portfolio is concentrated in
real estate loans, of which 22% consists of construction loans. A substantial
portion of these loans are secured by real estate in the
F-21
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's primary market area. In addition, a substantial portion of the real
estate owned is located in those same markets. Accordingly, the ultimate
collectibility of the subsidiaries' loan portfolio and the recovery of the
carrying amount of 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. The Bank, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 25% of
statutory capital, or approximately $3,300,000.
NOTE 12. STOCKHOLDERS' EQUITY
RETAINED EARNINGS
The primary source of funds available to First Alliance Bancorp, Inc. is the
payment of dividends by its subsidiaries. Banking regulations limit the amount
of dividends that may be paid without prior approval of the Bank's regulatory
agency. Approximately $915,000 are available to be paid as dividends by the
Bank at December 31, 1995.
At December 31, 1995, the Company's capital ratios were considered adequate
based on regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company at December 31,
1995 are as follows:
<TABLE>
<CAPTION>
REGULATORY
ACTUAL REQUIREMENT
------ -----------
<S> <C> <C>
Leverage capital ratio................................... 11.01% 4.00%
Risk based capital ratios:
Core capital............................................ 15.91 4.00
Total capital........................................... 17.16 8.00
</TABLE>
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate
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.
Statement No. 107 excludes certain financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
Many of the Company's assets and liabilities are short-term financial
instruments whose carrying amounts reported in the balance sheet approximate
fair value. These items include cash and due from banks, interest-bearing
deposits in banks, Federal funds sold, securities sold under repurchase
agreements, line of credit, Federal Home Loan Bank advances, subordinated
debentures and financial instruments included in other assets and liabilities.
The following methods and assumptions were used in estimating the fair value
of the Company's remaining financial instruments:
INVESTMENT SECURITIES:
Fair values for investment securities are based on quoted market prices.
F-22
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LOANS:
For equity lines and other loans with short-term or variable rate
characteristics, the carrying value is a reasonable estimate of fair value.
The fair value of all other loans is estimated by discounting their future
cash flows using interest rates currently being offered for loans with similar
terms.
DEPOSITS:
The fair values for demand deposits (e.g., interest- and noninterest-bearing
demand and savings) approximates the amounts payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for time deposits
are estimated using a discounted cash flow calculation that applies interest
rates currently being offered on time deposits. Fair values do not include
core deposit intangibles.
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments
(commitments to extend credit and standby letters of credit) 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 carrying value and estimated fair value of the Company's financial
instruments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
------------ ------------
<S> <C> <C>
FINANCIAL ASSETS:
Investment securities........................... $ 45,811,183 $ 45,811,183
Loans........................................... 95,953,638 95,950,597
Less allowance for loan losses.................. (1,535,700) --
------------ ------------
$140,229,121 $141,761,780
============ ============
FINANCIAL LIABILITIES:
Time deposits................................... $ 61,266,860 $ 61,610,550
============ ============
</TABLE>
NOTE 14. BUSINESS COMBINATIONS
On January 31, 1995, First Alliance Bancorp, Inc. acquired Interim Alliance
Corporation (d/b/a First Alliance Finance) in exchange for 80% of the
outstanding common stock owned personally by the President of First Alliance
Bancorp, Inc. The price paid for the stock was $28,000, which represents
$25,000 for the initial capitalization of the Company plus $3,000 of
incidental expenses. The acquisition has been accounted for as a purchase.
On January 30, 1996, the Company entered into an Agreement and Plan of
Reorganization with Premier Bancshares, Inc. ("Premier") of Atlanta, Georgia.
Under this agreement, Premier will merge with and into the Company, and
Premier Bank, FSB and Premier Lending Corporation, which are wholly owned
subsidiaries of Premier, will become wholly owned subsidiaries of the Company.
Upon consummation of the merger, each share of Premier common stock issued and
outstanding will be converted into and exchanged for the right to receive one
share of the Company's common stock and each share of Premier convertible
preferred stock issued and
F-23
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
outstanding will be converted into and exchanged for the right to receive one
share of Series A convertible preferred stock. Consummation of the merger is
subject to certain conditions, including approval of the agreement by Premier
shareholders and approval of the merger by various regulatory agencies.
NOTE 15. CONDENSED FINANCIAL INFORMATION ON FIRST ALLIANCE BANCORP, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash.................................................. $ 320,864 $ 447,373
Investment in subsidiaries............................ 16,527,899 14,524,721
Securities available for sale......................... 900,000 --
Other assets.......................................... 108,428 201,307
----------- -----------
Total assets......................................... $17,857,191 $15,173,401
=========== ===========
Minority interest in subsidiary........................ $ 16,754 $ --
Stockholders' equity................................... 17,840,437 15,173,401
----------- -----------
Total liabilities and stockholders' equity........... $17,857,191 $15,173,401
=========== ===========
</TABLE>
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INCOME
Interest................................................ $ 53,897 $ --
Dividends from subsidiary............................... 730,648 409,694
---------- ----------
784,545 409,694
---------- ----------
EXPENSE
Salaries and benefits................................... 25,000 25,031
Interest................................................ -- 18,000
Amortization............................................ 22,557 20,585
Legal and professional.................................. 35,758 109,324
Other expense........................................... 26,148 16,095
---------- ----------
Total expense.......................................... 109,463 189,035
---------- ----------
Income before income tax benefits and equity in
undistributed income of subsidiaries.................. 675,082 220,659
Income tax benefits...................................... 24,792 58,985
---------- ----------
Income before equity in undistributed income of
subsidiaries and minority interest in net income of
subsidiary............................................. 699,874 279,644
Equity in undistributed income of subsidiaries........... 1,163,226 1,051,601
---------- ----------
Income before minority interest in net income of
subsidiary............................................. 1,863,100 1,331,245
Minority interest in net income of subsidiary............ 12,709 --
---------- ----------
Net income.............................................. $1,850,391 $1,331,245
========== ==========
</TABLE>
F-24
<PAGE>
FIRST ALLIANCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income before minority interest in net income of
subsidiary......................................... $ 1,863,100 $ 1,331,245
----------- -----------
Adjustments to reconcile net income before minority
interest in net income of subsidiary to net cash
provided by operating activities:
Amortization....................................... 22,557 20,585
Undistributed income of subsidiaries............... (1,163,226) (1,051,601)
Other prepaids, deferrals and accruals, net........ 82,153 (128,399)
----------- -----------
Total adjustments................................ (1,058,516) (1,159,415)
----------- -----------
Net cash provided by operating activities........ 804,584 171,830)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale........... (900,000) --
Investment in subsidiary............................ (28,000) --
----------- -----------
Net cash used in investing activities.............. (928,000) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from redemption of subsidiaries common
stock.............................................. -- 2,000,000
Repayment of debt................................... -- (1,500,000)
Dividends paid...................................... (3,093) (305,758)
----------- -----------
Net cash provided by (used in) financing
activities........................................ (3,093) 194,242
----------- -----------
Net increase (decrease) in cash...................... (126,509) 366,072
Cash at beginning of year............................ 447,373 81,301
----------- -----------
Cash at end of year.................................. $ 320,864 $ 447,373
=========== ===========
</TABLE>
F-25
<PAGE>
PREMIER BANCSHARES, INC. FINANCIAL STATEMENTS
F-26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Premier Bancshares, Inc. and Subsidiaries
Atlanta, Georgia
We have audited the accompanying consolidated balance sheet of the Premier
Bancshares, Inc. and subsidiaries as of March 31, 1996, and the related
statements of operations, stockholders' equity and cash flows for the year
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 audit. The financial statements of Premier Bancshares,
Inc. for the year ended March 31, 1995 were audited by other auditors whose
report, dated May 19, 1995, expressed an unqualified opinion on these
statements.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1996 financial statements referred to above present
fairly, in all material respects, the financial position of the Premier
Bancshares, Inc. and subsidiaries as of March 31, 1996, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
Mauldin & Jenkins, LLC
Atlanta, Georgia
June 12, 1996
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Premier Bancshares, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Premier Bancshares, Inc. at March
31, 1995 and the results of its operations and of its cash flows for the year
then ended in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
May, 19, 1995
Atlanta, Georgia
F-28
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks.............................. $ 4,346,193 $ 288,512
Interest-bearing deposits............................ 6,028,879 --
Securities available for sale........................ 500,933 --
Loans held for sale.................................. 32,889,895 3,589,326
Loans................................................ 46,886,564 3,440,128
Less allowance for loan losses....................... 335,770 --
----------- -----------
Loans, net....................................... 46,550,794 3,440,128
Premises and equipment............................... 2,149,033 400,974
Accrued interest receivable.......................... 770,731 --
Goodwill............................................. 2,376,026 --
Other assets......................................... 586,369 561,562
----------- -----------
$96,198,853 $ 8,280,502
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand......................... $ 9,305,662 $ --
Interest-bearing demand............................ 5,535,766 --
Savings............................................ 1,436,861 --
Time deposits...................................... 43,939,211 --
----------- -----------
Total deposits................................... 60,217,500 --
Federal Home Loan Bank advances...................... 3,625,000 --
Other short-term borrowings.......................... 20,279,820 4,039,277
Long-term debt....................................... 3,000,000 --
Accrued expenses and other liabilities............... 2,531,595 319,910
----------- -----------
Total liabilities................................ 89,653,915 4,359,187
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Convertible preferred stock, no par value;
2,000,000 shares authorized, 389,122 and 200,004
shares issued and outstanding, respectively....... 4,321,917 2,285,248
Common stock, no par value; 10,000,000 shares
authorized; 435,669 shares issued and
outstanding....................................... 3,414,549 3,414,549
Accumulated deficit................................ (1,192,147) (1,778,482)
Unrealized gains on securities available for sale,
net of taxes...................................... 619 --
----------- -----------
Total stockholders' equity....................... 6,544,938 3,921,315
----------- -----------
$96,198,853 $ 8,280,502
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-29
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans........................... $6,900,430 $ 932,908
Interest on interest-bearing deposits................ 412,940 1,491
Interest on securities............................... 66,743 --
---------- -----------
7,380,113 934,399
---------- -----------
INTEREST EXPENSE
Interest on deposits................................. 1,976,049 --
Interest on borrowings............................... 2,254,434 409,253
---------- -----------
4,230,483 409,253
---------- -----------
Net interest income................................ 3,149,630 525,146
PROVISION FOR LOAN LOSSES.............................. 85,227 --
---------- -----------
Net interest income after provision for loan
losses............................................ 3,064,403 525,146
---------- -----------
OTHER OPERATING INCOME
Mortgage loan fees................................... 2,781,841 864,591
Gain on sale of mortgage loans held for sale......... 3,219,485 54,728
Service charges on deposit accounts.................. 161,199 --
Gain on sale of securities available for sale........ 10,377 --
Other income......................................... 89,461 68,765
---------- -----------
6,262,363 988,084
---------- -----------
OTHER OPERATING EXPENSES
Salaries and employee benefits....................... 5,772,062 2,044,312
Occupancy and equipment expenses..................... 873,065 276,643
Professional fees.................................... 313,988 90,845
Marketing............................................ 90,391 122,990
Goodwill amortization................................ 159,972 --
Other expenses....................................... 989,317 220,733
---------- -----------
8,198,795 2,755,523
---------- -----------
Income (loss) before income taxes.................. 1,127,971 (1,242,293)
PROVISION FOR INCOME TAXES............................. 263,483 --
---------- -----------
Net income (loss).................................... $ 864,488 $(1,242,293)
========== ===========
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Primary.............................................. $ 1.35 $ (2.85)
========== ===========
Fully diluted........................................ $ 1.05 $ --
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-30
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
CONVERTIBLE UNREALIZED
COMMON STOCK PREFERRED STOCK GAINS ON
------------------ ------------------ SECURITIES
NUMBER NUMBER AVAILABLE TOTAL
OF COMMON OF PREFERRED ACCUMULATED FOR SALE, STOCKHOLDERS'
SHARES STOCK SHARES STOCK DEFICIT NET OF TAXES EQUITY
------- ---------- ------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31,
1994................... 435,669 $3,414,549 -- $ -- $ (536,189) $-- $2,878,360
Proceeds from preferred
stock sold............ -- -- 200,004 2,300,036 -- -- 2,300,036
Costs associated with
preferred stock sold.. -- -- -- (14,788) -- -- (14,788)
Net loss............... -- -- -- -- (1,242,293) -- (1,242,293)
------- ---------- ------- ---------- ----------- ---- ----------
BALANCE, MARCH 31,
1995................... 435,669 3,414,549 200,004 2,285,248 (1,778,482) -- 3,921,315
Proceeds from preferred
stock sold............ -- -- 189,118 2,174,857 -- -- 2,174,857
Costs associated with
preferred stock sold.. -- -- -- (138,188) -- -- (138,188)
Dividends paid to
preferred
stockholders.......... -- -- -- -- (278,153) -- (278,153)
Net income............. -- -- -- -- 864,488 -- 864,488
Net change in
unrealized gain on
securities available
for sale.............. -- -- -- -- -- 619 619
------- ---------- ------- ---------- ----------- ---- ----------
BALANCE, MARCH 31,
1996................... 435,669 $3,414,549 389,122 $4,321,917 $(1,192,147) $619 $6,544,938
======= ========== ======= ========== =========== ==== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-31
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................. $ 864,488 $(1,242,293)
------------- -----------
Adjustments to reconcile net income (loss) to net
cash
used in operating activities:
Goodwill amortization............................ 159,972 --
Depreciation and amortization.................... 250,526 76,127
Provision for loan losses........................ 85,227 --
Gains on sale of mortgage loans held for sale.... (3,219,485) (54,728)
Gains on sale of securities available for sale... (10,377) --
Origination of loans held for sale............... (287,703,669) (64,207,565)
Proceeds from sales of loans held for sale....... 269,451,718 64,052,317
Other prepaids, deferrals and accruals, net...... 1,796,286 (204,321)
------------- -----------
Total adjustments.............................. (19,189,802) (338,170)
------------- -----------
Net cash used in operating activities.......... (18,325,314) (1,580,463)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest-bearing deposits......... (6,028,879) --
Proceeds from maturities of securities available
for sale......................................... 1,073,989 --
Net increase in loans............................. (7,372,530) (1,624,785)
Investment in subsidiary.......................... (5,894,871) --
Cash acquired in acquisition of subsidiary........ 617,746 --
Purchase of premises and equipment................ (638,006) (140,217)
------------- -----------
Net cash used in investing activities.......... (18,242,551) (1,765,002)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.......................... 29,186,477 --
Proceeds from long-term debt...................... 3,000,000 --
Net decrease in Federal Home Loan Bank advances... (9,559,990) --
Net increase in short-term borrowings............. 16,240,543 649,931
Issuance of preferred stock, net of offering costs
of $138,188 in 1996 and $14,788 in 1995.......... 2,036,669 2,285,248
Dividends paid on preferred stock................. (278,153) --
------------- -----------
Net cash provided by financing activities...... 40,625,546 2,935,179
------------- -----------
Net increase (decrease) in cash and due from
banks............................................. 4,057,681 (410,286)
Cash and due from banks, beginning of year......... 288,512 698,798
------------- -----------
Cash and due from banks, end of year............... $ 4,346,193 $ 288,512
============= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-32
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest.................. $ 3,913,984 $32,839
BUSINESS COMBINATION
Net cash acquired....................................... $ 617,746
============
Securities available for sale........................... $ 1,563,926
Loans held for sale..................................... 7,829,133
Loans................................................... 35,658,085
Premises and equipment.................................. 1,360,579
Other assets............................................ 1,214,120
Goodwill................................................ 2,535,998
Deposits................................................ (31,031,023)
Advances from Federal Home Loan Bank.................... (13,184,990)
Other liabilities....................................... (668,703)
------------
Net assets acquired, net of cash and due from banks of
$617,746............................................... $ 5,277,125
============
NONCASH TRANSACTIONS
Unrealized gains on securities available for sale....... $ (619) $ --
============ =======
Principal balances on loans transferred to other real
estate................................................. $ 165,278 $ --
============ =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-33
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
Premier Bancshares, Inc. (the "Company") is a thrift holding company whose
business is presently conducted by its wholly-owned subsidiaries, Premier Bank
(formerly Allatoona Federal Savings Bank), a savings bank, located in Acworth,
Georgia with a branch location in Dunwoody, Georgia and Premier Lending
Corporation, Inc. located in Atlanta, Georgia with eight loan production
offices located in metropolitan Atlanta. Premier Bank (the "Bank") was
acquired by the Company during the year in a business combination accounted
for as a purchase. The Bank provides a full range of banking services to
individual and corporate customers in its primary market area of Cobb County,
Georgia and surrounding counties. The Bank is subject to competition from
other financial institutions and the regulations of certain Federal agencies.
The Bank is periodically examined by certain regulatory authorities. Premier
Lending Corporation, Inc. originates, processes, funds, and sells residential
mortgage loans, construction loans, and commercial finance loans primarily in
the metropolitan Atlanta area. The majority of the mortgage loans are sold to
independent third party investors with servicing released and a significant
portion of the construction and commercial finance loans are participated to
other financial institutions.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the financial
services industry. The consolidated financial statements include the accounts
of the Company and its subsidiaries. Significant intercompany transactions and
accounts are eliminated in consolidation. In preparing the consolidated
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 consolidated balance sheet and operations for the period. Actual results
could differ from those estimates.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan losses.
The principles which significantly affect the determination of financial
position, results of operations, and cash flows are summarized below.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in process of
clearing). Cash flows from interest-bearing deposits, loans held for
investment originated by the Company, deposits, Federal Home Loan Bank
advances, and short-term borrowings are reported net.
The Company maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Company has not experienced any losses in such
accounts.
SECURITIES AVAILABLE FOR SALE
Securities classified as available for sale are those debt securities that
the Company intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security classified as
available for sale would be based on various factors, including significant
movements in interest rates, changes in the maturity mix of the Company's
assets and liabilities, liquidity needs, regulatory capital considerations,
and other similar factors. Securities available for sale are carried at fair
value. Unrealized gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized gains
or losses, determined on the basis of the cost of specific securities sold,
are included in earnings.
F-34
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LOANS AND LOANS HELD FOR SALE
Loans are stated at their unpaid principal balances, less net deferred loan
fees and costs and the allowance for loan losses. Interest income on loans is
credited to income based on the principal amount outstanding at the respective
rate of interest.
Loans held for sale are stated at the lower of aggregate cost or market
value. The determination of market value includes consideration of outstanding
commitments from investors, related origination fees and costs, and commitment
fees paid. Gains and losses are recognized at settlement dates and are
determined by the difference between the selling price and the carrying value
of the loans sold. The Company sells all loans on a servicing released basis.
The Company's practice is to originate loans subject to existing purchase
commitments from third party investors.
Accrual of interest income is discontinued on loans when, in the opinion of
management, collection of such interest income becomes doubtful. When a loan
is placed on nonaccrual status, all interest previously accrued but not
collected is reversed against current interest income. Accrual of interest on
such loans is resumed when, in management's judgment, the collection of
interest and principal becomes probable.
Nonrefundable loan fees and certain direct loan origination costs are
deferred and amortized over the life of the loan and the loan commitment
period as a yield adjustment using the interest method. Loan commitment fees
are generally amortized into income on a straight-line basis over the
commitment period.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans that may become uncollectible,
based on evaluation of the collectibility of loans and prior loss experience.
This evaluation also takes into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans, and current economic conditions that may affect the
borrower's ability to pay. While management uses the best information
available to make its evaluation, future adjustments to the allowance may be
necessary if there are significant changes in economic conditions. 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.
Losses on impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. A loan is impaired when it is probable the creditor
will be unable to collect all contractual principal and interest payments due
in accordance with the terms of the original loan agreement. Accrual of
interest on an impaired loan is discontinued when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Generally, collections on impaired loans are credited to the loan receivable
balance, and no interest income is recognized on those loans until the
principal balance has been collected.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.......................................... 39
Furniture and equipment............................................. 2-15
Leasehold improvements.............................................. 5-15
</TABLE>
F-35
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents real estate acquired through
foreclosure or other proceedings. OREO is held for sale and is recorded at the
lower of the recorded amount of the loan or fair value of the real estate less
estimated costs of disposal. Any write-down to fair value at the time of
transfer to OREO is charged to the allowance for loan losses. OREO is
evaluated regularly to insure the carrying amount is supported by its current
fair value and any valuation allowances to reduce the carrying amount to fair
value less estimated costs to dispose are recorded as necessary. Subsequent
decreases and increases in fair value, up to the value established at
foreclosure, are recognized as charges or credits to noninterest expense. OREO
is reported net of valuation allowances in the Company's financial statements.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax return. The
Company and subsidiaries provide for income taxes based on their contribution
to income taxes (benefits) of the consolidated group.
Deferred taxes are provided on the liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effect of changes in
tax laws on the date of enactment.
EARNINGS (LOSS) PER SHARE
Earnings (loss) for primary and fully diluted earnings (loss) per share is
adjusted for preferred stock dividends. Primary earnings (loss) per share data
is computed based on the weighted average number of common shares outstanding
and common stock equivalents arising from the assumed exercise of outstanding
stock options. Fully diluted earnings (loss) per share data is computed by
using such average common shares and equivalents increased by the assumed
conversion into common stock of convertible preferred stock. The convertible
preferred stock was excluded from the loss per share calculation in 1995
because its impact on the calculation was anti-dilutive.
Weighted average numbers of common and common equivalent shares applied in
calculating earnings (loss) per share are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Primary................................................... 435,669 435,669
Fully diluted............................................. 824,791 435,669
</TABLE>
CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board has issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of ", No. 122, "Accounting for Mortgage Servicing Rights", and
No. 123, "Accounting for Stock-Based Compensation", all of which are effective
for financial statements for years beginning after December 31, 1995 and for
transactions after December 31, 1995.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles, including goodwill, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In the event that the sum of the expected future cash flows is
less than the carrying
F-36
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
amount of an impaired long-lived asset, an impairment loss should be
recognized. The adoption of this Statement is not expected to have a material
effect on the earnings or financial condition of the Company.
SFAS No. 122 requires mortgage banking enterprises to recognize as a
separate asset the rights retained to service mortgage loans for third
parties. These assets are to be based on the fair value of the mortgage
servicing rights and mortgage loans, if practicable to estimate. Otherwise,
the entire cost of purchasing or originating these loans should be allocated
to mortgage loans. The adoption of this Statement is not expected to have a
material effect on the earnings or financial condition of the Company.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. The statement defines a fair value
based method of accounting for employee compensation plans and encourages the
adoption of all plans. However, the statement allows previous methods of
accounting for compensation plans to be utilized with additional disclosures
required. The adoption of this Statement is not expected to have a material
effect on the earnings or financial condition of the Company.
NOTE 2. SECURITIES AVAILABLE FOR SALE
The amortized cost and approximate fair value of securities available for
sale were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Securities Available for Sale
March 31, 1996:
U.S. Government and agency
securities.................. $500,000 $933 $-- $500,933
======== ==== ==== ========
</TABLE>
There were no sales of securities available for sale for the year ended
March 31, 1995. Gross realized gains (losses) on sales of securities available
for sale for the year ended March 31, 1996 were as follows:
<TABLE>
<S> <C>
Gross realized gains............................................... $ 11,020
Gross realized losses.............................................. (643)
--------
$ 10,377
========
</TABLE>
The amortized cost and fair value of securities available for sale as of
March 31, 1996 by contractual maturity are shown below.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due from one year to five years......................... $500,000 $500,933
======== ========
</TABLE>
Securities available for sale with a carrying value of $500,933 at March 31,
1996 were pledged to secure public deposits and for other purposes.
F-37
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amount of loans by type at March 31 were:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Residential real estate loans.................. $ 8,197,990 $ --
Real estate construction loans................. 75,615,056 15,365,268
Nonresidential real estate loans............... 3,364,909 --
Second mortgage and home equity loans.......... 2,042,377 --
Consumer loans................................. 2,458,982 --
Commercial loans............................... 10,867,830 1,500,000
------------ ------------
102,547,144 16,865,268
Undisbursed portion of construction and
commercial loans in process................... (55,618,637) (13,551,945)
Deferred fees and costs, net................... (41,943) 126,805
Allowance for loan losses...................... (335,770) --
------------ ------------
Loans, net................................. $ 46,550,794 $ 3,440,128
============ ============
</TABLE>
At March 31, 1996, management had identified approximately $590,000 of loans
as impaired, of which a specific allowance was established in the amount of
$15,000 on loans totaling $59,000. There was no specific allowance on the
remaining $531,000. The reduction in interest income related to these loans
was immaterial. There were no nonaccrual loans at March 31, 1995.
At March 31, 1996, executive officers and directors, and companies in which
they have a 10 percent or more beneficial ownership, were indebted to the Bank
in the aggregate amount of $42,327. 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. Following is a
summary of transactions:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR......................................... $ --
Advances........................................................... 74,994
Repayments......................................................... (42,854)
Transactions due to change in executive officers................... 10,187
--------
BALANCE, END OF YEAR............................................... $ 42,327
========
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR......................................... $ --
Reserve of bank acquired........................................... 241,729
Provision charged to operations.................................... 85,227
Loans charged off.................................................. (3,155)
Recoveries......................................................... 11,969
--------
BALANCE, END OF YEAR............................................... $335,770
========
</TABLE>
F-38
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. MORTGAGE BANKING ACTIVITIES
The detail of mortgage banking non-interest income for the years ended March
31, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Net loan origination fees............................ $ 2,781,841 $ 864,591
Net servicing release premiums....................... 216,147 303,690
Net gains (losses) on sales of mortgage loans........ 3,118,237 (132,838)
Commitment and other fees paid....................... (114,899) (116,124)
----------- ---------
Total mortgage banking non-interest income....... $ 6,001,326 $ 919,319
=========== =========
</TABLE>
At March 31, 1996, loans held for sale were committed to various third party
investors except for approximately $1,280,000. These loans are sold on a
servicing release basis.
NOTE 5. PREMISES AND EQUIPMENT
The carrying amount of premises and equipment at March 31 was:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land.................................................. $ 435,000 $ --
Buildings............................................. 671,094 --
Leasehold improvements................................ 154,047 --
Equipment............................................. 1,761,054 516,951
---------- ---------
3,021,195 516,951
Accumulated depreciation.............................. (872,162) (115,977)
---------- ---------
$2,149,033 $ 400,974
========== =========
</TABLE>
Depreciation expense for the years ended March 31, 1996 and 1995 was
$242,432 and $76,127, respectively.
NOTE 6. DEPOSIT ACCOUNTS
Deposits by type and weighted average interest rates at March 31, 1996 were:
<TABLE>
<CAPTION>
AMOUNT PERCENT
----------- -------
<S> <C> <C>
DEMAND DEPOSITS:
Noninterest-bearing..................................... $ 9,305,662 -- %
Savings................................................. 1,436,861 2.84
NOW and money market accounts........................... 5,535,766 1.87
TIME DEPOSITS............................................ 43,939,211 5.68
-----------
$60,217,500
===========
</TABLE>
The amount of time deposits with a minimum denomination of $100,000 was
approximately $8,632,000 at March 31, 1996.
F-39
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1996, scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
Years ended March 31,
1997.......................................................... $33,912,000
1998.......................................................... 4,816,000
1999.......................................................... 2,199,000
2000 and thereafter........................................... 3,012,211
===========
$43,939,211
===========
Interest expense on deposits for the year ended March 31, 1996 is summarized
as follows:
Savings......................................................... $ 42,773
NOW and money market accounts................................... 126,031
Time deposits................................................... 1,807,245
-----------
$ 1,976,049
===========
NOTE 7. FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank advances at March 31, 1996 consisted of:
Advance from the Federal Home Loan Bank with interest at 6.99%,
due on September 15, 1997. Interest is payable monthly......... $ 1,000,000
Advance from the Federal Home Loan Bank with interest at 8.27%,
due on December 8, 1997. Interest is payable monthly........... 1,750,000
Advance from the Federal Home Loan Bank with interest at 8.41%,
due on December 8, 1999. Interest is payable monthly........... 875,000
-----------
$ 3,625,000
===========
</TABLE>
The advances from the Federal Home Loan Bank are collateralized by a specific
collateral pledge including qualifying first mortgages and the Bank's Federal
Home Loan Bank stock.
F-40
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. OTHER SHORT-TERM BORROWINGS
Other short-term borrowings at March 31, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Revolving line of credit of $2,000,000 with a non-
affiliated institution, bearing interest at prime
plus .75% (9.00% at March 31, 1996) due on
January 4, 1997. Line is cross-collateralized
with long-term debt to the Company, and
personally guaranteed by the Company's chief
executive officer................................ $ 1,850,120 $ --
Line of credit of $505,000 with a non-affiliated
institution, bearing interest at prime plus 1%
(9.25% at March 31, 1996) due on August 14, 1996.
Line is personally guaranteed by the Company's
chief executive officer.......................... 505,000 350,000
Revolving line of credit of $3,000,000 with a non-
affiliated institution, bearing interest at prime
plus 2% (10.25% at March 31, 1996) due on May 31,
1996. Line is secured by specific assigned
loans............................................ 1,212,090 --
Revolving warehouse line of credit of $40,000,000
with a non-affiliated institution, bearing
interest at 2.25% plus LIBOR, due November 30,
1996. Line is secured by mortgage loans
originated by Premier Lending Corporation and
guaranteed by the Company........................ 16,712,610 --
Revolving warehouse line of credit of $12,000,000
with a non-affiliated institution, bearing
interest at an annual rate varying from published
rates on high-graded unsecured commercial paper
plus 1.75% to plus 3%, due October 21, 1995. Line
is secured by mortgage loans held for sale and
personally guaranteed by the Company's chief
executive officer................................ -- 3,341,277
Revolving warehouse line of credit with a non-
affiliated institution, bearing interest at prime
plus 2%, due May 31, 1995. Line is secured by
commercial loans and personally guaranteed by the
Company's chief executive officer................ -- 348,000
----------- ----------
$20,279,820 $4,039,277
=========== ==========
</TABLE>
NOTE 9. LONG-TERM DEBT
Long-term debt at March 31, 1996 consisted of:
<TABLE>
<S> <C>
Note payable in the amount of $3,000,000, due in annual
installments of $300,000 with interest due quarterly at prime
plus 1% (9.25% at March 31, 1996) to October 28, 2006
collateralized by 320,000 shares of common stock of Premier
Bank and personally guaranteed by the Company's chief
executive officer............................................ $3,000,000
==========
</TABLE>
In connection with the long-term debt, the Company has agreed, among other
things, to: (1) maintain earnings of the Bank at a level equal to or above
.1875 percent of average assets per quarter; (2) maintain reserves for
possible loan losses at a level of not less than 1% of total gross loans,
excluding residential first mortgage loans on owner-occupied single family
dwelling, of the Bank; (3) maintain reserves for possible loan
F-41
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
losses of a level not less then .35% of total gross residential first mortgage
loans for owner-occupied single family dwellings of the Bank; (4) the Bank
shall maintain a return on equity of not less than 1.5%; (5) the Bank shall
maintain in aggregate a total risk based capital ratio of no less than 12.0%;
and (6) the Bank shall maintain past due loans more than 30 days past due at a
level not to exceed 1% of total loan volume.
The Company was in violation of certain of the above covenants as of March
31, 1996; however, these violations have been waived by the noteholder for the
period ended March 31, 1996.
Aggregate maturities required on long-term debt at March 31, 1996 were as
follows:
<TABLE>
<S> <C>
1997........................................................... $ 300,000
1998........................................................... 300,000
1999........................................................... 300,000
2000........................................................... 300,000
Thereafter..................................................... 1,800,000
----------
$3,000,000
==========
</TABLE>
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company enters into firm commitments to sell mortgage loans which it has
originated at agreed upon prices. The prices for the loans are set based on
market rates at the time that the commitment is entered into. The Company
generally has ten days after a mortgage loan closes in which to provide the
investor with the loan documentation, at which time the investor will fund the
loan. The investor bears interest rate risk on the loan from the time of the
commitment. The Company's risk is limited to specific recourse provisions
within the agreement with the investor and its ability to provide the required
loan documentation to the investor within the commitment period.
The Company sells mortgage loans to investors under various blanket
agreements. Under the agreements, investors generally have a limited right of
recourse to the Company for normal representations and warranties and, in some
cases, for delinquencies within the first three to six months which lead to
loan default and foreclosure. Management believes that the risk of loss to the
Company as a result of these provisions is insignificant.
The Company enters into residential construction and commercial loan
commitments in advance of closing to fund mortgage loans to its customers at
locked-in interest rates in the normal course of business. These instruments,
to the extent they are not covered by investor purchase commitments, involve
credit and interest rate risk in excess of the amount recognized in the
financial statements.
Additionally, the Company enters into residential construction and
commercial loan commitments with off-balance-sheet risk in the normal course
of business to meet the financing needs of its customers. These instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the financial statements.
In the normal course of business, the Bank 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.
F-42
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. The Company uses the same credit and collateral policies for
these off-balance-sheet financial instruments as it does for on-balance-sheet
financial instruments. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Unfunded mortgage loan commitments................. $33,046,361 $21,113,000
Residential construction and commercial loan
commitments....................................... 11,485,504 1,700,000
Standby letters of credit.......................... 81,909 --
----------- -----------
$44,613,774 $22,813,000
=========== ===========
</TABLE>
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, marketable
securities, accounts receivable, inventories, and personal property.
Standby letters of credit are conditional commitments issued by the Bank 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 Bank deems
necessary.
The Company does not anticipate any material losses as a result of the
commitments and contingent liabilities.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Company's
financial statements.
The Company leases ten office facilities and certain equipment under
noncancelable lease agreements.
The future minimum lease commitments at March 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDING MARCH 31,
----------------------
<S> <C>
1997.......................................................... $ 578,958
1998.......................................................... 591,507
1999.......................................................... 517,584
2000.......................................................... 293,559
2001.......................................................... 196,698
Thereafter.................................................... 22,610
----------
$2,200,916
==========
</TABLE>
Rental expense for the years ended March 31, 1996 and 1995 was $357,122 and
$142,549, respectively.
F-43
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. CONVERTIBLE PREFERRED STOCK
As of March 31, 1996, the Company had issued 389,122 shares of no-par
convertible preferred stock. The holders of the convertible preferred stock
are entitled to a non-cumulative, preferred dividend at an annual rate equal
to the one year U.S. Treasury Bill interest rate plus 2.5%. The holders of the
convertible preferred stock are also entitled to a liquidating preference
equal to the consideration paid to the Company in consideration for the
issuance of each share of convertible preferred stock plus any declared and
unpaid preferred dividends; the liquidation preference approximates the stated
value of the convertible preferred stock recorded in the accompanying balance
sheet. Each share of convertible preferred stock may be converted into one
share of common stock at the option of the holder. The Company may, at its
option, require the conversion of all convertible preferred shares into an
equal number of common shares upon the occurrence of either the closing of an
underwritten public offering of the Company's common stock pursuant to a
registration statement filed with the Securities and Exchange Commission, or
the approval by the holders of the Company's common stock of a merger or other
acquisition of the Company, or a change in control of the current management
of the Company. As of March 31, 1996, the Company had reserved 389,122 shares
of its authorized and unissued common stock for issuance upon conversion of
the convertible preferred stock.
NOTE 12. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) retirement plan covering all employees, subject to
certain minimum service requirements. The contributions to the plan are
determined by the Board of Directors. No contribution was paid by the Company
during fiscal years 1996 or 1995.
NOTE 13. STOCK OPTION PLANS
The Company has established employee and director stock option plans whereby
40,000 and 32,500 shares, respectively, of common stock have been reserved for
stock options.
The employees annually vest in their right to exercise one-third of the
granted options. The options expire ten years from the date of grant. Changes
in outstanding options were as follows:
<TABLE>
<CAPTION>
PRICE SHARES
------- ------
<S> <C> <C>
OUTSTANDING, MARCH 31, 1994.................................. $ 10.00 10,500
Options granted............................................ 10.00 1,000
------
OUTSTANDING, MARCH 31, 1995.................................. 11,500
Options granted............................................ 10.00 33,000
Options canceled........................................... (4,500)
------
OUTSTANDING, MARCH 31, 1996.................................. 40,000
======
</TABLE>
As of March 31, 1996, 4,331 shares granted to employees under the plan were
exercisable.
Each eligible director who attends at least 75% of the meetings of the
Company's Board and related committees shall receive an option to purchase 500
shares annually of common stock. The options expire ten years from the date of
grant. All options granted were exercisable at March 31, 1996. Changes in
outstanding options were as follows:
<TABLE>
<CAPTION>
PRICE SHARES
------ ------
<S> <C> <C>
OUTSTANDING, MARCH 31, 1994.................................... $10.00 15,000
Options granted.............................................. 6,000
------
OUTSTANDING, MARCH 31, 1995.................................... 21,000
Options granted.............................................. 10.00 3,000
------
OUTSTANDING, MARCH 31, 1996.................................... 24,000
======
</TABLE>
F-44
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14. SEGMENT REPORTING
The Company's operations include two primary business segments: banking and
mortgage banking. The Company, primarily through its subsidiary bank, offers
banking services including commercial and corporate banking. Mortgage banking
activities are provided primarily by Premier Lending Corporation and include
the origination of residential mortgage loans for sale to various investors
and origination of construction and commercial finance loans for participation
with other financial institutions. Prior to the acquisition of the Bank in
1995, the Company's operations consisted solely of mortgage banking.
<TABLE>
<CAPTION>
ORGANIZATIONAL TOTAL
REVENUES EARNINGS ASSETS
----------- -------------- -----------
<S> <C> <C> <C>
Banking............................... $ 5,175,619 $113,728 $72,399,082
Mortgage banking...................... 8,466,857 59,708 24,078,912
----------- -------- -----------
Total............................... $13,642,476 $173,436 $96,477,994
=========== ======== ===========
</TABLE>
NOTE 15. INCOME TAXES
The total income taxes in the consolidated statements of operations are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Current................................................ $ -- $(499,312)
Change in valuation allowance.......................... (264,496) 414,783
Deferred............................................... 527,979 84,529
--------- ---------
$ 263,483 $ --
========= =========
</TABLE>
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>
MARCH 31,
-------------------------------------
1996 1995
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Tax provision at statutory rate....... $ 383,510 34% $(422,380) (34)%
Increase (decrease) resulting from:
Goodwill amortization............... 54,390 5 -- --
Disallowed expenses................. 36,958 3 7,597 1
Change in valuation allowance....... (264,496) (24) 414,783 33
State income taxes.................. 53,121 5 -- --
--------- --- --------- ---
Provision for income taxes............ $ 263,483 23% $ -- -- %
========= === ========= ===
</TABLE>
F-45
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net deferred income tax liabilities of $30,065 at March 31, 1996 are
included in other liabilities. The components of deferred income taxes at
March 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1995
--------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan loss reserves.................................. $ 9,005 $ --
Purchase price allocation, loans.................... 15,598 --
Other............................................... 11,676 6,887
Tax credit carryforwards............................ 106,000 --
Net operating loss carryforward..................... 749,534 733,209
Valuation allowance................................. (476,686) (697,639)
--------- --------
415,127 42,457
--------- --------
DEFERRED TAX LIABILITIES:
Depreciation........................................ 55,461 18,620
Accrual to cash method adjustment for income tax
reporting purposes................................. 107,944 --
Mark to market...................................... 12,455 --
Purchase price allocation, fixed assets............. 46,178 --
Deferred loan cost, net of fee income............... 217,132 23,837
Other............................................... 6,022 --
--------- --------
445,192 42,457
--------- --------
NET DEFERRED TAX LIABILITIES.......................... $ (30,065) $ --
========= ========
</TABLE>
As of March 31, 1996, the Company has net operating loss carryforwards of
approximately $1,986,000. These loss carryforwards may be utilized to offset
future taxable income. The amount of loss carryforwards which could be used in
future years would be limited if there were a change in control of the
Company. The net operating loss carryforwards expire in fiscal years 2009
through 2011. A valuation allowance has been provided against these loss
carryforwards due to the uncertainty of their future use.
F-46
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. BANK CAPITAL AND REGULATORY CAPITAL
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") prescribes certain capital requirements. The Bank must have core
capital equal to 3% of adjusted total assets and tangible capital equal to
1.5% of adjusted total assets. FIRREA also establishes risk-based capital
standards of 8% of risk-weighted assets.
The following table presents the Bank's capital position relative to its
minimum capital requirements under FIRREA:
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------
PERCENT
AMOUNT OF ASSETS
---------- ---------
<S> <C> <C>
Core capital............................................ $4,761,000 6.71%
Minimum core capital requirement........................ 2,128,000 3.00
---------- -----
Excess.................................................. $2,633,000 3.71%
========== =====
Tangible capital........................................ $4,761,000 6.71%
Minimum tangible capital requirement.................... 1,064,000 1.50
---------- -----
Excess.................................................. $3,697,000 5.21%
========== =====
Risk-based capital...................................... $5,082,000 10.01%
Minimum risk-based capital requirement.................. 4,060,000 8.00
---------- -----
Excess.................................................. $1,022,000 2.01%
========== =====
</TABLE>
NOTE 17. BUSINESS COMBINATION
On May 1, 1995, the Company acquired all of the stock of Allatoona Federal
Savings Bank for $5,496,458, including expenses related to the merger totaling
$339,973. The purchase price was raised through the sale of preferred stock
described in Note 11 and a loan obtained from a third party financial
institution in the amount of $3 million as described in Note 9. The excess of
the total acquisition cost over the fair value of the net assets acquired of
$2,779,772 is being amortized over a period of fifteen years. The acquisition
has been accounted for as a purchase and the results of operations of
Allatoona Federal Savings Bank since the date of acquisition are included in
the consolidated financial statements.
Unaudited pro forma consolidated results of operations for the year ended
March 31, 1995 as though Allatoona Federal Savings Bank had been acquired as
of April 1, 1994 are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------
<S> <C>
Interest income............................................... $ 3,220,780
Interest expense.............................................. 2,079,705
Provision for loan losses..................................... 9,714
Other income.................................................. 2,298,832
Other expenses................................................ 5,048,682
Income tax benefit............................................ 46,727
-----------
Net loss.................................................... $(1,571,762)
===========
Net loss per common and common equivalent share............... $ (3.61)
===========
</TABLE>
Included in the pro forma consolidated results of operations are adjustments
necessary to reflect the business combination of the Company and Allatoona
accounted for as a purchase transaction. These adjustments consisted of
interest expense of $295,375 related to the $3 million loan obtained to
partially fund the acquisition and amortization of goodwill recorded in the
acquisition of $199,374.
F-47
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The consolidated statement of operations for the year ended March 31, 1996
in this financial report includes the combined operations of the Company and
Allatoona since acquisition. Allatoona's results of operations included are
for the period from April 28, 1995 through March 31, 1996. The net loss for
the month ended April 28, 1995 was $123,395, as summarized below:
<TABLE>
<S> <C>
Interest income................................................... $ 330,556
Interest expense.................................................. 193,925
---------
Net interest income............................................. 136,631
Plus non-interest income.......................................... 215,090
Less non-interest expense......................................... 475,116
---------
Net loss........................................................ $(123,395)
=========
</TABLE>
Upon the acquisition of Allatoona, the mortgage operations of Allatoona were
combined with the mortgage operations of Premier Lending Corporation. The
commercial banking operations continued to operate as Premier Bank.
On January 30, 1996, the Company entered into an Agreement and Plan of
Reorganization with First Alliance Bancorp, Inc. ("Alliance") of Marietta,
Georgia. Under this agreement, the Company will merge with and into Alliance,
and Premier Bank and Premier Lending Corporation will become wholly owned
subsidiaries of Alliance. Upon consummation of the merger, each share of the
Company's common stock and convertible preferred stock issued and outstanding
will be converted into and exchanged for the right to receive one share of
Alliance's common stock. Consummation of the merger is subject to certain
conditions, including approval of the agreement by the Company's stockholders
and approval of the merger by various regulatory agencies.
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS NO. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. Fair value estimates in accordance with SFAS No. 107 are
determined as of a specific date (March 31, 1996) utilizing various
assumptions and estimates. In cases where quoted market prices are not
available, fair values are based on estimates using present value valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate 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. SFAS No. 107 excludes certain financial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
Many of the Company's assets and liabilities are short-term financial
instruments whose carrying amounts reported in the consolidated balance sheet
approximate fair value. These items include cash and due from banks, interest-
bearing deposits, interest receivable and payable and short-term borrowings.
The following methods and assumptions were used in estimating the fair value
of the Company's remaining financial instruments:
INTEREST-BEARING DEPOSITS:
Fair values of interest-bearing deposits approximate their carrying amounts.
SECURITIES AVAILABLE FOR SALE:
Fair values of securities available for sale are based on quoted market
prices.
LOANS HELD FOR SALE:
Fair values of loans held for sale are stated at market prices.
F-48
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LOANS:
For loans with short-term or variable rate characteristics, the carrying
value is a reasonable estimate of fair value. The fair value of all other
loans is estimated by discounting their future cash flows using interest rates
currently being offered for loans with similar terms.
DEPOSITS:
The fair values for demand deposit, savings, NOW, and money market accounts
approximates the amounts payable on demand. Fair values for time deposits are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on time deposits. Fair values do not include core
deposit intangibles.
FEDERAL HOME LOAN BANK ADVANCES:
Fair values of fixed rate Federal Home Loan Bank Advances are estimated
using a discounted cash flow calculation that applies interest rates currently
available to the Company.
SHORT-TERM BORROWINGS
The carrying value of short-term borrowings approximates the fair value due
to the short-term nature of the financial instrument.
LONG-TERM DEBT
The fair value of long-term debt is estimated based on the present value of
contractual cash flows discounted by rates currently available to the Company.
OFF-BALANCE-SHEET INSTRUMENTS:
Fair values of the Company's off-balance-sheet financial instruments
(commitments to extend credit and standby letters of credit) 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 carrying value and estimated fair value of the above financial
instruments at March 31, 1996 are as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
----------- -----------
<S> <C> <C>
FINANCIAL ASSETS:
Interest-bearing deposits........................ $ 6,028,879 $ 6,028,879
Securities available for sale.................... 500,933 500,933
Loans held for sale.............................. 32,889,895 32,992,022
Loans............................................ 46,886,564 47,523,409
Less allowance for loan losses................... (335,770) --
----------- -----------
$85,970,501 $87,045,243
=========== ===========
FINANCIAL LIABILITIES
Demand and savings deposits...................... $16,278,289 $16,278,289
Time deposits.................................... 43,939,211 44,257,373
Federal Home Loan Bank advances.................. 3,625,000 3,749,313
Other short-term borrowings...................... 20,279,820 20,279,820
Long-term debt................................... 3,000,000 3,000,000
----------- -----------
$87,122,320 $87,564,795
=========== ===========
</TABLE>
F-49
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19. CONDENSED FINANCIAL INFORMATION ON PREMIER BANCSHARES, INC. (PARENT
COMPANY ONLY)
Condensed financial information for Premier Bancshares, Inc. (parent company
only) is presented below. For the year ended March 31, 1995, the Company
operated as one entity.
CONDENSED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<S> <C>
Assets
Cash........................................................... $ 2,235
Investment in subsidiaries..................................... 8,666,981
Other assets................................................... 952,185
----------
Total assets................................................. $9,621,401
==========
Long-term debt................................................... $3,000,000
Other liabilities................................................ 76,463
Stockholders' equity............................................. 6,544,938
----------
Total liabilities and stockholders' equity................... $9,621,401
==========
</TABLE>
CONDENSED STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1996
<TABLE>
<S> <C>
Mortgage income................................................. $ 160,484
Income, dividends from subsidiaries............................. 50,000
Interest income................................................. 186,673
---------
397,157
---------
Expense
Interest expense.............................................. 312,228
Salaries and employee benefits................................ 385,857
Other expense................................................. 164,161
---------
862,246
---------
Loss before income tax benefits and equity in undistributed
earnings of subsidiaries................................... (465,089)
Income tax benefits............................................. 374,667
---------
Loss before equity in undistributed earnings of
subsidiaries............................................... (90,422)
Equity in undistributed earnings of subsidiaries................ 954,910
---------
Net income.................................................. $ 864,488
=========
</TABLE>
F-50
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 864,488
-----------
Adjustments to reconcile net income to net cash used in
operating activities:
Undistributed earnings of subsidiaries.................... (954,910)
Depreciation.............................................. 7,030
Net increase in loans held for sale....................... (1,992,229)
Net increase in other assets and liabilities.............. 1,099,816
-----------
Total adjustments....................................... (1,840,293)
-----------
Net cash used in operating activities................... (975,805)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans....................................... 336,852
Investment in subsidiaries.................................. (6,711,452)
Cash paid to subsidiary..................................... (1,372,419)
-----------
Net cash used in investing activities................... (7,747,019)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.............................................. (278,153)
Issuance of preferred stock................................. 2,036,669
Proceeds from long-term debt................................ 3,000,000
Net increase in short-term borrowings....................... 3,678,031
-----------
Net cash provided by financing activities............... 8,436,547
-----------
Net decrease in cash.......................................... (286,277)
Cash at beginning of year..................................... 288,512
-----------
Cash at end of year........................................... $ 2,235
===========
</TABLE>
F-51
<PAGE>
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED
A-1
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST ALLIANCE BANCORP, INC.
AND
PREMIER BANCSHARES, INC.
Dated as of January 30, 1996
A-2
<PAGE>
TABLE OF CONTENTS
Page
Preamble................................................................. A-8
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER.............................. A-8
1.1 Merger........................................................ A-8
1.2 Time and Place of Closing..................................... A-9
1.3 Effective Time................................................ A-9
ARTICLE 2 TERMS OF MERGER............................................... A-9
2.1 Articles of Incorporation..................................... A-9
2.2 Bylaws........................................................ A-9
2.3 Directors and Officers........................................ A-9
2.4 Name.......................................................... A-10
ARTICLE 3 MANNER OF CONVERTING SHARES................................... A-10
3.1 Conversion of Shares.......................................... A-10
3.2 Anti-Dilution Provisions...................................... A-10
3.3 Shares Held by Premier or First Alliance...................... A-10
3.4 Conversion of Stock Options; Restricted Stock................. A-10
3.5 Dissenting Shareholders....................................... A-11
ARTICLE 4 EXCHANGE OF SHARES............................................ A-11
4.1 Exchange Procedures........................................... A-11
4.2 Rights of Former Premier Shareholders......................... A-12
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF
PREMIER.................................................. A-12
5.1 Organization, Standing, and Power............................. A-12
5.2 Authority; No Breach By Agreement............................. A-13
5.3 Capital Stock................................................. A-14
5.4 Premier Subsidiaries.......................................... A-14
5.5 Financial Statements.......................................... A-15
5.6 Absence of Undisclosed Liabilities............................ A-15
5.7 Absence of Certain Changes or Events.......................... A-15
5.8 Tax Matters................................................... A-15
5.9 Allowance for Possible Loan Losses............................ A-16
5.10 Assets........................................................ A-16
5.11 Environmental Matters......................................... A-17
5.12 Compliance with Laws.......................................... A-17
5.13 Labor Relations............................................... A-18
5.14 Employee Benefit Plans........................................ A-18
5.15 Material Contracts............................................ A-20
A-3
<PAGE>
5.16 Legal Proceedings............................................. A-20
5.17 Reports....................................................... A-21
5.18 Statements True and Correct................................... A-21
5.19 Accounting, Tax and Regulatory Matters........................ A-21
5.20 Charter Provisions............................................ A-22
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF FIRST
ALLIANCE................................................. A-22
6.1 Organization, Standing, and Power............................. A-22
6.2 Authority; No Breach By Agreement............................. A-22
6.3 Capital Stock................................................. A-23
6.4 First Alliance Subsidiaries................................... A-23
6.5 Financial Statements.......................................... A-24
6.6 Absence of Undisclosed Liabilities............................ A-24
6.7 Absence of Certain Changes or Events.......................... A-25
6.8 Tax Matters................................................... A-25
6.9 Allowance for Possible Loan Losses............................ A-26
6.10 Assets........................................................ A-26
6.11 Environmental Matters......................................... A-27
6.12 Compliance with Laws.......................................... A-27
6.13 Labor Relations............................................... A-28
6.14 Employee Benefit Plans........................................ A-28
6.15 Material Contracts............................................ A-30
6.16 Legal Proceedings............................................. A-30
6.17 Reports....................................................... A-30
6.18 Statements True and Correct................................... A-31
6.19 Accounting, Tax and Regulatory Matters........................ A-31
6.20 Charter Provisions............................................ A-31
ARTICLE 7 CONDUCT OF BUSINESS PENDING
CONSUMMATION.............................................. A-32
7.1 Affirmative Covenants of Premier.............................. A-32
7.2 Negative Covenants of Premier................................. A-32
7.3 Affirmative Covenants of First Alliance....................... A-34
7.4 Negative Covenants of First Alliance.......................... A-34
7.5 Adverse Changes in Condition.................................. A-36
7.6 Reports....................................................... A-36
ARTICLE 8 ADDITIONAL AGREEMENTS......................................... A-37
8.1 Registration Statement; Proxy Statement;
Shareholder Approval.......................................... A-37
8.2 Exchange Listing.............................................. A-37
8.3 Applications.................................................. A-37
A-4
<PAGE>
8.4 Filings with State Offices.................................... A-38
8.5 Agreement as to Efforts to Consummate......................... A-38
8.6 Investigation and Confidentiality............................. A-38
8.7 Press Releases................................................ A-39
8.8 Acquisition Proposals......................................... A-39
8.9 Accounting and Tax Treatment.................................. A-39
8.10 Agreement of Affiliates....................................... A-39
8.11 Authorization of Common Stock and Preferred Stock............. A-40
8.12 Notice to Premier Preferred Stockholders...................... A-40
8.13 Indemnification............................................... A-40
8.14 Employee Benefits and Contracts............................... A-41
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE............................................... A-41
9.1 Conditions to Obligations of Each Party....................... A-41
9.2 Conditions to Obligations of First
Alliance...................................................... A-43
9.3 Conditions to Obligations of Premier.......................... A-44
ARTICLE 10 TERMINATION................................................... A-45
10.1 Termination................................................... A-45
10.2 Effect of Termination......................................... A-47
10.3 Non-Survival of Representations and Covenants................. A-47
ARTICLE 11 MISCELLANEOUS................................................. A-47
11.1 Definitions................................................... A-47
11.2 Expenses...................................................... A-55
11.3 Brokers and Finders........................................... A-55
11.4 Entire Agreement.............................................. A-55
11.5 Amendments.................................................... A-56
11.6 Waivers....................................................... A-56
11.7 Assignment.................................................... A-56
11.8 Notices....................................................... A-56
11.9 Governing Law................................................. A-57
11.10 Counterparts.................................................. A-57
11.11 Captions...................................................... A-57
11.12 Enforcement of Agreement...................................... A-58
11.13 Severability.................................................. A-58
A-5
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit Number Description
- -------------- -----------
1. Form of Agreement of Affiliates of Premier. ((S) 8.10).
2. Form of Notice to Premier Preferred Stockholders ((S) 8.12).
3. Matters as to which Counsel for Premier will opine. ((S)
9.2(d)).
4. Form of Claims/Indemnification Letter ((S) 9.2(f)).
5. Matters as to which Counsel for First Alliance will opine.
((S) 9.3(d)).
A-6
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of January 30, 1996 by and between FIRST ALLIANCE BANCORP, INC.
("First Alliance"), a corporation organized and existing under the laws of the
State of Georgia, with its principal office located in Marietta, Georgia, and
PREMIER BANCSHARES, INC. ("Premier"), a corporation organized and existing under
the laws of the State of Georgia, with its principal office located in Atlanta,
Georgia.
Preamble
--------
The Boards of Directors of Premier and First Alliance are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective shareholders. This Agreement provides for the merger of
Premier with and into First Alliance, with First Alliance technically being the
surviving corporation of the merger. At the effective time of such merger, the
surviving corporation will change its name to "Premier Bancshares, Inc.", and
the outstanding shares of capital stock of Premier will be converted into the
right to receive shares of capital stock of the surviving corporation. As a
result, shareholders of Premier will become shareholders of the surviving
corporation, and each of the subsidiaries of Premier will continue to conduct
its business and operations as a wholly-owned subsidiary of the surviving
corporation. The transactions described in this Agreement are subject to the
approvals of the Boards of Directors and the shareholders of both First Alliance
and Premier, the Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the merger (i) for federal income tax purposes shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code and (ii) for accounting purposes shall be accounted for as a
"pooling of interests."
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, Premier shall be merged with and into First Alliance in
accordance with the provisions of Section 14-2-1101 of the GBCC and with the
effect provided in Section 14-2-1106 of the GBCC (the "Merger"). First Alliance
shall be the Surviving Corporation resulting from the Merger. The
A-7
<PAGE>
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of Directors of Premier and
First Alliance.
1.2 Time and Place of Closing. The Closing will take place at 10:00 a.m.
-------------------------
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 10:00 a.m.), or at such other time as the
Parties, acting through their chief executive officers may mutually agree. The
place of Closing shall be at the offices of Powell, Goldstein, Frazer & Murphy,
Atlanta, Georgia, or such other place as may be mutually agreed upon by the
Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
--------------
this Agreement shall become effective on the date and at the time the Articles
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Georgia (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the chief
executive officer of each Party, the Parties shall use their reasonable efforts
to cause the Effective Time to occur on the last business day of the month in
which occurs the last to occur of (a) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, (b) the
date on which the shareholders of First Alliance approve this Agreement to the
extent such approval is required by applicable Law, and (c) the date on which
the shareholders of Premier approve this Agreement to the extent such approval
is required by applicable Law; or such later date as may be mutually agreed upon
in writing by the chief executive officer of each Party.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 Articles of Incorporation. The Articles of Incorporation of First
-------------------------
Alliance in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until otherwise amended or
repealed.
2.2 Bylaws. The Bylaws of First Alliance in effect immediately prior to
------
the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Directors and Officers. The directors of the Surviving Corporation
----------------------
from and after the Effective Time shall consist of five current directors of
First Alliance and three current directors of Premier who shall serve in
accordance with the Bylaws of the Surviving Corporation. The officers of the
Surviving Corporation shall be as follows: Darrell D. Pittard shall be its
Chairman of the Board and Chief Executive Officer, and J. Edward Mulkey, Jr.
shall be its President and Chief Operating Officer. Such officers, together
with such additional persons as may thereafter be elected, shall serve as the
officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. At the Effective Time
of the Merger, Darrell D. Pittard shall be elected to the Board of Directors of
First Alliance Bank, and Edward J. Mulkey, Jr. shall be elected to the Board of
Directors of Premier Bank, FSB.
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<PAGE>
2.4 Name. At the Effective Time of the Merger, the Surviving Corporation
----
will change its name to "Premier Bancshares, Inc."
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at the
--------------------
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof the shares of the constituent corporations shall be
converted as follows:
(a) Each share of First Alliance Capital Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Each share of Premier Common Stock (excluding shares held by
Premier or First Alliance or any of their respective Subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of Surviving Corporation Common Stock (the "Exchange Ratio").
(c) Each share of Premier Preferred Stock (excluding shares held by
Premier or First Alliance or any of their respective Subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of Surviving Corporation Preferred Stock.
3.2 Anti-Dilution Provisions. In the event Premier or First Alliance
------------------------
changes the number of shares of Premier Common Stock or First Alliance Common
Stock, respectively, issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend or similar recapitalization with respect
to such stock and the record date therefor (in the case of a stock dividend) or
the effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the Exchange Ratio shall
be proportionately adjusted.
3.3 Shares Held by Premier or First Alliance. Each of the shares of
----------------------------------------
Premier Common Stock and Premier Preferred Stock held by any Premier Company or
by any First Alliance Company, in each case other than in a fiduciary capacity
or as a result of debts previously contracted, shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
3.4 Conversion of Stock Options; Restricted Stock.
---------------------------------------------
(a) At the Effective Time, all rights with respect to Premier Common
Stock pursuant to stock options ("Premier Options") granted by Premier under the
Premier Stock Plans, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Surviving
Corporation Common Stock, and the Surviving Corporation shall assume each
Premier Option, in accordance with the terms of the Premier Stock Plan and stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Premier Option assumed by the Surviving Corporation may be exercised
solely for shares of Surviving
A-9
<PAGE>
Corporation Common Stock, (ii) the number of shares of Surviving Corporation
Common Stock subject to such Premier Option shall be equal to the number of
shares of Premier Common Stock subject to such Premier Option immediately prior
to the Effective Time, and (iii) the per share exercise price under each such
Premier Option shall not be changed. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Internal Revenue Code, as to any
stock option which is an "incentive stock option." Premier and First Alliance
agree to take all necessary steps to effect the provisions of this Section 3.4.
(b) All restrictions or limitations on transfer with respect to
Premier Common Stock awarded under the Premier Stock Plans or any other plan,
program or arrangement of any Premier Company, to the extent that such
restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program or arrangement, shall remain
in full force and effect with respect to shares of Surviving Corporation Common
Stock into which such restricted stock is converted pursuant to Section 3.1 of
this Agreement.
3.5 Dissenting Shareholders. Any holder of shares of Premier Common Stock
-----------------------
who perfects such holder's dissenters' rights of appraisal in accordance with
and as contemplated by Section 14-2-1106 of the GBCC shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the GBCC and surrendered to Premier the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of Premier fails to
perfect, or effectively withdraws or loses, such holder's right to appraisal and
of payment for such holder's shares, the Surviving Corporation shall issue and
deliver the consideration to which such holder of shares of Premier Common Stock
is entitled under this Article 3 (without interest) upon surrender by such
holder of the certificate or certificates representing shares of Premier Common
Stock held by such holder.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures. Unless the parties otherwise agree, promptly
-------------------
after the Effective Time, the Surviving Corporation shall mail to the former
holders of Premier Common Stock and to the former holders of Premier Preferred
Stock appropriate transmittal materials which shall specify that delivery shall
be effected, and risk of loss and title to the certificates theretofore
representing shares of Premier Capital Stock shall pass, only upon proper
delivery of such certificates to the Surviving Corporation. After the Effective
Time, each holder of shares of Premier Capital Stock (other than shares to be
canceled pursuant to Section 3.3 of this Agreement or as to which dissenters'
rights have been perfected as provided in Section 3.5 of this Agreement) issued
and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Surviving Corporation and shall
promptly upon surrender thereof receive in exchange therefor the consideration
provided in Section 3.1 of this Agreement, together with all undelivered
dividends or distributions in respect of such shares (without interest thereon)
pursuant to Section 4.2
A-10
<PAGE>
of this Agreement. The Surviving Corporation shall not be obligated to deliver
the consideration to which any former holder of Premier Capital Stock is
entitled as a result of the Merger until such holder surrenders his or her
certificate or certificates representing the shares of Premier Capital Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
Premier Capital Stock so surrendered shall be duly endorsed as the Surviving
Corporation may require. Any other provision of this Agreement notwithstanding,
the Surviving Corporation shall not be liable to a holder of Premier Capital
Stock for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property Law.
4.2 Rights of Former Premier Shareholders. At the Effective Time, the
-------------------------------------
stock transfer books of Premier shall be closed as to holders of Premier Capital
Stock immediately prior to the Effective Time and no transfer of Premier Capital
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Agreement, each certificate theretofore representing shares of Premier
Capital Stock (other than shares to be canceled pursuant to Section 3.3 or as to
which dissenters' rights have been perfected as provided in Section 3.5 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Section 3.1 of this
Agreement in exchange therefor. To the extent permitted by Law, former holders
of record of Premier Common Stock shall be entitled to vote after the Effective
Time at any meeting of Surviving Corporation shareholders the number of whole
shares of Surviving Corporation Common Stock into which their respective shares
of Premier Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Premier Common Stock for certificates
representing Surviving Corporation Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by the Surviving Corporation on the Surviving Corporation Capital
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of Surviving Corporation Capital Stock as of
any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of Premier Capital Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such Premier Capital Stock certificate, both the Surviving
Corporation Capital Stock certificate (together with all such undelivered
dividends or other distributions without interest) shall be delivered and paid
with respect to each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PREMIER
-----------------------------------------
Premier hereby represents and warrants to First Alliance as follows:
5.1 Organization, Standing, and Power. Premier is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Premier is duly
qualified or licensed to transact business as a foreign corporation in good
A-11
<PAGE>
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Premier.
5.2 Authority; No Breach By Agreement.
---------------------------------
(a) Premier has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Premier,
subject to the approval of this Agreement by the holders of a majority of the
outstanding Premier Common Stock, which is the only shareholder vote required
for approval of this Agreement and consummation of the Merger by Premier.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid and binding obligation of Premier, enforceable against Premier in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Premier,
nor the consummation by Premier of the transactions contemplated hereby, nor
compliance by Premier with any of the provisions hereof will (i) conflict with
or result in a breach of any provision of Premier's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Premier
Company under, any Contract or Permit of any Premier Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1 (b) of
this Agreement, violate any Law or Order applicable to any Premier Company or
any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier, no notice to, filing with, or Consent of any
public body or authority is necessary for the consummation by Premier of the
Merger and the other transactions contemplated in this Agreement.
A-12
<PAGE>
5.3 Capital Stock.
-------------
(a) The authorized capital stock of Premier consists of (i) 10,000,000
shares of Premier Common Stock, of which 435,669 shares are issued and
outstanding as of the date of this Agreement and not more than 499,669 shares
will be issued and outstanding at the Effective Time (as a result of the
exercise of outstanding options) and (ii) 650,000 shares of Premier Preferred
Stock, of which 389,122 shares are issued and outstanding as of the date of this
Agreement. All of the issued and outstanding shares of capital stock of Premier
are duly and validly issued and outstanding and are fully paid and nonassessable
under the GBCC. None of the outstanding shares of capital stock of Premier has
been issued in violation of any preemptive rights of the current or past
shareholders of Premier. Premier has reserved 75,000 shares of Premier Common
Stock for issuance under the Premier Stock Plans, pursuant to which options to
purchase not more than 64,000 shares of Premier Common Stock are outstanding as
of the date of this Agreement and at the Effective Time.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the Premier Disclosure Memorandum, there are no
---------------------
shares of capital stock or other equity securities of Premier outstanding and no
outstanding Rights relating to the capital stock of Premier.
5.4 Premier Subsidiaries. Premier has disclosed in Section 5.4 of the
--------------------
Premier Disclosure Memorandum all of the Premier Subsidiaries as of the date of
---------------------
this Agreement. Except as disclosed in Section 5.4 of the Premier Disclosure
----------
Memorandum, Premier or one of its Subsidiaries owns all of the issued and
- ----------
outstanding shares of capital stock of each Premier Subsidiary. No equity
securities of any Premier Subsidiary are or may become required to be issued
(other than to another Premier Company) by reason of any Rights, and there are
no Contracts by which any Premier Subsidiary is bound to issue (other than to
another Premier Company) additional shares of its capital stock or Rights, or by
which any Premier Company is or may be bound to transfer any shares of the
capital stock of any Premier Subsidiary (other than to another Premier Company),
and there are no Contracts by which any Premier Company is bound to issue (other
than to another Premier Company) additional shares of its capital stock. There
are no Contracts relating to the rights of any Premier Company to vote or to
dispose of any shares of the capital stock of any Premier Subsidiary. All of
the shares of capital stock of each Premier Subsidiary held by a Premier Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the Premier Company free and clear of any Lien. Each Premier Subsidiary is
either a bank, a savings association or a corporation and is duly organized,
validly existing, and (as to corporations) in good standing under the Laws of
the jurisdiction in which it is organized and has the corporate power and
authority necessary for it to own, lease and operate its Assets and to carry on
its business as now conducted. Each Premier Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier. Each Premier Subsidiary that
is a depository institution is an "insured institution" as defined in the
Federal Deposit
A-13
<PAGE>
Insurance Act and applicable regulations thereunder, and the deposits in which
are insured by the Bank Insurance Fund or the Savings Association Insurance
Fund, as appropriate.
5.5 Financial Statements. Premier has included in Section 5.5 of the
--------------------
Premier Disclosure Memorandum copies of all Premier Financial Statements for
---------------------
periods ended prior to the date hereof and will deliver to First Alliance copies
of all Premier Financial Statements prepared subsequent to the date hereof. The
Premier Financial Statements (as of the dates thereof and for the periods
covered thereby) (a) are, or if dated after the date of this Agreement will be,
in accordance with the books and records of the Premier Companies, which are or
will be, as the case may be, complete and correct and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, and (b) present or will present, as the case may be, fairly the
consolidated financial position of the Premier Companies as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows of the Premier Companies for the periods indicated, in
accordance with GAAP (subject to any exceptions as to consistency specified
therein or as may be indicated in the notes thereto or, in the case of interim
financial statements, to normal recurring year-end adjustments that are not
material in amount or effect).
5.6 Absence of Undisclosed Liabilities. No Premier Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Premier as of
December 31, 1994 and September 30, 1995, included in the Premier Financial
Statements or reflected in the notes thereto. No Premier Company has incurred
or paid any Liability since September 30, 1995, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Premier.
5.7 Absence of Certain Changes or Events. Since September 30, 1995,
------------------------------------
except as disclosed in Section 5.7 of the Premier Disclosure Memorandum, (a)
---------------------
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier, and (b) the Premier Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of Premier
provided in Article 7 of this Agreement.
5.8 Tax Matters.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
Premier Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
September 30, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on Premier and all returns filed are complete and accurate to the
Knowledge of Premier. All Taxes shown on filed returns have been paid. As of
the date of this Agreement, there is no audit examination, deficiency or refund
Litigation with respect to any Taxes that is reasonably likely to
A-14
<PAGE>
result in a determination that would have, individually or in the aggregate, a
Material Adverse Effect on Premier, except as reserved against in the Premier
Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.8(a) of the Premier Disclosure Memorandum. All Taxes and
---------------------
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the Premier Disclosure
----------
Memorandum, none of the Premier Companies has executed an extension or waiver of
- ----------
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect, and no unpaid tax deficiency has been asserted in
writing against or with respect to any Premier Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier.
(c) Adequate provision for any Taxes due or to become due for any of
the Premier Companies for the period or periods through and including the date
of the respective Premier Financial Statements has been made and is reflected on
such Premier Financial Statements.
(d) Deferred Taxes of the Premier Companies have been provided for in
accordance with GAAP.
(e) Each of the Premier Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code, except
for such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier.
5.9 Allowance for Possible Loan Losses. The allowance for possible loan
----------------------------------
or credit losses (the "Allowance") shown on the consolidated balance sheets of
Premier included in the most recent Premier Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of Premier included in the Premier Financial Statements as of
dates subsequent to the execution of this Agreement will be, as of the dates
thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in the
loan and lease portfolios (including accrued interest receivables) of the
Premier Companies and other extensions of credit (including letters of credit
and commitments to make loans or extend credit) by the Premier Companies as of
the dates thereof except where the failure of such Allowance to be so adequate
is not reasonably likely to have a Material Adverse Effect on Premier.
5.10 Assets. Except as disclosed in Section 5.10 of the Premier Disclosure
------ ----------
Memorandum or as disclosed or reserved against in the Premier Financial
- ----------
Statements, the Premier Companies have good and marketable title, free and clear
of all Liens, to all of their respective Assets. All material tangible
properties used in the businesses of the Premier Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Premier's past practices. All Assets which
are material to Premier's business on a consolidated
A-15
<PAGE>
basis, held under leases or subleases by any of the Premier Companies, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the enforcement of creditors'
rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is in
full force and effect. The policies of fire, theft, liability and other
insurance maintained with respect to the Assets or businesses of the Premier
Companies provide adequate coverage under current industry practices against
loss or Liability, and the fidelity and blanket bonds in effect as to which any
of the Premier Companies is a named insured are reasonably sufficient. The
Assets of the Premier Companies include all assets required to operate the
business of the Premier Companies as presently conducted.
5.11 Environmental Matters.
---------------------
(a) Except as disclosed in Section 5.11(a) of the Premier Disclosure
----------
Memorandum, to the Knowledge of Premier, each Premier Company, its Participation
- ----------
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Premier.
(b) To the Knowledge of Premier, there is no Litigation pending or
threatened before any court, governmental agency or authority or other forum in
which any Premier Company or any of its Loan Properties or Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material (as defined below) or
oil, whether or not occurring at, on, under or involving a site owned, leased or
operated by any Premier Company or any of its Loan Properties or Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier and to the Knowledge of Premier, there is no reasonable basis
for any such Litigation.
(c) To the Knowledge of Premier, there have been no releases of
Hazardous Material or oil in, on, under or affecting any Participation Facility
or Loan Property, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Premier.
5.12 Compliance with Laws. Premier is duly registered as a thrift holding
--------------------
company under the HOLA. Each Premier Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier. Except as disclosed in
Section 5.12 of the Premier Disclosure Memorandum, no Premier Company:
---------------------
A-16
<PAGE>
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Premier Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier,
or (iii) requiring any Premier Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.13 Labor Relations. No Premier Company is the subject of any Litigation
---------------
asserting that it or any other Premier Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Premier Company to bargain with
any labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any Premier Company, pending or, to its
Knowledge, threatened, nor, to its Knowledge, is there any activity involving
any Premier Company's employees seeking to certify a collective bargaining unit
or engaging in any other organization activity.
5.14 Employee Benefit Plans.
----------------------
(a) Premier has disclosed in Section 5.14 of the Premier Disclosure
----------
Memorandum and delivered or made available to First Alliance prior to the
- ----------
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including, without limitation, "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any
Premier Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Premier Benefit Plans"). Any of the Premier Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Premier ERISA Plan." Each Premier ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Premier Pension Plan." No
Premier Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
A-17
<PAGE>
(b) All Premier Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier. Each Premier ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the Internal Revenue
Service, and Premier is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge of
Premier, no Premier Company nor any other party has engaged in a transaction
with respect to any Premier Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would subject any Premier
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier.
(c) Neither Premier nor any ERISA Affiliate of Premier maintains or
has maintained an "employee benefit pension plan," within the meaning of Section
3(2) of ERISA that is or was subject to Title IV of ERISA.
(d) Neither Premier nor any ERISA Affiliate of Premier has any past,
present or future obligation or liability to contribute to any multi-employer
plan, as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Section 5.14(e) of the Premier Disclosure
----------
Memorandum, (i) no Premier Company has any obligations for retiree health and
- ----------
life benefits under any of the Premier Benefit Plans and (ii) there are no
restrictions on the rights of such Premier Company to amend or terminate any
such Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have a Material Adverse Effect on Premier.
(f) Except as disclosed in Section 5.14(f) of the Premier Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement nor the
- ----------
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any Premier Company from any Premier Company under any Premier Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Premier
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Premier Company and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Premier Financial Statements to the
extent required by and in accordance with GAAP.
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<PAGE>
(h) Premier and each ERISA Affiliate of Premier has complied with the
continuation of coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608.
(i) Neither Premier nor any ERISA Affiliate of Premier is obligated,
contingently or otherwise, under any agreement to pay any amount which would be
treated as a "parachute payment," as defined in Section 280G(b) of the Internal
Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the
Internal Revenue Code).
(j) Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending, or threatened against any
Premier Benefit Plan, any trust or other funding agency created thereunder, or
against any fiduciary of any Premier Benefit Plan or against the assets of any
Premier Benefit Plan.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the
------------------
Premier Disclosure Memorandum or otherwise reflected in the Premier Financial
---------------------
Statements, none of the Premier Companies, nor any of their respective Assets,
businesses or operations, is a party to, or is bound or affected by, or receives
benefits under, (a) any employment, severance, termination, consulting or
retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, excluding "at will" employment arrangements,
(b) any Contract relating to the borrowing of money by any Premier Company or
the guarantee by any Premier Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, Federal
Home Loan Bank advances, fully-secured repurchase agreements, trade payables,
and Contracts relating to borrowings or guarantees made in the ordinary course
of business), (c) any Contracts between or among Premier Companies, and (d) any
other Contract (excluding this Agreement) or amendment thereto that would be
required to be filed as an exhibit to a Form 10-KSB filed by Premier with the
SEC as of the date of this Agreement if Premier were required to file a Form 10-
KSB with the SEC (together with all Contracts referred to in Sections 5.10 and
5.14(a) of this Agreement, the "Premier Contracts"). None of the Premier
Companies is in Default under any Premier Contract, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier. All of the indebtedness of any Premier Company for
money borrowed is prepayable at any time by such Premier Company without penalty
or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the Premier
-----------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
- ---------------------
Knowledge of Premier, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Premier Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Premier Company, that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier.
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<PAGE>
5.17 Reports. Since January 1, 1994, each Premier Company has timely filed
-------
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (a) the Regulatory
Authorities, and (b) any applicable state securities or banking authorities
(except, in the case of state securities authorities, failures to file which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier). As of their respective dates, each of such reports
and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of its
respective date, each such report and document to Premier's Knowledge did not,
in any material respects, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
5.18 Statements True and Correct. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any Premier Company or any
Affiliate thereof to First Alliance pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any Premier Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by First Alliance with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Premier Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to Premier's shareholders in connection with the
Premier Shareholders' Meeting, and any other documents to be filed by a Premier
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Premier, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Premier Shareholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Premier Shareholders'
Meeting. All documents that any Premier Company or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.19 Accounting, Tax and Regulatory Matters. No Premier Company or any
--------------------------------------
Affiliate thereof has taken any action, or agreed to take any action, or has any
Knowledge of any fact or circumstance that is reasonably likely to (a) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or treatment as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of a
condition or restriction of the type referred to in the second sentence of such
Section. To the Knowledge of Premier, there exists no fact, circumstance,
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<PAGE>
or reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without the imposition of any
condition or restriction of the type described in the second sentence of such
Section 9.1(b).
5.20 Charter Provisions. Each Premier Company has taken all action so that
------------------
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any Premier Company or restrict or
impair the ability of the Surviving Corporation to vote, or otherwise to
exercise the rights of a shareholder with respect to, shares of any Premier
Company that may be acquired or controlled by it.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FIRST ALLIANCE
------------------------------------------------
First Alliance hereby represents and warrants to Premier as follows:
6.1 Organization, Standing, and Power. First Alliance is a corporation
---------------------------------
duly organized, validly existing, and in good standing under the Laws of the
State of Georgia, and is duly registered as a bank holding company under the BHC
Act. First Alliance has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. First
Alliance is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Alliance.
6.2 Authority; No Breach By Agreement.
---------------------------------
(a) First Alliance has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of First
Alliance, subject to the approval of this Agreement by the holders of a majority
of the outstanding First Alliance Common Stock, which is the only shareholder
vote required for approval of this Agreement and consummation of the Merger by
First Alliance. Subject to such requisite shareholder approval, this Agreement
represents a legal, valid and binding obligation of First Alliance, enforceable
against First Alliance in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by First
Alliance, nor the consummation by First Alliance of the transactions
contemplated hereby, nor compliance by First
A-21
<PAGE>
Alliance with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of First Alliance's Articles of Incorporation or Bylaws,
or (ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any First Alliance
Company under, any Contract or Permit of any First Alliance Company, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Alliance, or (iii) subject to receipt of the requisite approvals referred to in
Section 9.1(b) of this Agreement, violate any Law or Order applicable to any
First Alliance Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Alliance, no notice to, filing with, or Consent
of any public body or authority is necessary for the consummation by First
Alliance of the Merger and the other transactions contemplated in this
Agreement.
6.3 Capital Stock.
-------------
(a) The authorized capital stock of First Alliance consists of
2,000,000 shares of First Alliance Common Stock, of which 1,604,999 shares were
issued and outstanding as of the date of this Agreement and not more than
1,619,999 shares will be issued and outstanding at the Effective Time (as a
result of the exercise of outstanding options). All of the issued and
outstanding shares of First Alliance Common Stock are, and all of the shares of
Surviving Corporation Common Stock and Surviving Corporation Preferred Stock to
be issued in exchange for shares of Premier Common Stock and Premier Preferred
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the GBCC. None of the outstanding shares of First
Alliance Common Stock has been, and none of the shares of Surviving Corporation
Common Stock and Surviving Corporation Preferred Stock to be issued in exchange
for shares of Premier Common Stock and Premier Preferred Stock upon consummation
of the Merger will be, issued in violation of any preemptive rights of the
current or past shareholders of First Alliance. First Alliance has reserved
75,000 shares of First Alliance Common Stock for issuance under the First
Alliance Stock Plans, pursuant to which options to purchase not more than 15,000
shares of First Alliance Common Stock are outstanding as of the date of this
Agreement and at the Effective Time.
(b) Except as set forth in Section 6.3(a) of this Agreement, or as
disclosed in Section 6.3(b) of the First Alliance Disclosure Memorandum, there
---------------------
are no shares of capital stock or other equity securities of First Alliance
outstanding and no outstanding Rights relating to the capital stock of First
Alliance.
6.4 First Alliance Subsidiaries. First Alliance has disclosed in Section
---------------------------
6.4 of the First Alliance Disclosure Memorandum all of the First Alliance
---------------------
Subsidiaries as of the date of this
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<PAGE>
Agreement. Except as disclosed in Section 6.4 of the First Alliance Disclosure
----------
Memorandum, First Alliance or one of its Subsidiaries owns all of the issued and
- ----------
outstanding shares of capital stock of each First Alliance Subsidiary. No
equity securities of any First Alliance Subsidiary are or may become required to
be issued (other than to another First Alliance Company) by reason of any
Rights, and there are no Contracts by which any First Alliance Subsidiary is
bound to issue (other than to another First Alliance Company) additional shares
of its capital stock or Rights, or by which any First Alliance Company is or may
be bound to transfer any shares of the capital stock of any First Alliance
Subsidiary (other than to another First Alliance Company), and there are no
Contracts by which any First Alliance Company is bound to issue (other than to
another First Alliance Company) additional shares of its capital stock. There
are no Contracts relating to the rights of any First Alliance Company to vote or
to dispose of any shares of the capital stock of any First Alliance Subsidiary.
All of the shares of capital stock of each First Alliance Subsidiary held by a
First Alliance Company are fully paid and nonassessable under the applicable Law
of the jurisdiction in which such Subsidiary is incorporated or organized and
are owned by the First Alliance Company free and clear of any Lien. Each First
Alliance Subsidiary is either a bank, a savings association or a corporation and
is duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is organized and has the
corporate power and authority necessary for it to own, lease and operate its
Assets and to carry on its business as now conducted. Each First Alliance
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Alliance. Each First Alliance Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder, and the deposits in which
are insured by the Bank Insurance Fund or the Savings Association Insurance
Fund, as appropriate.
6.5 Financial Statements. First Alliance has included in Section 6.5 of
--------------------
the First Alliance Disclosure Memorandum copies of all First Alliance Financial
---------------------
Statements for periods ended prior to the date hereof and will deliver to
Premier copies of all First Alliance Financial Statements prepared subsequent to
the date hereof. The First Alliance Financial Statements (as of the dates
thereof and for the periods covered thereby) (a) are, or if dated after the date
of this Agreement will be, in accordance with the books and records of the First
Alliance Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (b) present or will present, as the
case may be, fairly the consolidated financial position of the First Alliance
Companies as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the First Alliance Companies
for the periods indicated, in accordance with GAAP (subject to exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material in amount or effect).
6.6 Absence of Undisclosed Liabilities. No First Alliance Company has
----------------------------------
any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on
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<PAGE>
First Alliance, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of First Alliance as of December 31, 1994 and
September 30, 1995, included in the First Alliance Financial Statements or
reflected in the notes thereto. No First Alliance Company has incurred or paid
any Liability since September 30, 1995, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Alliance.
6.7 Absence of Certain Changes or Events. Since September 30, 1995,
------------------------------------
except as disclosed in SEC Documents filed by First Alliance prior to the date
of this Agreement, (a) there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Alliance, and (b) the First Alliance Companies
have not taken any action, or failed to take any action, prior to the date of
this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of First Alliance provided in Article 7 of this
Agreement.
6.8 Tax Matters.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
First Alliance Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
September 30, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on First Alliance, and all returns filed are complete and
accurate to the Knowledge of First Alliance. All Taxes shown on filed returns
have been paid. As of the date of this Agreement, there is no audit
examination, deficiency or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on First Alliance, except as
reserved against in the First Alliance Financial Statements delivered prior to
the date of this Agreement or as disclosed in Section 6.8(a) of the First
Alliance Disclosure Memorandum. All Taxes and other Liabilities due with
---------------------
respect to completed and settled examinations or concluded Litigation have been
paid.
(b) Except as disclosed in Section 6.8(b) of the First Alliance
Disclosure Memorandum none of the First Alliance Companies has executed an
- ---------------------
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any First
Alliance Company, which deficiency is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First Alliance.
(c) Adequate provision for any Taxes due or to become due for any of
the First Alliance Companies for the period or periods through and including the
date of the respective First Alliance Financial Statements has been made and is
reflected on such First Alliance Financial Statements.
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<PAGE>
(d) Deferred Taxes of the First Alliance Companies have been provided
for in accordance with GAAP.
(e) Each of the First Alliance Companies is in compliance with, and
its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Alliance.
6.9 Allowance for Possible Loan Losses. The Allowance shown on the
----------------------------------
consolidated balance sheets of First Alliance included in the most recent First
Alliance Financial Statements dated prior to the date of this Agreement was, and
the Allowance shown on the consolidated balance sheets of First Alliance
included in the First Alliance Financial Statements as of dates subsequent to
the execution of this Agreement will be, as of the dates thereof, adequate
(within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of the First Alliance
Companies and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the First Alliance Companies as
of the dates thereof except where the failure of such Allowance to be so
adequate is not reasonably likely to have a Material Adverse Effect on First
Alliance.
6.10 Assets. Except as disclosed in Section 6.10 of the First Alliance
------
Disclosure Memorandum or as disclosed or reserved against in the First Alliance
- ---------------------
Financial Statements, the First Alliance Companies have good and marketable
title, free and clear of all Liens, to all of their respective Assets. All
tangible properties used in the businesses of the First Alliance Companies are
in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with First Alliance's past practices.
All Assets which are material to First Alliance's business on a consolidated
basis, held under leases or subleases by any of the First Alliance Companies,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect. The policies of fire, theft, liability
and other insurance maintained with respect to the Assets or businesses of the
First Alliance Companies provide adequate coverage under current industry
practices against loss or Liability, and the fidelity and blanket bonds in
effect as to which any of the First Alliance Companies is a named insured are
reasonably sufficient. The Assets of the First Alliance Companies include all
assets required to operate the business of the First Alliance Companies as
presently conducted.
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<PAGE>
6.11 Environmental Matters.
---------------------
(a) Except as disclosed in Section 6.11(a) of the First Alliance
Disclosure Memorandum, to the Knowledge of First Alliance, each First Alliance
- ---------------------
Company, its Participation Facilities and its Loan Properties are, and have
been, in compliance with all Environmental Laws, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Alliance.
(b) To the Knowledge of First Alliance, there is no Litigation pending
or threatened before any court, governmental agency or authority or other forum
in which any First Alliance Company or any of its Loan Properties or
Participation Facilities has been or, with respect to threatened Litigation, may
be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material (as
defined below) or oil, whether or not occurring at, on, under or involving a
site owned, leased or operated by any First Alliance Company or any of its Loan
Properties or Participation Facilities, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Alliance and to the Knowledge of
First Alliance, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of First Alliance, there have been no releases of
Hazardous Material or oil in, on, under or affecting any Participation Facility
or Loan Property, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on First Alliance.
6.12 Compliance with Laws. First Alliance is duly registered as a bank
--------------------
holding company under the BHC Act. Each First Alliance Company has in effect
all Permits necessary for it to own, lease or operate its Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Alliance, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Alliance.
Except as disclosed in Section 6.12 of the First Alliance Disclosure Memorandum,
---------------------
no First Alliance Company:
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Alliance; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any First Alliance Company is not in
compliance with any of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, where such noncompliance is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Alliance, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Alliance, or (iii) requiring any
A-26
<PAGE>
First Alliance Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
6.13 Labor Relations. No First Alliance Company is the subject of any
---------------
Litigation asserting that it or any other First Alliance Company has committed
an unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other First Alliance
Company to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any First
Alliance Company, pending or, to its Knowledge, threatened, nor, to its
Knowledge, is there any activity involving any First Alliance Company's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
6.14 Employee Benefit Plans.
----------------------
(a) First Alliance has disclosed in Section 6.14 of the First Alliance
Disclosure Memorandum and delivered or made available to Premier prior to the
- ---------------------
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including, without limitation, "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any First
Alliance Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses. directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "First Alliance Benefit Plans"). Any of the First Alliance Benefit Plans
which is an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as a "First Alliance ERISA Plan." Each
First Alliance ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a "First
Alliance Pension Plan." No First Alliance Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All First Alliance Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Alliance.
Each First Alliance ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable determination
letter from the Internal Revenue Service, and First Alliance is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. To the Knowledge of First Alliance, no First Alliance Company nor any
other party has engaged in a transaction with respect to any First Alliance
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date hereof, would subject any First Alliance Company to a tax or penalty
imposed by either Section 4975 of the
A-27
<PAGE>
Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Alliance.
(c) Neither First Alliance nor any ERISA Affiliate of First Alliance
maintains or has maintained an "employee benefit pension plan," within the
meaning of Section 3(2) of ERISA that is or was subject to Title IV of ERISA.
(d) Neither First Alliance nor any ERISA Affiliate of First Alliance
has any past, present or future obligation or liability to contribute to any
multi-employer plan, as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Section 6.14(e) of the First Alliance
Disclosure Memorandum, (i) no First Alliance Company has any obligations for
- ---------------------
retiree health and life benefits under any of the First Alliance Benefit Plans
and (ii) there are no restrictions on the rights of such First Alliance Company
to amend or terminate any such Plan without incurring any Liability thereunder,
which Liability is reasonably likely to have a Material Adverse Effect on First
Alliance.
(f) Except as disclosed in Section 6.14(f) of the First Alliance
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
- ---------------------
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any First Alliance Company from any First Alliance Company under any First
Alliance Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any First Alliance Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any First Alliance Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the First Alliance Financial
Statements to the extent required by and in accordance with GAAP.
(h) First Alliance and each ERISA Affiliate of First Alliance has
complied with the continuation of coverage requirements of Section 1001 of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA
Sections 601 through 608.
(i) Except as disclosed in Section 6.14(i) of the First Alliance
Disclosure Memorandum, neither First Alliance nor any ERISA Affiliate of First
- ---------------------
Alliance is obligated, contingently or otherwise, under any agreement to pay any
amount which would be treated as a "parachute payment," as defined in Section
280G(b) of the Internal Revenue Code (determined without regard to Section
280G(b)(2)(A)(ii) of the Internal Revenue Code).
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<PAGE>
(j) Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending, or threatened against any First
Alliance Benefit Plan, any trust or other funding agency created thereunder, or
against any fiduciary of any First Alliance Benefit Plan or against the assets
of any First Alliance Benefit Plan.
6.15 Material Contracts. Except as disclosed in Section 6.15 of the First
------------------
Alliance Disclosure Memorandum or otherwise reflected in the First Alliance
---------------------
Financial Statements, none of the First Alliance Companies, nor any of their
respective Assets, businesses or operations, is a party to, or is bound or
affected by, or receives benefits under, (a) any employment, severance,
termination, consulting or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $10,000, excluding "at will"
employment arrangements, (b) any Contract relating to the borrowing of money by
any First Alliance Company or the guarantee by any First Alliance Company of any
such obligation (other than Contracts evidencing deposit liabilities, purchases
of federal funds, Federal Home Loan Bank advances, fully-secured repurchase
agreements, trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (c) any Contracts between or among
First Alliance Companies, and (d) any other Contract (excluding this Agreement)
or amendment thereto that would be required to be filed as an exhibit to a Form
10-KSB filed by First Alliance with the SEC as of the date of this Agreement
that has not been filed as an exhibit to First Alliance's Form 10-KSB filed for
the fiscal year ended December 31, 1994, or in an SEC Document and identified to
First Alliance (together with all Contracts referred to in Sections 6.10 and
6.14(a) of this Agreement, the "First Alliance Contracts"). None of the First
Alliance Companies is in Default under any First Alliance Contract, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Alliance. All of the indebtedness
of any First Alliance Company for money borrowed is prepayable at any time by
such First Alliance Company without penalty or premium.
6.16 Legal Proceedings. Except as disclosed in Section 6.16 of the First
-----------------
Alliance Disclosure Memorandum, there is no Litigation instituted or pending,
---------------------
or, to the Knowledge of First Alliance, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any First Alliance Company, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on First
Alliance, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any First Alliance
Company, that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Alliance.
6.17 Reports. Since January 1, 1994, each First Alliance Company has
-------
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-KSB, and
proxy statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Alliance).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in any material
respects with all applicable Laws. As of its respective date, each such report
and document to First
A-29
<PAGE>
Alliance's Knowledge did not, in any material respects, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
6.18 Statements True and Correct. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any First Alliance Company or any
Affiliate thereof to Premier pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
First Alliance Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by First Alliance with the SEC, will, when
the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied or
to be supplied by any First Alliance Company or any Affiliate thereof for
inclusion in the Proxy Statement to be mailed to First Alliance's shareholders
in connection with the First Alliance Shareholders' Meeting, and any other
documents to be filed by any First Alliance Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of First Alliance, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the First Alliance Shareholders' Meeting,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the First Alliance
Shareholders' Meeting. All documents that any First Alliance Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.19 Accounting, Tax and Regulatory Matters. No First Alliance Company or
--------------------------------------
any Affiliate thereof has taken any action, or agreed to take any action, or has
any Knowledge of any fact or circumstance that is reasonably likely to (a)
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge
of First Alliance, there exists no fact, circumstance, or reason why the
requisite Consents referred to in Section 9.1(b) of this Agreement cannot be
received in a timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such Section 9.1(b).
6.20 Charter Provisions. Each First Alliance Company has taken all action
------------------
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any First Alliance
A-30
<PAGE>
Company or restrict or impair the ability of the Surviving Corporation to vote,
or otherwise to exercise the rights of a shareholder with respect to, shares of
any First Alliance Company that may be acquired or controlled by it.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of Premier. Unless the prior written consent of
--------------------------------
First Alliance shall have been obtained, and except as otherwise contemplated
herein, Premier shall, and shall cause each of its Subsidiaries, from the date
of this Agreement until the Effective Time or termination of this Agreement:
(a) to operate its business in the usual, regular and ordinary course; (b) to
preserve intact its business organization and Assets and maintain its rights and
franchises; (c) to use its reasonable efforts to cause its representations and
warranties to be correct at all times; and (d) to take no action which would (i)
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) or
9.1(c) of this Agreement or (ii) adversely affect in any material respect the
ability of either Party to perform its covenants and agreements under this
Agreement.
7.2 Negative Covenants of Premier. From the date of this Agreement until
-----------------------------
the earlier of the Effective Time or the termination of this Agreement, Premier
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer of First Alliance,
which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any Premier Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Premier Company to another
Premier Company) in excess of an aggregate of $100,000 (for the Premier
Companies on a consolidated basis) except in the ordinary course of the
business of Premier Companies consistent with past practices (which shall
include, for any of its Subsidiaries, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or
Federal Home Loan Bank, and entry into repurchase agreements fully secured
by U.S. government or agency securities), or impose, or suffer the
imposition, on any Asset of any Premier Company of any Lien or permit any
such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, Federal Home Loan Bank advances, "treasury
tax and loan" accounts established in the ordinary course of business, the
satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Premier
Disclosure Memorandum); or
---------------------
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Premier Company, or declare or pay any dividend or
make any other distribution in respect of Premier's capital
A-31
<PAGE>
stock except for dividends legally and contractually required to be paid in
respect of the Premier Preferred Stock; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.2(d) of the
Premier Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
---------------------
issuance of or enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of or otherwise permit to become outstanding, any
additional shares of Premier Common Stock or any other capital stock of any
Premier Company, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
Premier Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Premier Capital Stock or
sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any Premier Subsidiary (unless any such shares
of stock are sold or otherwise transferred to another Premier Company) or
(ii) any Asset having a book value in excess of $50,000 other than in the
ordinary course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities or securities of like maturity or grade,
purchase any securities or make any material investment, either by purchase
of stock or securities, contributions to capital, Asset transfers, or
purchase of any Assets, in any Person other than a wholly-owned Premier
Subsidiary; or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, or (ii) acquisitions of control by Premier Bank in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Premier Company (including such discretionary increases as
may be contemplated by existing employment agreements), except in
accordance with past practice or previously approved by the Board of
Directors of Premier, in each case as disclosed in Section 7.2(g) of the
Premier Disclosure Memorandum or as required by Law; pay any severance or
---------------------
termination pay or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement and disclosed in
Section 7.2(g) of the Premier Disclosure Memorandum; enter into or amend
---------------------
any severance agreements with officers of any Premier Company; grant any
increase in fees or other increases in compensation or other benefits to
directors of any Premier Company; or voluntarily accelerate the vesting of
any stock options or other stock-based compensation or employee benefits;
or
(h) enter into or amend any employment Contract between any Premier
Company and any Person (unless such amendment is required by Law) that the
Premier Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
A-32
<PAGE>
(i) adopt any new employee benefit plan of any Premier Company or make
any material change in or to any existing employee benefit plans of any
Premier Company other than any such change that is required by Law or that,
in the opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Premier
Company for money damages in excess of $50,000 or material restrictions
upon the operations of any Premier Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.3 Affirmative Covenants of First Alliance. Unless the prior written
---------------------------------------
consent of Premier shall have been obtained, and except as otherwise
contemplated herein, First Alliance shall, and shall cause each of its
Subsidiaries, from the date of this Agreement until the Effective Time or
termination of this Agreement: (a) to operate its business in the usual,
regular and ordinary course; (b) to preserve intact its business organization
and Assets and maintain its rights and franchises; (c) to use its reasonable
efforts to cause its representations and warranties to be correct at all times;
and (d) to take no action which would (i) adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type referred to in the
last sentence of Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely
affect in any material respect the ability of either Party to perform its
covenants and agreements under this Agreement.
7.4 Negative Covenants of First Alliance. From the date of this Agreement
------------------------------------
until the earlier of the Effective Time or the termination of this Agreement,
First Alliance covenants and agrees that it will not do or agree or commit to
do, or permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer of
Premier, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any First Alliance Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a First Alliance Company to
another First Alliance Company) in excess of an aggregate of $100,000 (for
the First Alliance Companies on a consolidated basis) except in the
ordinary course of the business of First Alliance Companies consistent with
past practices (which shall include, for First Alliance Bank, creation of
deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any Asset of any First Alliance
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<PAGE>
Company of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances,
Federal Home Loan Bank advances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the
date hereof that are disclosed in the First Alliance Disclosure
----------
Memorandum); or
----------
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any First Alliance Company, or declare or pay any
dividend or make any other distribution in respect of First Alliance's
capital stock; provided, however, that First Alliance may (to the extent
legally and contractually permitted to do so) pay a cash dividend of up to
$.50 per share on the shares of First Alliance Common Stock in January or
February of 1996; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.4(d) of the
First Alliance Disclosure Memorandum, issue, sell, pledge, encumber,
---------------------
authorize the issuance of or enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of or otherwise permit to
become outstanding, any additional shares of First Alliance Common Stock or
any other capital stock of any First Alliance Company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
First Alliance Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of First Alliance
Capital Stock or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of any First Alliance Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another First Alliance Company) or (ii) any Asset having a book value in
excess of $50,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities or securities of like maturity or grade,
purchase any securities or make any material investment, either by purchase
of stock or securities, contributions to capital, Asset transfers, or
purchase of any Assets, in any Person other than a wholly-owned First
Alliance Subsidiary; or otherwise acquire direct or indirect control over
any Person, other than in connection with (i) foreclosures in the ordinary
course of business, or (ii) acquisitions of control by First Alliance Bank
in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any First Alliance Company (including such discretionary
increases as may be contemplated by existing employment agreements), except
in accordance with past practice or previously approved by the Board of
Directors of First Alliance, in each case as disclosed in Section 7.4(g) of
the First Alliance Disclosure Memorandum or as required by Law; pay
---------------------
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<PAGE>
any severance or termination pay or any bonus other than pursuant to
written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 7.4(g) of the First Alliance Disclosure
----------
Memorandum; enter into or amend any severance agreements with officers of
----------
any First Alliance Company; grant any increase in fees or other increases
in compensation or other benefits to directors of any First Alliance
Company; or voluntarily accelerate the vesting of any stock options or
other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any First
Alliance Company and any Person (unless such amendment is required by Law)
that the First Alliance Company does not have the unconditional right to
terminate without Liability (other than Liability for services already
rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any First Alliance Company
or make any material change in or to any existing employee benefit plans of
any First Alliance Company other than any such change that is required by
Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any First
Alliance Company for money damages in excess of $50,000 or material
restrictions upon the operations of any First Alliance Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.5 Adverse Changes in Condition. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.6 Reports. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed.
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<PAGE>
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
-------------------------------------------------------------
(a) As soon as practicable after execution of this Agreement, First
Alliance shall file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of
Surviving Corporation Common Stock upon consummation of the Merger. Premier
shall furnish all information concerning it and the holders of its capital stock
as First Alliance may reasonably request in connection with such action.
(b) Both First Alliance and Premier shall call a Shareholders'
Meeting, to be held as soon as reasonably practicable after the Registration
Statement is declared effective by the SEC, for the purpose of voting upon
approval of this Agreement and such other related matters as First Alliance or
Premier, as the case may be, deems appropriate.
(c) In connection with the Premier Shareholders' Meeting, (i) First
Alliance shall prepare and file with the SEC on Premier's behalf a Proxy
Statement (which shall be included in the Registration Statement) and mail it to
Premier's shareholders, (ii) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Proxy Statement, (iii) the Board of Directors of Premier shall recommend
(subject to compliance with the fiduciary duties of the members of the Board of
Directors as advised by counsel) to its shareholders the approval of this
Agreement and (iv) the Board of Directors and officers of Premier shall use
their reasonable efforts to obtain such shareholders' approval (subject to
compliance with their fiduciary duties as advised by counsel).
(d) In connection with the First Alliance Shareholders' Meeting, (i)
First Alliance shall prepare and file with the SEC on its own behalf a Proxy
Statement (which shall be included in the Registration Statement) and mail it to
First Alliance's shareholders, (ii) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Proxy Statement, (iii) the Board of Directors of First Alliance shall
recommend (subject to compliance with the fiduciary duties of the members of the
Board of Directors as advised by counsel) to its shareholders the approval of
this Agreement and (iv) the Board of Directors and officers of First Alliance
shall use their reasonable efforts to obtain such shareholders' approval
(subject to compliance with their fiduciary duties as advised by counsel).
8.2 Exchange Listing. First Alliance shall use its reasonable efforts to
----------------
list, prior to the Effective Time, on the Nasdaq the shares of Surviving
Corporation Common Stock to be issued to the holders of Premier Common Stock
pursuant to the Merger.
8.3 Applications. First Alliance shall promptly prepare and file, and
------------
Premier shall cooperate in the preparation and, where appropriate, filing
of, applications with the Board of Governors of the Federal Reserve System, the
Office of Thrift Supervision and the Georgia
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<PAGE>
Department of Banking and Finance seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
8.4 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, First Alliance shall execute and file the Articles
of Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other Party hereto to that end (it being understood that any amendments
to the Registration Statement filed by First Alliance in connection with the
Surviving Corporation Common Stock to be issued in the Merger shall not violate
this covenant), including, without limitation, using its reasonable efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement. Each Party shall use, and shall
cause each of its Subsidiaries to use, its reasonable efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 Investigation and Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof and all work papers containing
confidential information received from the other Party, except for one copy of
any materials prepared by that Party or any attorney for or other representative
of that Party based upon such confidential information.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
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<PAGE>
8.7 Press Releases. Prior to the Effective Time, Premier and First
--------------
Alliance shall agree with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, however, that nothing in this
Section 8.7 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 Acquisition Proposals. Except with respect to this Agreement and
---------------------
the transactions contemplated hereby, no Party nor any Affiliate thereof nor any
investment banker, attorney, accountant or other representative (collectively,
"Representatives") retained by any Party shall directly or indirectly solicit
any Acquisition Proposal by any Person. Except to the extent necessary to
comply with the fiduciary duties of a Party's Board of Directors as advised by
counsel, no Party or any Affiliate or Representative thereof shall furnish any
non-public information that it is not legally obligated to furnish, negotiate
with respect to, or enter into any Contract with respect to, any Acquisition
Proposal, but a Party may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by counsel. Each Party
shall promptly notify the other orally and in writing in the event that it
receives any inquiry or proposal relating to any such transaction. Unless the
prior written consent of the other Party is obtained, each Party shall (a)
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (b) direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
----------------------------
agrees to use its reasonable efforts to cause the Merger, to take no action
which would cause the Merger not to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes and to take no action which would cause the Merger not to be
eligible to be accounted for as a "pooling of interests."
8.10 Agreement of Affiliates. Premier has disclosed in Section 8.10
-----------------------
of the Premier Disclosure Memorandum all Persons whom it reasonably believes is
---------------------
an "affiliate" of Premier for purposes of Rule 145 under the 1933 Act. Premier
shall use its reasonable efforts to cause each such Person to deliver to First
Alliance and Premier, not later than thirty (30) days after the date of this
Agreement, a written agreement, substantially in the form of Exhibit 1,
---------
providing that such Person will not sell, pledge, transfer or otherwise dispose
of the shares of Premier Common Stock held by such Person except as contemplated
by such agreement or by this Agreement and will not sell, pledge, transfer or
otherwise dispose of the shares of Surviving Corporation Common Stock to be
received by such Person upon consummation of the Merger except in compliance
with applicable provisions of the 1933 Act and the rules and regulations
thereunder. The Surviving Corporation shall be entitled to place restrictive
legends upon certificates for shares of Surviving Corporation Common Stock
issued to Affiliates of Premier pursuant to this Agreement to enforce the
provisions of this Section 8.10. The Surviving Corporation shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of Surviving Corporation Common Stock by
such Affiliates.
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<PAGE>
8.11 Authorization of Common Stock and Preferred Stock. First
-------------------------------------------------
Alliance shall cause its Articles of Incorporation to be amended to increase its
authorized shares of Common Stock to 20,000,000 shares and to authorize the
issuance of 2,000,000 shares of preferred stock with such designations, relative
rights and preferences as may be approved from time to time by its Board of
Directors. First Alliance shall also establish a series of preferred stock (the
"Surviving Corporation Preferred Stock") to permit the conversion of shares
described in Section 3.1(b) of this Agreement. The terms of the Surviving
Corporation Preferred Stock shall be the same, in all material respects, as the
Premier Preferred Stock except that the Surviving Corporation Preferred Stock
will not be convertible into Surviving Corporation Common Stock for a period of
twelve months following the Effective Time.
8.12 Notice to Premier Preferred Stockholders. Premier shall deliver
----------------------------------------
to each Person who holds Premier Preferred Stock, not later than ten (10) days
after the Effective Time, a written notice, substantially in the form of Exhibit
-------
2, providing that such Person will be required to convert his or her shares of
- -
Premier Preferred Stock into Surviving Corporation Common Stock as of a date
which is twelve (12) months following the Effective Time.
8.13 Indemnification.
---------------
(a) For a period of three years after the Effective Time, the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former directors, officers, employees and agents of the Premier Companies (each,
an "Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent permitted under
Georgia Law and by Premier's Articles of Incorporation and Bylaws as in effect
on the date hereof including provisions relating to advances of expenses
incurred in the defense of any Litigation.
(b) The Surviving Corporation shall use its reasonable efforts to
maintain Premier's existing directors' and officers' liability insurance policy
(or a policy, including First Alliance's existing policy, providing at least
comparable coverage) covering persons who are currently covered by such
insurance for a period of three years after the Effective Time on terms no less
favorable than those in effect on the date hereof, provided that the Surviving
Corporation shall not be obligated to make annual premium payments in respect of
such policy (or coverage replacing such policy) which exceed, for the portion
related to Premier's directors and officers, 150% of the annual premium payments
on Premier's current policy in effect as of the date of this Agreement.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a), upon learning of any such Liability or Litigation, shall promptly
notify the Surviving Corporation thereof. In the event of any such Litigation
(whether arising before or after the Effective Time), (i) the Surviving
Corporation shall have the right to assume the defense thereof and the Surviving
Corporation shall not be liable to such Indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are substantive issues which raise conflicts of
interest between the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel
A-39
<PAGE>
satisfactory to them, and the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however, that the Surviving
Corporation shall be obligated pursuant to this paragraph (c) to pay for only
one firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent; and provided further that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
(d) If the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall transfer
all or substantially all of its assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of Surviving
Corporation shall assume the obligations set forth in this Section 8.13.
8.14 Employee Benefits and Contracts. Following the Effective Time,
-------------------------------
the Surviving Corporation shall provide generally to officers and employees of
the Premier Companies who continue employment with the Surviving Corporation or
its Subsidiaries following the Effective Time employee benefits under employee
benefit plans, on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the First Alliance
Companies to their similarly situated officers and employees. For purposes of
participation under such employee benefit plans, the service of the employees of
the Premier Companies prior to the Effective Time shall be treated as service
with a First Alliance Company participating in such employee benefit plans,
provided that, with respect to any employee benefit plan where the benefits are
funded through insurance, the granting of such service shall be subject to the
consent of the appropriate insurer and may be conditioned upon an employee's
participation in a Premier Benefit Plan of the same type immediately prior to
the Effective time, and provided further that employees of the Premier Companies
shall not receive credit for their Premier Company service prior to the
Effective Time for purposes of determining vesting service under the First
Alliance Bank 401(k) Profit Sharing Plan. The Surviving Corporation and its
Subsidiaries also shall honor in accordance with their terms all employment,
severance, consulting and other compensation Contracts disclosed in Section 8.14
of the Premier Disclosure Memorandum to First Alliance between any Premier
---------------------
Company and any current or former director, officer, or employee thereof and
all provisions for vested benefits accrued through the Effective Time under the
Premier Benefit Plans.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
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<PAGE>
(a) Shareholder Approval. The shareholders of both Premier and First
--------------------
Alliance shall have approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law, or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including, without limitation,
requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of either Party would so materially adversely impact the economic
or business benefits of the transactions contemplated by this Agreement as
to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of either party would so materially adversely
impact the economic or business benefits of the transactions contemplated
by this Agreement as to render inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(e) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance or trading of the shares of the Surviving Corporation Common Stock
issuable pursuant to the Merger shall have been received.
(f) Exchange Listing. The shares of Surviving Corporation Common
----------------
Stock issuable pursuant to the Merger shall have been approved for listing
on Nasdaq.
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<PAGE>
(g) Tax Matters. Premier and First Alliance shall have received a
-----------
written opinion of counsel from Powell, Goldstein, Frazer & Murphy, in form
reasonably satisfactory to them (the "Tax Opinion"), to the effect that for
federal income tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii) the
exchange in the Merger of Premier Common Stock or Premier Preferred Stock
for Surviving Corporation Common Stock or Surviving Corporation Preferred
Stock, respectively, will not give rise to gain or loss to the shareholders
of Premier with respect to such exchange (except to the extent of any cash
received), and (iii) neither Premier nor First Alliance will recognize gain
or loss as a consequence of the Merger (except for income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of
the Internal Revenue Code). In rendering such Tax Opinion, counsel shall
be entitled to rely upon representations of officers of Premier and First
Alliance reasonably satisfactory in form and substance to such counsel.
(h) Affiliate Agreements. The Parties shall have received from each
--------------------
affiliate of Premier the affiliates letter referred to in Section 8.10
hereof.
(i) Dissenting Shares. The aggregate number of shares of Premier
-----------------
Common Stock dissenting to the Merger shall not exceed 21,783 shares.
(j) Pooling Letter. The Parties shall have received a letter from
--------------
Mauldin & Jenkins, dated as of the Effective Time, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Agreement.
9.2 Conditions to Obligations of First Alliance. The obligations of First
-------------------------------------------
Alliance to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by First Alliance pursuant to Section
11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.2(a), the accuracy of the representations and warranties of Premier set
forth or referred to in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of Premier set forth in Section 5.3 of this
Agreement shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties of Premier set
forth in Section 5.19 of this Agreement shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of Premier set forth in this Agreement
(excluding the representations and warranties set forth in Sections 5.3 and
5.19) such that the aggregate effect of such inaccuracies would have, or is
reasonably likely to have, a Material Adverse Effect on Premier; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" shall be deemed not to include such qualifications.
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<PAGE>
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Premier to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Premier shall have delivered to First Alliance (i)
------------
a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect
that the conditions of its obligations set forth in Sections 9.2(a) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Premier's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, all in such reasonable detail as
First Alliance and its counsel shall request.
(d) Opinion of Counsel. Premier shall have delivered to First
------------------
Alliance an opinion of Parker, Johnson, Cook & Dunlevie, counsel to
Premier, dated as of the Effective Time, in form reasonably satisfactory to
First Alliance, as to the matters set forth in Exhibit 3 hereto.
---------
(e) Premier Preferred Stock. None of the Premier Preferred
-----------------------
Stockholders shall have converted their Premier Preferred Stock into
Premier Common Stock.
(f) Claims/Indemnification Letters. Each of the directors and
------------------------------
officers of Premier shall have executed and delivered to First Alliance
letters in substantially the form of Exhibit 4.
---------
(g) Fairness Opinion. First Alliance shall have received from Alex
----------------
Sheshunoff & Co. Investment Banking a letter, dated not more than five (5)
business days prior to the date of the Proxy Statement, to the effect that,
in the opinion of such firm, the consideration to be paid to Premier
shareholders in connection with the Merger is fair, from a financial point
of view, to the shareholders of First Alliance.
9.3 Conditions to Obligations of Premier. The obligations of Premier to
------------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Premier pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of First
Alliance set forth or referred to in this Agreement shall be assessed as of
the date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made on
and as of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such date).
The representations and warranties of First Alliance set forth in Section
6.3 of this Agreement shall be true and correct (except for inaccuracies
which are de minimus in amount). The representations and warranties of
First
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<PAGE>
Alliance set forth in Section 6.19 of this Agreement shall be true and
correct in all material respects. There shall not exist inaccuracies in
the representations and warranties set forth in this Agreement (excluding
the representations and warranties set forth in Sections 6.3 and 6.19) such
that the aggregate effect of such inaccuracies would have, or is reasonably
likely to have a Material Adverse Effect on First Alliance; provided that,
for purposes of this sentence only, those representations and warranties
which are qualified by reference to "material" or "Material Adverse Effect"
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of First Alliance to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with in all material respects.
(c) Certificates. First Alliance shall have delivered to Premier (i)
------------
a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect
that the conditions of its obligations set forth in Section 9.3(a) and
9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by First Alliance's Board of Directors evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Premier
and its counsel shall request.
(d) Opinion of Counsel. First Alliance shall have delivered to
------------------
Premier an opinion of Powell, Goldstein, Frazer & Murphy, counsel to First
Alliance, dated as of the Effective Time, in form reasonably acceptable to
Premier, as to matters set forth in Exhibit 4 hereto.
---------
(e) Fairness Opinion. Premier shall have received from J. C. Bradford
----------------
& Co. a letter, dated not more than five (5) business days prior to the
date of the Proxy Statement, to the effect that, in the opinion of such
firm, the consideration to be received by Premier shareholders in
connection with the Merger is fair from a financial point of view, to such
shareholders.
ARTICLE 10
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of First
Alliance and Premier, this Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of First Alliance and
the Board of Directors of Premier; or
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<PAGE>
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Premier and Section 9.3(a)
in the case of First Alliance or in the material breach of any covenant or
other covenant or agreement contained in this Agreement) in the event of a
material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach and which breach would provide the non-breaching Party the
ability to refuse to consummate the Merger under the standard set forth in
Section 9.2(a) of this Agreement in the case of First Alliance and Section
9.3(a) of this Agreement in the case of Premier; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Premier and Section 9.3(a)
in the case of First Alliance or in the material breach of any covenant or
other covenant or agreement contained in this Agreement) in the event of a
material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within thirty (30)
days after the giving of written notice to the breaching Party of such
breach; or
(d) By the Board of Directors of either Party in the event (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set
forth in Section 9.2(a) of this Agreement in the case of Premier and
Section 9.3(a) in the case of First Alliance or in the material breach of
any covenant or other covenant or agreement contained in this Agreement)
(i) any Consent of any Regulatory Authority required for consummation of
the Merger and the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for appeal,
or (ii) if the shareholders of Premier fail to vote their approval of this
Agreement and the transactions contemplated hereby as required by the GBCC
at the Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or (iii) if the shareholders of
First Alliance fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the GBCC at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated on or before September 30, 1996, but
only if the failure to consummate the transactions contemplated hereby on
or before such date is not caused by any breach of this Agreement by the
Party electing to terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Premier
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<PAGE>
and Section 9.3(a) in the case of First Alliance or in the material breach
of any covenant or other covenant or agreement contained in this Agreement)
in the event that any of the conditions precedent to the obligations of
such Party to consummate the Merger (other than as contemplated by Section
10.1(d) of this Agreement) cannot be satisfied or fulfilled by the date
specified in Section 10.1(e) of this Agreement; or
(g) By the Board of Directors of either Party, at any time prior to
the 7th day after execution of this Agreement without any Liability in the
event that the review of the Assets, business, financial condition, results
of operations, and prospects of the other Party undertaken by it or any of
the disclosures contained in the other Party's Disclosure Memorandum causes
---------------------
its Board of Directors to determine, in its reasonable good faith judgment,
that a fact or circumstance exists or is likely to exist or result which
materially and adversely impacts one or more of the economic benefits to it
of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
10.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that the provisions of
this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment.
10.3 Non-Survival of Representations and Covenants. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles 2, 3, 4 and 11 and Sections 8.10, 8.12, 8.13, 8.14 and 11.2 of this
Agreement.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Definitions. Except as otherwise provided herein, the capitalized
-----------
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger (other than the
Merger), acquisition of all of the stock or Assets of, or other business
combination involving such Party or any of its Subsidiaries or the
acquisition of a substantial equity interest in, or a substantial portion
of the Assets of such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial
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<PAGE>
owner of any 10% or greater equity or voting interest of such Person; or
(iii) any other Person for which a Person described in clause (ii) acts in
such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Allowance" shall have the meaning provided in Section 5.9 of this
Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(c) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws pertaining to pollution or
protection of the environment and which are administered, interpreted or
enforced by the United States
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Environmental Protection Agency and state and local agencies with primary
jurisdiction over pollution or protection of the environment.
"ERISA" shall mean the Employee Retirement Income Premier Act of 1974,
as amended.
"ERISA Affiliate" shall refer to a relationship between entities such
that the entities would, now or at any time in the past, constitute a
"single employer" within the meaning of Section 414 of the Code.
"ERISA Plan" shall have the meaning provided in Section 5.14 of this
Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"First Alliance Bank" shall mean First Alliance Bank, a Georgia state-
chartered bank and a First Alliance Subsidiary.
"First Alliance Benefit Plans" shall have the meaning set forth in
Section 6.14 of this Agreement.
"First Alliance Capital Stock" shall mean, collectively, the First
Alliance Common Stock and any other class or series of capital stock of
First Alliance.
"First Alliance Common Stock" shall mean the $5.00 par value common
stock of First Alliance.
"First Alliance Companies" shall mean, collectively, First Alliance
and all First Alliance Subsidiaries.
"First Alliance Disclosure Memorandum" shall mean the written
---------------------
information entitled "First Alliance Disclosure Memorandum" delivered on or
---------------------
prior to the date of this Agreement to Premier describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement under
which such disclosure is being made.
"First Alliance Financial Statements" shall mean (a) the consolidated
balance sheets (including related notes and schedules, if any) of First
Alliance as of September 30, 1995, and as of December 31, 1994 and 1993,
and the related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) for the
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nine months ended September 30, 1995, and for each of the two years ended
December 31, 1994 and 1993, as filed by First Alliance in SEC Documents and
(b) the consolidated balance sheets (including related notes and schedules,
if any) of First Alliance and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to September 30, 1995.
"First Alliance Stock Plans" shall mean the existing stock option and
other stock-based compensation plans.
"First Alliance Subsidiaries" shall mean the Subsidiaries of First
Alliance at the Effective Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Georgia Articles of Merger" shall mean the Articles of Merger to be
executed by First Alliance and filed with the Secretary of State of the
State of Georgia relating to the Merger as contemplated by Section 1.1 of
this Agreement.
"Hazardous Material" shall mean any pollutant, contaminant, or toxic
or hazardous substance, pollutant, chemical or waste within the meaning of
the Comprehensive Environment Response, Compensation, and Liability Act, 42
U.S.C. (S) 9601 et seq., or any similar federal, state or local Law (and
specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities,
polychlorinated biphenyls, and petroleum and petroleum products).
"HOLA" shall mean the Home Owners Loan Act of 1933, as amended.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean the knowledge
after due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, General Counsel, any
Assistant or Deputy General Counsel, or any Senior or Executive Vice
President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including, without limitation, those
promulgated, interpreted or enforced by any of the Regulatory Authorities.
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<PAGE>
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable. (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including, without limitation, Contracts
related to it), or the transactions contemplated by this Agreement, but
shall not include regular, periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial
position, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (b) the ability of such Party to perform
its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement, provided that "material
adverse impact" shall not be deemed to include the impact of (w) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (x) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (y) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (z) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
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<PAGE>
"Merger" shall mean the merger of Premier with and into First Alliance
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the National Market System or the SmallCap System
of the National Association of Securities Dealers Automated Quotations
System.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management (including any property or facility held in a joint venture)
and, where required by the context, said term means the owner or operator
of such facility or property, but only with respect to such facility or
property.
"Party" shall mean either Premier or First Alliance, and "Parties"
shall mean both Premier and First Alliance.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Premier Benefit Plans" shall have the meaning set forth in Section
5.14 of this Agreement.
"Premier Common Stock" shall mean the no par value common stock of
Premier.
"Premier Companies" shall mean, collectively, Premier and all Premier
Subsidiaries.
"Premier Disclosure Memorandum" shall mean the written information
---------------------
entitled "Premier Disclosure Memorandum" delivered on or prior to the date
---------------------
of this Agreement to First Alliance describing in reasonable detail the
matters contained therein, specifically referencing each Section of this
Agreement under which such disclosure is being made.
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<PAGE>
"Premier Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of Premier as of
December 31, 1995, and as of March 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
December 31, 1995, and for each of the two fiscal years ended March 31,
1995 and 1994 (or period from inception of business, if shorter), included
in the Premier Disclosure Memorandum, and (b) the consolidated balance
---------------------
sheets (including related notes and schedules, if any) of Premier and
related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) filed with respect to
periods ended subsequent to December 31 1995.
"Premier Options" shall have the meaning set forth in Section 3.4 of
this Agreement.
"Premier Preferred Stock" shall mean the Convertible Preferred Stock
of Premier.
"Premier Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of Premier disclosed in Section 5.14 of the
Premier Disclosure Memorandum.
---------------------
"Premier Subsidiaries" shall mean the subsidiaries of Premier.
"Proxy Statement" shall mean (a) the proxy statement used by Premier
to solicit the approval of its shareholders of the transactions
contemplated by this Agreement and (b) the proxy statement used by First
Alliance to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, both of which shall be included in the
prospectus of the Surviving Corporation relating to shares of Surviving
Corporation Common Stock to be issued to the shareholders of Premier.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by First Alliance under
the 1933 Act with respect to the shares of Surviving Corporation Common
Stock to be issued to the shareholders of Premier in connection with the
transactions contemplated by this Agreement and which shall include the
Proxy Statements.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NASD and the SEC.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of
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the capital stock of a Person or by which a Person is or may be bound to
issue additional shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
Premier or the meeting of the shareholders of First Alliance to be held
pursuant to Section 8.1 of this Agreement, including any adjournment or
adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks, associations
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, however, there shall not be included any such entity
acquired through foreclosure or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean First Alliance as the surviving
corporation resulting from the Merger to be known as Premier Bancshares,
Inc.
"Surviving Corporation Common Stock" shall mean the $5.00 par value
common stock of the Surviving Corporation.
"Surviving Corporation Preferred Stock" shall mean the preferred stock
of the Surviving Corporation as described in Section 8.11 of this
Agreement.
"Tax" or "Taxes" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy and other taxes,
assessments, charges, fares or impositions, including interest, penalties
and additions imposed thereon or with respect thereto.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
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11.2 Expenses.
---------
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and
fees and expenses of its own financial or other consultants, investment
bankers, accountants and counsel, except that each of the Parties shall
bear and pay (i) one-half of the filing fees payable in connection with the
Registration Statement and the applications filed with other Regulatory
Authorities, and (ii) one-half of the costs incurred in connection with the
printing or copying of the Proxy Statements.
(b) Notwithstanding the provisions of Section 11.2(a) of this
Agreement, if for any reason this Agreement is terminated pursuant to
Sections 10.1(b) or 10.1(c) of this Agreement, the breaching Party agrees
to pay the non-breaching Party (i) an amount equal to the reasonable and
documented fees and expenses incurred by such non-breaching Party in
connection with the examination and investigation of the breaching Party,
the preparation and negotiation of this Agreement and related agreements,
regulatory filings and other documents related to the transactions
contemplated hereunder, including, without limitation, fees and expenses of
investment banking consultants, accountants, attorneys and other agents and
(ii) the sum of (x) $50,000 if the breach is not willful or (y) $150,000 if
the breach is willful or this Agreement is terminated in contemplation of
an Acquisition Proposal, which sums represent compensation for the non-
breaching Party's loss as a result of the transaction contemplated by this
Agreement not being consummated. Final settlement with respect to payment
of such fees and expenses shall be made within thirty (30) days after the
termination of this Agreement. This Section 11.2(b) shall be the non-
breaching Party's sole and exclusive remedy for actionable breach by the
breaching Party under this Agreement.
11.3 Brokers and Finders. Each of the Parties represents and warrants that
-------------------
neither it nor any of its officers, directors, employees or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
Premier or First Alliance, each of Premier and First Alliance, as the case may
be, agrees to indemnify and hold the other Party harmless of and from any
Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
----------------
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Section 8.10 and Section 8.13 of this Agreement.
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11.5 Amendments. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Premier Common Stock or First Alliance
Common Stock, there shall be made no amendment that pursuant to the GBCC
requires further approval by such shareholders without the further approval of
such shareholders.
11.6 Waivers.
-------
(a) Prior to or at the Effective Time, First Alliance, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by Premier, to waive or extend the time for the compliance or
fulfillment by Premier of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of First
Alliance under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of First Alliance.
(b) Prior to or at the Effective Time, Premier, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by First Alliance, to waive or extend the time for the compliance or
fulfillment by First Alliance of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of Premier under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Premier.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
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First Alliance: First Alliance Bancorp
P. O. Box 670148
63 Barrett Parkway, N.E.
Marietta, Georgia 30066-0120
Telecopy Number: (770) 428-6057
Attention: J. Edward Mulkey, Jr.
President and CEO
Copy to Counsel: Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 572-6999
Attention: Walter G. Moeling, IV, Esq.
Premier: Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Telecopy Number: (404) 814-3672
Attention: Darrell D. Pittard
Chairman and CEO
Copy to Counsel: Parker, Johnson, Cook & Dunlevie
Suite 700
1275 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy Number: (404) 888-7490
Attention: Steven S. Dunlevie, Esq.
11.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of the
United States may apply to the Merger.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
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11.12 Enforcement of Agreement. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.13 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: FIRST ALLIANCE BANCORP, INC.
/s/ Frank H. Roach By: /s/ J. Edward Mulkey, Jr.
- ------------------ -------------------------
Frank H. Roach J. Edward Mulkey, Jr.
Assistant Secretary President and CEO
[CORPORATE SEAL]
ATTEST: PREMIER BANCSHARES, INC.
/s/ Barbara J. Burtt By: /s/ Darrell D. Pittard
- -------------------- ----------------------
Secretary Darrell D. Pittard
Chairman and CEO
[CORPORATE SEAL]
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EXHIBIT 1
---------
AFFILIATE AGREEMENT
First Alliance Bancorp, Inc.
63 Barrett Parkway, N.E.
Atlanta, Georgia 30066-3305
Premier Bancshares, Inc.
Suite 100
47 Perimeter Center East
Atlanta, Georgia 30346
Gentlemen:
The undersigned is a shareholder of Premier Bancshares, Inc. ("Premier"), a
corporation organized and existing under the laws of the State of Georgia, and
will become a shareholder of First Alliance Bancorp, Inc. ("First Alliance" or
the "Surviving Corporation") pursuant to the transactions described in the
Agreement and Plan of Reorganization, dated as of January 30, 1996 (the
"Agreement"), by and between First Alliance and Premier. Under the terms of the
Agreement, Premier and First Alliance will be merged (the "Merger") and the
shares of common stock of Premier ("Premier Common Stock") will be converted
into shares of common stock of the Surviving Corporation ("Surviving Corporation
Common Stock"). This Affiliate Agreement represents an agreement between the
undersigned and the Surviving Corporation regarding certain rights and
obligations of the undersigned in connection with the shares of the Surviving
Corporation to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and the Surviving Corporation hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
----------------
Premier the undersigned is an "affiliate" under Rule 145(c) as defined in Rule
405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at the
time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that the
----------------------------------
undersigned will not, except by operation of law, by will or under the laws of
descent and distribution, sell, transfer, or otherwise dispose of the
undersigned's interests in, or reduce the undersigned's risk relative to, any of
the shares of the Surviving Corporation Common Stock into which the
undersigned's shares of Premier Common Stock are converted upon consummation of
the Merger until such time as the Surviving Corporation notifies the undersigned
that the requirements of SEC Accounting Series
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<PAGE>
Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned
understands that ASR 130 and 135 relate to publication of financial results of
post-Merger combined operations of the Surviving Corporation and Premier. The
Surviving Corporation agrees that it will publish such results within 45 days
after the end of the first fiscal quarter of the Surviving Corporation
containing the required period of post-Merger combined operations and that it
will notify the undersigned promptly following such publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
---------------------------------------
warrants and agrees that:
(a) During the 30 days immediately preceding the effective time of the
Merger, the undersigned will not, except by operation of law, by will, or
under the laws of descent and distribution, sell, transfer, or otherwise
dispose of the undersigned's interests in, or reduce the undersigned's risk
relative to, any of the shares of Premier Common Stock beneficially owned by
the undersigned as of the date of the shareholders' meeting of Premier held
to approve the merger.
(b) The Surviving Corporation Common Stock received by the undersigned
as a result of the Merger will be taken for the undersigned's own account
and not for others, directly or indirectly, in whole or in part.
(c) The undersigned understands that any distribution by the
undersigned of the Surviving Corporation Common Stock has not been
registered under the 1933 Act and that shares of the Surviving Corporation
Common Stock received pursuant to the Merger can only be sold by the
undersigned (1) following registration under the 1933 Act, or (2) in
conformity with the volume and other requirements of Rule 145(d) promulgated
by the SEC as the same now exist or may hereafter be amended, or (3) to the
extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that the Surviving Corporation is
-------------------------------------------------------------
under no obligation to file a registration statement with the SEC covering
--------------------------------------------------------------------------
the disposition of the undersigned's shares of the Surviving Corporation
------------------------------------------------------------------------
Common Stock.
------------
(d) The undersigned is aware that the Merger is to be treated as a tax-
free reorganization under Section 368 of the Internal Revenue Code ("Code")
for federal income tax purposes. The undersigned agrees to treat the
transaction in the same manner for federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the Income Tax
Regulations requires "continuity of interest" in order for the Merger to be
treated as tax-free under Section 368 of the Code. This requirement is
satisfied if, taking into account those who dissent from the Merger, there
is no plan or intention on the part of the Premier shareholders to sell or
otherwise dispose of the Surviving Corporation Common Stock to be received
in the Merger that will reduce such shareholders' ownership to a number of
shares having, in the aggregate, a value at the time of the Merger of less
than 50% of the total fair market value of the Premier Common Stock
outstanding immediately prior to the Merger. The undersigned has no
prearrangement, plan or intention to sell or otherwise dispose of an
A-60
<PAGE>
amount of the undersigned's Surviving Corporation Common Stock to be
received in the Merger which would cause the foregoing requirement not to be
satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees that
------------------------
stop transfer instructions with respect to the shares of the Surviving
Corporation Common Stock received by the undersigned pursuant to the Merger will
be given to the Surviving Corporation's transfer agent and that there will be
placed on the certificates for such shares, or shares issued in substitution
thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risks
relative thereto in any way, until such time as the Surviving
Corporation has published the financial results covering at least 30
days of combined operations after the effective date of the merger
through which the business combination was effected. In addition, the
shares represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (a) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(b) in accordance with (i) Rule 145(d) (in the case of shares issued to
an individual who is not an affiliate of the Surviving Corporation) or
---
(ii) Rule 144 (in the case of shares issued to an individual who is an
affiliate of the Surviving Corporation) of the Rules and Regulations of
such Act, or (c) in accordance with a legal opinion satisfactory to
counsel for the Surviving Corporation that such sale or transfer is
otherwise exempt from the registration requirements of such Act."
Such legend will also be placed on any certificate representing the Surviving
Corporation securities issued subsequent to the original issuance of the
Surviving Corporation Common Stock pursuant to the Merger as a result of any
stock dividend, stock split or other recapitalization as long as the Surviving
Corporation Common Stock issued to the undersigned pursuant to the Merger has
not been transferred in such manner to justify the removal of the legend
therefrom. If the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the Surviving Corporation Common Stock received by
the undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), the Surviving Corporation, upon the request of
the undersigned, will cause the certificates representing the shares of the
Surviving Corporation Common Stock issued to the undersigned in connection with
the Merger to be reissued free of any legend relating to the restrictions set
forth in Rules 144 and 145(d) upon receipt by the Surviving Corporation of an
opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer or otherwise
dispose of the shares of the Surviving Corporation Common Stock received by the
undersigned, to the extent the undersigned believes necessary, with the
undersigned's counsel or counsel for Premier.
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<PAGE>
6. Filing of Reports by the Surviving Corporation. The Surviving
----------------------------------------------
Corporation agrees, for a period of three years after the effective date of the
Merger, to file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, so
that the public information provisions of Rule 145(d) promulgated by the SEC as
the same are presently in effect will be available to the undersigned in the
event the undersigned desires to transfer any shares of the Surviving
Corporation Common Stock issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of the Surviving Corporation Common Stock received
by the undersigned in connection with the Merger at any time during the
restrictive period set forth in Rule 145(d), the undersigned will provide the
necessary representation letter to the transfer agent for the Surviving
Corporation Common Stock together with such additional information as the
transfer agent may reasonably request. If the Surviving Corporation's counsel
concludes that such proposed sale or transfer complies with the requirements of
Rule 145(d), the Surviving Corporation shall cause such counsel to provide such
opinions as may be necessary to the Surviving Corporation's transfer agent so
that the undersigned may complete the proposed sale or transfer.
8. Acknowledgements. The undersigned recognizes and agrees that the
----------------
foregoing provisions also apply to (a) the undersigned's spouse, (b) any
relative of the undersigned or of the undersigned's spouse who has the same home
as the undersigned, (c) any trust or estate in which the undersigned, the
undersigned's spouse, and any such relative collectively own at least a 10%
beneficial interest or of which any of the foregoing serves as trustee, executor
or in any similar capacity and (d) any corporation or other organization in
which the undersigned, the undersigned's spouse and any such relative
collectively own at least 10% of any class of equity securities or of the equity
interest. The undersigned further recognizes that, in the event that the
undersigned is a director or officer of the Surviving Corporation or becomes a
director or officer of the Surviving Corporation upon consummation of the
Merger, among other things, any sale of the Surviving Corporation Common Stock
by the undersigned within a period of less than six months following the
effective time of the Merger may subject the undersigned to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between the Surviving Corporation and the undersigned concerning the subject
matter hereof. Any notice required to be sent to any party hereunder shall be
sent by registered or certified mail, return receipt requested, using the
addresses set forth herein or such other address as shall be furnished in
writing by the parties. This Affiliate Agreement shall be governed by the laws
of the State of Georgia.
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<PAGE>
This Affiliate Agreement is executed as of the_____ day of _______________,
1996.
Very truly yours,
--------------------------------
Signature
--------------------------------
Print Name
AGREED TO AND ACCEPTED as of
______________________, 1996
FIRST ALLIANCE BANCORP, INC.
By:
-------------------------
AGREED TO AND ACCEPTED as of
______________________, 1996
PREMIER BANCSHARES, INC.
By:
-------------------------
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<PAGE>
EXHIBIT 2
---------
NOTICE OF CONVERSION TO HOLDERS OF
CONVERTIBLE PREFERRED STOCK OF
PREMIER BANCSHARES, INC.
Premier Bancshares, Inc. (the "Corporation") hereby furnishes notice to the
holders of its Convertible Preferred Stock that, as a result of the approval by
the holders of the Common Stock of the Corporation of a merger between the
Corporation and First Alliance Bancorp, Inc., the Corporation has set
____________, 199___ at its offices at 2180 Atlanta Plaza, 950 East Paces Ferry
Road, Atlanta, Georgia 30326 for the mandatory conversion of all outstanding
shares of Convertible Preferred Stock pursuant to the Convertible Preferred
Stock Statement of Rights and Preferences (the "Preferred Stock Designation").
The conversion rate is one share of Common Stock for each share of Convertible
Preferred Stock so converted.
On or before the date set above for such mandatory conversion, each holder
of shares of Convertible Preferred Stock shall surrender such certificates(s)
for such shares at the offices of the Corporation and shall receive
certificate(s) for the number of shares of Common Stock to which such holder is
entitled. On the date set above for such mandatory conversion, all rights with
respect to the Convertible Preferred Stock so converted will terminate, except
only the rights of the holders thereof, upon surrender of their certificate(s)
therefor, to receive certificates for the number of shares of Common Stock into
which such Convertible Preferred Stock has been converted. As soon as
practicable after the date of such mandatory conversion and the surrender of the
certificate(s) for the Convertible Preferred Stock, the Corporation shall cause
to be issued and delivered to such holders certificates for the number of shares
of Common Stock issuable on such mandatory conversion.
All certificates evidencing shares of Convertible Preferred Stock which are
required to be surrendered for mandatory conversion in accordance with the
provisions of the Preferred Stock Designation shall, from and after the date
such certificates are so required to be surrendered, be deemed to have been
returned and cancelled and the shares of Convertible Preferred Stock represented
thereby converted into shares of Common Stock for all purposes, notwithstanding
the failure of a holder to surrender such certificates on or prior to such date.
By Order of the Board of Directors
of Premier Bancshares, Inc.
A-64
<PAGE>
EXHIBIT 3
---------
MATTERS AS TO WHICH
COUNSEL TO PREMIER WILL OPINE*
1. Premier is a corporation duly organized, existing and in good standing
under the laws of the State of Georgia with corporate power and authority to
conduct its business as now conducted and to own and use its Assets.
2. Premier's authorized capital stock consists of 10,000,000 shares of
Premier Common Stock, of which 435,669 shares were outstanding as of the date
hereof and 650,000 shares of Premier Preferred Stock, of which 389,122 shares
were issued and outstanding on the date hereof. The outstanding shares of
Premier Common Stock are duly authorized, validly issued, fully paid and
nonassessable. None of the outstanding shares of Premier Common Stock has been
issued in violation of any statutory preemptive rights. Except as disclosed in
Premier's Disclosure Memorandum dated ____________________, 1996, to our
knowledge, there are no options, subscriptions, warrants, calls, rights or
commitments obligating Premier to issue equity securities or acquire its equity
securities.
3. The execution and delivery by Premier of the Agreement do not, and if
Premier were now to perform its obligations under the Agreement such performance
would not, result in any violation of the Articles of Incorporation or Bylaws of
any Premier Company, or, to our knowledge, result in any breach of, or default
or acceleration under, any material Contract or Order to which a Premier Company
is a party or by which a Premier Company is bound.
4. Premier has duly authorized the execution and delivery of the Agreement
and all performance by Premier thereunder and has duly executed and delivered
the Agreement.
5. The Agreement is enforceable against Premier.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.
A-65
<PAGE>
EXHIBIT 4
---------
CLAIMS/INDEMNIFICATION LETTER
_______________________, 1996
First Alliance Bancorp, Inc.
63 Barrett Parkway, N.E.
Marietta, Georgia 30066
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(g) of the Agreement and
Plan of Merger (the "Agreement"), dated as of January 30, 1996, by and between
First Alliance Bancorp, Inc. ("First Alliance") and Premier Bancshares, Inc.
("Premier") which provides for the merger (the "Merger") of First Alliance and
Premier.
Concerning claims which I may have against Premier or its wholly-owned
subsidiaries, Premier Bank, FSB and Premier Lending Corporation, in my capacity
as an officer or director:
(a) First Alliance shall assume all liability (to the extent Premier
was so liable) for claims for indemnification arising under Premier's
Articles of Incorporation or Bylaws or under any indemnification contract
disclosed to First Alliance, as existing on January 30, 1996, and for claims
for salaries, wages or other compensation, employee benefits, reimbursement
of expenses, or worker's compensation arising out of employment through the
effective time of the Merger;
(b) Premier Bank, FSB and Premier Lending Corporation shall retain all
liability (to the extent they were so liable) for claims for indemnification
arising under their respective Articles of Incorporation or Bylaws as
existing on January 30, 1996, and for claims for salaries, wages, or other
compensation, employee benefits, reimbursement of expenses, or worker's
compensation arising out of employment through the effective time of the
Merger;
(c) In my capacity as an officer or a director, I am not aware that I
have any claims (other than those referred to in paragraphs (a) or (b)
above) against Premier, Premier Bank, FSB or Premier Lending Corporation
(other than routine deposit, loan and other banking services conducted in
the ordinary course of business with Premier, Premier Bank, FSB or Premier
Lending Corporation, as applicable); and
(d) I hereby release Premier, Premier Bank, FSB and Premier Lending
Corporation from any and all claims which I am aware that I have against any
of them in my capacity as an officer or a director, other than those
referred to in paragraphs (a) or (b) above.
A-66
<PAGE>
First Alliance Bancorp, Inc.
______________________, 1996
Page 67
By executing this letter on behalf of First Alliance, you shall acknowledge
the assumption by First Alliance of the liabilities described in paragraphs (a)
and (b) above, except to the extent set forth in Section 8.13 of the Merger
Agreement.
Sincerely,
--------------------------------------
Signature of Officer or Director
--------------------------------------
Printed Name of Officer or Director
On behalf of First Alliance, I hereby acknowledge receipt of this letter and
affirm the assumption by First Alliance of the liabilities described in
paragraph (a) and (b) above, as of this _____ day of _______________, 1996.
FIRST ALLIANCE BANCORP, INC.
By:
---------------------------------
J. Edward Mulkey, Jr.
President
A-67
<PAGE>
First Alliance Bancorp, Inc.
______________________, 1996
Page 68
EXHIBIT 5
---------
MATTERS AS TO WHICH
COUNSEL TO FIRST ALLIANCE WILL OPINE*
1. First Alliance is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority to conduct its business as now conducted and to own and use its
Assets.
2. First Alliance's authorized capital stock consists of 20,000,000 shares
of First Alliance Common Stock, of which 1,604,999 shares were outstanding as of
the date hereof and 2,000,000 shares of First Alliance Preferred Stock none of
which was outstanding as of the date hereof. The outstanding shares of First
Alliance Common Stock are, and all of the shares of Surviving Corporation Common
Stock to be issued in exchange for Premier Common Stock upon consummation of the
Merger, when issued in accordance with the terms of the Agreement, will be, duly
authorized, validly issued, fully paid and nonassessable. None of the
outstanding shares of First Alliance Common Stock has been, and none of the
shares of Surviving Corporation Common Stock to be issued in exchange for shares
of Premier Common Stock upon consummation of the Merger will be, issued in
violation of any statutory preemptive rights. Except as disclosed in First
Alliance's Disclosure Memorandum dated _______________, 1996, to our knowledge,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating First Alliance to issue equity securities or acquire its equity
securities.
3. The execution and delivery by First Alliance of the Agreement do not,
and if First Alliance were now to perform its obligations under the Agreement
such performance would not, result in any violation of the Articles of
Incorporation or Bylaws of any First Alliance Company, or, to our knowledge,
result in any breach of, or default or acceleration under, any material Contract
or Order to which a First Alliance Company is a party or by which a First
Alliance Company is bound.
4. First Alliance has duly authorized the execution and delivery of the
Agreement and all performance by First Alliance thereunder and has duly executed
and delivered the Agreement.
5. The Agreement is enforceable against First Alliance.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.
A-68
<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 1 (the "Amendment") to the Agreement and Plan of
Reorganization (the "Agreement) dated January 30, 1996 between First Alliance
Bancorp, Inc. ("First Alliance") and Premier Bancshares, Inc. ("Premier") is
made and entered into as of the 29th day of April, 1996. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.
WHEREAS, the parties desire to amend the Agreement to reflect that:
(i) the holders of First Alliance Common Stock will not be entitled or required
to vote on the merger of Premier with and into First Alliance (the "Merger");
(ii) the number of shares of Premier Common Stock held by shareholders
dissenting to the Merger may not exceed 4,218 shares; (iii) Premier will not
obtain a fairness opinion with respect to the consideration to be issued to its
shareholders in the Merger; and (iv) the Premier Preferred Stock will be
converted into premier Corporation Common Stock immediately prior to, and
contingent upon, consummation of the Merger.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, and for the purpose of so amending the Agreement,
First Alliance and Premier agree as follows, subject to ratification of this
Amendment by their respective Boards of Directors:
1. To amend the first paragraph of the Preamble to the Agreement by
deleting the fifth sentence thereof and inserting in lieu thereof the following:
"The transactions described in this Agreement are subject to the approvals of
the Boards of Directors of both First Alliance and Premier, the shareholders of
Premier, the Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance and the satisfaction of certain other
conditions described in this Agreement."
2. By deleting clause (b) of the second sentence of Section 1.3 and
renumbering clause (c) as clause (b).
3. By deleting Section 3.1(c) in its entirety.
4. By deleting the phrase "and Premier Preferred Stock" from Section
3.3
5. By deleting the second and third sentences of Section 6.3(a) and
Exhibit 5 in their entirety and inserting in lieu thereof the following:
"All of the issued and outstanding shares of First Alliance
Common Stock are, and all of the shares of Surviving Corporation Common Stock to
be issued in exchange for shares of Premier Common Stock upon Consummation of
the Merger, when issued in accordance with the terms of this Agreement, will be,
duly and validly issued and outstanding and fully paid and non-assessable under
the GBCC. None of the outstanding shares of First Alliance Common Stock has
been, and none
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<PAGE>
of the shares of Surviving Corporation Common Stock to be issued in
exchange for shares of Premier Common Stock upon consummation of the
Merger will be, issued in violation of any pre-emptive rights of the
current or past shareholders of First Alliance."
6. By deleting Section 8.1(b) in its entirety and inserting in lieu
thereof the following:
"(b) Premier shall call a shareholders' meeting to be held as
soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon
approval of this Agreement and such other related matters as Premier
deems appropriate."
7. By deleting Section 8.1(d) in its entirety.
8. By deleting Section 8.11 in its entirety and inserting in lieu
thereof the following:
"8.11 Authorization of Common Stock and Preferred Stock. First
-------------------------------------------------
Alliance shall cause its Articles of Incorporation to be amended to
increase its authorized shares of Common Stock to 20,000,000
shares."
9. By deleting Section 8.12 in its entirety.
10. By deleting Section 9.1(a) in its entirety and inserting in lieu
thereof:
"(a) Shareholder Approval. The shareholders of Premier shall
--------------------
have approved this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, as and to
the extent required by Law or by the provisions of any governing
instruments."
11. By deleting Section 9.1(g)(ii) in its entirety and inserting in
lieu thereof the following:
"(ii) the exchange in the Merger of Premier Common Stock for
Surviving Corporation Common Stock will not give rise to gain or
loss to the shareholders of Premier with respect to such exchange
(except to the extent of any cash received), and"
12. By changing the number "21,783" in Section 9.1(i) to "4,218".
13. By deleting Section 9.3(e) in its entirety and inserting in lieu
thereof:
"(e) Conversion of Premier Preferred Stock. All of the
-------------------------------------
outstanding shares of Premier Preferred Stock shall have been
converted into shares of Premier Common Stock in accordance with
Section 6(A)(ii) of the Certificate of Designation of the Relative
Rights and Preferences of the Premier Preferred Stock."
A-70
<PAGE>
14. By deleting Exhibit 2 in its entirety and renumbering Exhibits 3, 4
and 5 as Exhibits 2,3 and 4 wherever they appear.
15. By adding the following definition to Section 11.1:
"Premier Capital Stock" shall mean the Premier Common Stock and
the Premier Preferred Stock, collectively."
16. By deleting the definition of "Surviving Corporation Preferred Stock"
from Section 11.1.
[Remainder of Page Intentionally Left Blank]
A-71
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed
by their duly authorized officers as of the date first above written.
FIRST ALLIANCE BANCORP, INC.
By:/s/J. Edward Mulkey, Jr.
---------------------------------
J. Edward Mulkey, Jr.
President
PREMIER BANCSHARES, INC.
By:/s/Darrell D. Pittard
---------------------------------
Darrell D. Pittard
Chairman and CEO
21324086.W51
DO2573.0008
A-72
<PAGE>
APPENDIX B: ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE
B-1
<PAGE>
Appendix B
----------
#21324083
Part 1. Right To Dissent And Obtain Payment For Shares
(S) 14-2-1301. Definitions.
As used in this article, the term:
a. "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
b. "Corporate Action" means the transaction or other action by the
corporation that creates dissenters' rights under the Code Section 14-2-
1302.
c. "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
d. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through 14-2-
1327.
e. "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
f. "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
g. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
h. "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 14-2-1302. Right to Dissent.
(a) A record shareholder of the corporation is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of,
any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is
a party:
(A) If approval of the shareholders of the corporation is
required for the merger by Code Section 14-2-1103 or the articles
of incorporation and the shareholder is entitled to vote on the
merger; or
B-2
<PAGE>
(B) If the corporation is a subsidiary that is merged
with its parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially
all of the property of the corporation if a shareholder vote is
required on the sale or exchange pursuant to Code Section 14-2-1202,
but not including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within
one year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for
the redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with
similar voting rights;
(E) Reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so created is to
be acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the
shares of the class; or
(5) Any corporate action taken pursuant to a shareholder vote to
the extent that Article 9 of this chapter, the articles of
incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his
shares under this article may not challenge the corporate action creating
his entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the
B-3
<PAGE>
articles of incorporation or bylaws of the corporation or the vote required
to obtain approval of the corporate action was obtained by fraudulent and
deceptive means, regardless of whether the shareholder has exercised
dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall
be no right of dissent in favor of the holder of shares of any class or
series which, at the record date fixed to determine the shareholders
entitled to receive notice of and to vote at a meeting at which a plan of
merger or share exchange or a sale or exchange of property or an amendment
of the articles of incorporation is to be acted on, were either listed on a
national securities exchange or held of record by more than 2,000
shareholders, unless:
(1) In the case of a plan of merger or share exchange, the
holders of shares of the class or series are required under the plan
of merger or share exchange to accept for their shares anything except
shares of the surviving corporation or another publicly held
corporation which at the effective date of the merger or share
exchange are either listed on a national securities exchange or held
of record by more than 2,000 shareholders, except for scrip or cash
payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board
of directors approving the transaction provides otherwise.
(S)14-2-1303. Dissent by Nominees and Beneficial Owners.
A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one beneficial shareholder and
notifies the corporation in writing of the name and address of each person
on whose behalf he asserts dissenters' rights. The rights of a partial
dissenter under this Code section are determined as if the shares as to
which he dissents and his other shares were registered in the names of
different shareholders.
Part 2. Procedure For Exercise of Dissenters' Rights
(S) 14-2-1320. Notice of Dissenters' Rights.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is submitted to a vote at a shareholders' meeting,
the meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this article and be accompanied by a copy
of this article.
(b) If corporate action creating dissenters' rights under Code
Section 14-2-1302 is taken without a vote of shareholders, the corporation
shall notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice
described in Code Section 14-2-1322 no later than ten days after the
corporate action was taken.
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<PAGE>
(S) 14-2-1321. Notice of Intent to Demand Payment.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a
record shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(2) must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his
shares under this article.
(S) 14-2-1322. Dissenters' Notice.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after
the corporate action was taken and must:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days
after the date the notice required in subsection (a) of this Code
section is delivered; and
(4) Be accompanied by a copy of this article.
(S) 14-2-1323. Duty to Demand Payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in
accordance with the terms of the notice.
B-5
<PAGE>
(b) A record shareholder who demands payment and deposits his shares
under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are cancelled or modified by the taking of
the proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
(S) 14-2-1324. Share Restrictions.
(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under Code
Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
(S) 14-2-1325. Offer of Payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of
the later of the date the proposed corporate action is taken or receipt of
a payment demand, the corporation shall by notice to each dissenter who
complied with Code Section 14-2-1323 offer to pay to such dissenter the
amount the corporation estimates to be the fair value of his or her shares,
plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, an
income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) A statement of the corporation's estimate of the fair value
of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Code Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written
notice to the corporation within 30 days after the corporation's offer or
is deemed to have accepted
B-6
<PAGE>
such offer by failure to respond within said 30 days, payment for his or
her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
(S) 14-2-1326. Failure to Take Action.
(a) If the corporation does not take the proposed action within 60
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment
demand procedure.
(S) 14-2-1327. Procedure if Shareholder Dissatisfied With Payment or
Offer.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and
demand payment of his estimate of the fair value of his shares and interest
due, if:
(1) The dissenter believes that the amount offered under Code
Section 14-2-1325 is less than the fair value of his shares or that
the interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
Code section and is deemed to have accepted the corporation's offer unless
he or she notifies the corporation of his or her demand in writing under
subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-
1325..
(c) If the corporation does not offer payment within the time set
forth in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall
provide the information to the shareholder within ten days after
receipt of a written demand for the information; and
(2) The shareholder may at any time, subject to the limitations
period of Code Section 14-2-1332, notify the corporation of his own
estimate of the fair
B-7
<PAGE>
value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due.
Part 3. Judicial Appraisal of Shares
(S) 14-2-1330. Court Action.
(a) If a demand for payment under Code Section 14-2-1327 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60 day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving
corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state where
the registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the
proceeding, which shall have the effect of an action quasi in rem against
their shares. The corporation shall serve a copy of the petition in the
proceeding upon each dissenting shareholder who is a resident of this state
in the manner provided by law for the service of a summons and complaint,
and upon each nonresident dissenting shareholder either by registered or
certified mail or by publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) of this Code section is plenary and
exclusive. The court may appoint one or more persons as appraisers to
receive evidence and recommend decision on the question of fair value. The
appraisers have the powers described in the order appointing them or in any
amendment to it. Except as otherwise provided in this chapter, Chapter 11
of Title 9, known as the "Georgia Civil Practice Act," applies to any
proceeding with respect to dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount which the court finds to be the fair value of his
shares, plus interest to the date of judgment.
(S) 14-2-1331. Court Costs and Counsel Fees.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court,
but not including fees and expenses of
B-8
<PAGE>
attorneys and experts for the respective parties. The court shall assess
the costs against the corporation, except that the court may assess the
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of Code Sections 14-2-1320 through 14-2-
1327; or
(2) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these attorneys reasonable
fees to be paid out of the amounts awarded the dissenters who were
benefited.
(S) 14-2-1332. Limitation of Actions.
No action by any dissenter to enforce dissenters' rights shall be
brought more than three years after the corporate action was taken,
regardless of whether notice of the corporate action and of the right to
dissent was given by the corporation in compliance with the provisions of
Code Section 14-2-1320 and Code Section 14-2-1322.
21324083.W51
B-9
<PAGE>
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
, 1996
------------
Board of Directors
First Alliance Bancorp, Inc.
63 Barrett Parkway, N.E.
Marietta, Georgia 30066
Members of the Board:
You have requested our opinion, as an independent financial analyst to the
shareholders of First Alliance Bancorp, Inc., Marietta, Georgia ("First
Alliance"), as to the fairness, from a financial point of view to the
shareholders of First Alliance, of the terms of the proposed merger of Premier
Bancshares, Inc., Atlanta, Georgia ("Premier"), with and into First Alliance.
Pursuant to the terms of the Agreement and Plan of Reorganization between First
Alliance and Premier dated January 30, 1996 and as amended April 29, 1996,
Premier shall be merged into First Alliance. First Alliance shall be the
Surviving Corporation resulting from the merger. Each share of Premier Common
Stock (excluding shares held by Premier or First Alliance or any of their
respective Subsidiaries, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at the Effective
Time shall cease to be outstanding and shall be converted into and exchanged for
the right to receive one share of Surviving Corporation Common Stock (the
"Exchange Ratio"). Prior to the Effective Time, each outstanding share of
Premier Preferred Stock (excluding shares held by Premier or First Alliance or
any of their respective Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) will have been converted
into shares of Premier Common Stock on a share-for-share basis.
As part of its banking analysis business, Alex Sheshunoff & Co. Investment
Banking is continually engaged in the valuation of bank, bank holding company
and thrift securities in connection with mergers and acquisitions nationwide.
Prior to being retained for this assignment, Alex Sheshunoff & Co. Investment
Banking has provided professional services and products to First Alliance. The
revenues derived from such services and products are insignificant when compared
to the firm's total gross revenues.
In connection with this assignment, we reviewed: (i) the Agreement and Plan of
Reorganization between First Alliance and Premier dated January 30, 1996 and as
amended April 29, 1996; (ii) the
[LETTERHEAD OF ALEX SHESHUNOFF & COMPANY APPEARS HERE]
<PAGE>
Board of Directors
First Alliance Bancorp, Inc.
, 1996
- --------
Page 2
most recent external auditor's reports to the Board of Directors of each
organization; (iii) the March 31, 1996 balance sheet and income statement for
each organization, the audited December 31, 1995 balance sheet and income
statement for First Alliance and the audited March 31, 1996 balance sheet and
income statement for Premier; (iv) each organization's listing of marketable
securities showing rate, maturity and market value as compared to book value;
(v) each organization's internal loan classification list; (vi) the budget and
projected operating plan of each organization; (vii) a listing of unfunded
letters of credit and any other off-balance sheet risks for each organization;
(viii) the Minutes of the Board of Directors meetings of each organization; (ix)
the most recent Board report for each organization; (x) material leases on real
and personal property for each organization; (xi) the directors and officers
liability and blanket bond insurance policies for each organization; and (xiii)
market conditions and current trading levels of outstanding common stock of both
organizations.
We have also had discussions with the management of First Alliance and Premier
regarding their respective financial results and have analyzed the most current
financial data available on First Alliance and Premier. We also considered such
other information, financial studies, analyses and investigations, and economic
and market criteria which we deemed relevant. We have met with the management
of First Alliance and Premier to discuss the foregoing information with them.
We have considered certain financial data of First Alliance and Premier, and
have compared that data with similar data for other thrifts and thrift holding
companies which have recently merged or been acquired; furthermore, we have
considered the financial terms of these business combinations involving said
thrifts and thrift holding companies.
We have not independently verified any of the information reviewed by us and
have relied on its being complete and accurate in all material respects. In
addition, we have not made an independent evaluation of the assets of First
Alliance or Premier.
In reaching our opinion we took into consideration the financial benefits of the
proposed transaction to all First Alliance common shareholders. Based on all
factors that we deem relevant and assuming the accuracy and completeness of the
information and data provided to us by First Alliance and Premier, it is our
opinion as of ___________, 1996, that the proposed transaction is fair and
equitable to all First Alliance common shareholders from a financial point of
view.
Our opinion does not constitute an endorsement of the merger or a recommendation
to any stockholder of First Alliance as to how such stockholder should vote.
<PAGE>
Board of Directors
First Alliance Bancorp, Inc.
, 1996
- --------
Page 3
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Respectfully submitted,
ALEX SHESHUNOFF & CO
INVESTMENT BANKING
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The provisions of the Georgia Business Corporation Code (the "Georgia Code")
and the Registrant's Bylaws set forth the extent to which the Registrant's
directors and officers may be indemnified against liabilities they may incur
while serving in such capacities. Under the Registrant's Bylaws, the Registrant
is required to indemnify its officers and directors against reasonable expenses
(including attorneys' fees) incurred by them in the defense of any action, suit
or proceeding to which they were made a party, or in defense of any claim, issue
or matter therein, by reason of the fact that they are or were officers,
directors, employees or agents of the Registrant, to the extent that they have
been successful, on the merits or otherwise, in such defense. The Registrant's
Bylaws also permit indemnification of its directors and officers against any
liability incurred in connection with any threatened, pending or completed
action, suit or proceeding by reason of the fact that they are or were directors
or officers of the Registrant or who, while directors or officers of the
Registrant, are or were serving at the Registrant's request as directors,
officers, partners, trustees, employees or agents of another entity, if they
acted in a manner they believed in good faith to be in, or not opposed to, the
best interests of the Registrant, or, with respect to any criminal proceeding,
had no reasonable cause to believe their conduct was unlawful, if a
determination has been made that they have met these standards of conduct. Such
indemnification in connection with a proceeding by or in the right of the
Registrant, however, is limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding. The Registrant must also
provide advancement of expenses incurred by any director or officer in defending
any such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such officer or director to repay such advances unless it is
ultimately determined that he or she is not entitled to indemnification by the
Registrant.
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or officer
was adjudged liable to the Registrant for appropriation of a business
opportunity or payment of unlawful dividends, in connection with a proceeding in
which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit or for intentional misconduct or a knowing violation
of law.
The indemnification provisions of the Georgia Code are essentially identical
to those set forth above, except that the Georgia Code permits, but does not
require, a corporation to advance expenses under the circumstances for such
payments described above.
The Registrant maintains an insurance policy insuring the Registrant and its
directors and officers against certain liabilities, including liabilities under
the Securities Act of 1933.
II-1
<PAGE>
The Registrant's Articles of Incorporation provide that no director of First
Alliance shall be personally liable to the Registrant or its shareholders for
monetary damages for a breach of the duty of care or of any other duty as a
director, except in the case of: (i) wrongful appropriation of any business
opportunity of the Registrant; (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation or law; (iii) liability
for unlawful distributions; or (iv) any transaction from which the director
derived an improper personal benefit.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
Exhibit
Number Description of Exhibits
- ------- -----------------------
1 -- Agreement and Plan of Merger, dated January 30, 1996 and amended April
29, 1996, between First Alliance and Premier (included as Appendix A to
the Joint Proxy Statement/Prospectus contained herein).
3.1 -- Articles of Incorporation of the Registrant, as amended.
3.2 -- Bylaws of the Registrant.(1)
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent
8.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent
10.1 -- Lease with Option to Purchase, dated August 28, 1985, with Addendum,
dated August 16, 1986, among various parties, including First Peoples
Bank of Cobb (now known as First Alliance Bank).(1)
10.2 -- Commercial Lease Contract, dated December 6, 1990, by and between Life
College, Inc. and Georgia Security Bank (now part of First Alliance
Bank).(1)
10.3 -- Letter Agreement dated September 15, 1995 between First Alliance Bank
and Life College.(2)
10.4 -- Individual Director's Defined Benefit Plan Agreements, dated January 1,
1994, between First Alliance Bank and each of its directors.(1)
10.5 -- Employment Agreement dated as of July 1, 1995 by and among First
Alliance, First Alliance Bank and J. Edward Mulkey, Jr.(2)
10.6 -- First Alliance Bancorp, Inc. 1995 Stock Option Plan, dated as of
August 8, 1995 and amended as of March 12, 1996, and related form of
employee incentive stock option agreement.(2)
10.7 -- Guaranty, dated March 25, 1996 by First Alliance relating to a
$2,000,000 loan made by The Bankers Bank to Interim Alliance
Corporation (d/b/a Alliance Finance).(2)
23.1 -- Consent of Powell, Goldstein, Frazer & Murphy (included in Exhibits 5
and 8)
II-3
<PAGE>
23.2(a) -- Consent of Mauldin & Jenkins regarding First Alliance Financial
statements
23.2(b) -- Consent of Mauldin & Jenkins regarding Premier financial statements
23.3 -- Consent of Price Waterhouse LLP
23.4 -- Consent of Alex Sheshunoff & Co. Investment Banking
24 -- Power of Attorney (see signature page to the Registration Statement)
(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Form 10-SB, filed with the Commission as of May 2, 1994 and as
amended by the Registrant's Form 10-SB/A filed with the Commission as of
August 19, 1994.
(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December 31,
1995.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
II-4
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions (see Item 20), or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on July 11, 1996.
FIRST ALLIANCE BANCORP, INC.
By: /s/ J. Edward Mulkey, Jr.
-------------------------
J. Edward Mulkey, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on
the signature pages to this Registration Statement constitutes and appoints J.
Edward Mulkey, Jr. and Frank H. Roach, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents in
connection herewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do so and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Billy L. Askea Director July 11, 1996
- ------------------ --------------
Billy L. Askea
/s/ James L. Coxwell, Sr. Director July 11, 1996
- ------------------------- --------------
James L. Coxwell, Sr.
/s/ Robert E. Flournoy, III Director July 11, 1996
- --------------------------- --------------
Robert E. Flournoy, III
II-6
<PAGE>
Signature Title Date
--------- ----- ----
/s/ James E. Freeman Director and Treasurer July 11, 1996
- -------------------- --------------
James E. Freeman
/s/ John B. Harwell Director and Secretary July 11, 1996
- ------------------- --------------
John B. Harwell
/s/ Charles E. Holmes Director July 11, 1996
- --------------------- --------------
Charles E. Holmes
/s/ Robin R. Howell Director July 11, 1996
- ------------------- --------------
Robin R. Howell
/s/ Nisbet S. Kendrick, III Director and Vice President July 11, 1996
- --------------------------- --------------
Nisbet S. Kendrick, III
/s/ Billy H. Martin Director July 11, 1996
- ------------------- --------------
Billy H. Martin
/s/ J. Edward Mulkey, Jr. Director, President and July 11, 1996
- ------------------------- Chief Executive Officer -------------
J. Edward Mulkey, Jr. (principal executive officer)
/s/ James L. Newsome Chairman of the Board July 11, 1996
- -------------------- of Directors --------------
James L. Newsome
/s/ A. McKoy Rose, Jr. M.D. Director July 11, 1996
- --------------------------- --------------
A. McKoy Rose, Jr. M.D.
/s/ Frank H. Roach CFO/Assistant Secretary July 11, 1996
- ------------------ (principal financial and --------------
Frank H. Roach accounting officer)
II-7
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description of
Number Exhibits
- ------ --------
1 - Agreement and Plan of Merger, dated January 30, 1996 and amended
April 29, 1996, between First Alliance and Premier, (included as
Appendix A to the Joint Proxy Statement/Prospectus contained
herein).
3.1 - Articles of Incorporation of the Registrant, as amended.
3.2 - Bylaws of the Registrant.(1)
5.1 - Opinion of Powell, Goldstein, Frazer & Murphy, including consent
8.1 - Opinion of Powell, Goldstein, Frazer & Murphy, including consent
10.1 - Lease with Option to Purchase, dated August 28, 1985, with
Addendum, dated August 16, 1986, among various parties, including
First Peoples Bank of Cobb (now known as First Alliance Bank).(1)
10.2 - Commercial Lease Contract, dated December 6, 1990, by and between
Life College, Inc. and Georgia Security Bank (now part of First
Alliance Bank).(1)
10.3 - Letter Agreement dated September 15, 1995 between First Alliance
Bank and Life College.(2)
10.4 - Individual Director's Defined Benefit Plan Agreements, dated
January 1, 1994, between First Alliance Bank and each of its
directors.(1)
10.5 - Employment Agreement dated as of July 1, 1995 by and among First
Alliance, First Alliance Bank and J. Edward Mulkey, Jr.(2)
10.6 - First Alliance Bancorp, Inc. 1995 Stock Option Plan, dated as of
August 8, 1995 and amended as of March 12, 1996, and related form
of employee incentive stock option agreement.(2)
10.7 - Guaranty, dated March 25, 1996 by First Alliance relating to a
$2,000,000 loan made by The Bankers Bank to Interim Alliance
Corporation (d/b/a Alliance Finance).(2)
23.1 - Consent of Powell, Goldstein, Frazer & Murphy (included in Exhibits
5 and 8)
<PAGE>
23.2(a) - Consent of Mauldin & Jenkins regarding First Alliance financial
statements
23.2(b) - Consent of Mauldin & Jenkins regarding Premier financial statements
23.3 - Consent of Price Waterhouse LLP
23.4 - Consent of Alex Sheshunoff & Co. Investment Banking
24 - Power of Attorney (see signature page to the Registration
Statement)
___________________
(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Form 10-SB, filed with the Commission as of May 2, 1994 and as
amended by the Registrant's Form 10-SB/A filed with the Commission as of
August 19, 1994.
(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December 31,
1995.
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
FIRST ALLIANCE BANCORP, INC.
1. The name of the corporation is First Alliance Bancorp, Inc.
2. The Articles of Incorporation of First Alliance Bancorp, Inc. are
hereby amended by deleting Article 5 thereof in its entirety and substituting
therefor the following:
"5.
"The aggregate number of shares which the Corporation shall have
authority to issue is 2,000,000, all of which shall be common shares
of $1.00 par value per share."
All other provisions of the Articles of Incorporation shall remain in full force
and effect.
3. The foregoing amendment was approved by the Board of Directors of the
corporation, without shareholder action, on March 12, 1996. Shareholder approval
was not required pursuant to the provisions of Section 14-2-1002(5) of the
Georgia Business Corporation Code.
IN WITNESS WHEREOF, the corporation has caused these Articles of Amendment to
be executed by its duly authorized officer this 8th day of May, 1996.
FIRST ALLIANCE BANCORP, INC.
By: /s/ J. Edward Mulkey, Jr.
--------------------------
J. Edward Mulkey, Jr.
President and Chief
Executive Officer
<PAGE>
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
COMMEX FINANCIAL CORPORATION
1. The name of the corporation is Commex Financial Corporation. The
Corporation was incorporated on April 22, 1988.
2. The Articles of Incorporation of Commex Financial Corporation are
amended by deleting Article 1 thereof in its entirety and substituting therefor
the following:
"The name of the corporation is First Alliance Bancorp, Inc."
All other provisions of the Articles of Incorporation shall remain in full force
and effect.
3. The foregoing amendment was adopted by resolution of the Board of
Directors of the corporation at a meeting held on May 21, 1991. Pursuant to
Section 14-2-1002(6) of the Georgia Business Corporation Code, shareholder
approval was not required to adopt this amendment.
IN WITNESS WHEREOF, the corporation has caused these Articles of Amendment
to be executed by its duly authorized officers this 15th day of January, 1992.
COMMEX FINANCIAL CORPORATION
By:/s/ Clyde A. McArthur
---------------------
Clyde A. McArthur
Vice President and Chief
Financial Officer
[CORPORATE SEAL]
ATTEST:
By:/s/ Priscilla Gamwell
---------------------
Priscilla Gamwell
Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
COMMEX FINANCIAL CORPORATION
1. The name of the corporation is Commex Financial Corporation. The
Corporation was incorporated on April 22, 1988.
2. The Articles of Incorporation of Commex Financial Corporation are
amended by deleting Article 5 thereof in its entirety and substituting therefor
the following:
"The aggregate number of shares which the Corporation shall have
authority to issue is 2,000,000, all of which shall be common shares
of $5.00 par value per share."
All other provisions of the Articles of Incorporation shall remain in full force
and effect.
3. The foregoing amendment was adopted by resolution of the Board of
Directors of the corporation at a meeting held on May 21, 1991 and was duly
approved by the shareholders of the corporation on June 18, 1991 in accordance
with the provisions of Section 14-2-1003 of the Georgia Business Corporation
Code.
IN WITNESS WHEREOF, the corporation has caused these Articles of Amendment to
be executed by its duly authorized officers this 15th day of January, 1992.
COMMEX FINANCIAL CORPORATION
By:/s/ Clyde A. McArthur
---------------------
Clyde A. McArthur
Vice President and Chief
Financial Officer
[CORPORATE SEAL]
ATTEST:
By:/s/ Priscilla Gamwell
---------------------
Priscilla Gamwell
Secretary
<PAGE>
ARTICLES OF INCORPORATION
OF
COMMEX FINANCIAL CORPORATION
1.
The name of the Corporation is COMMEX FINANCIAL CORPORATION.
2.
The Corporation is organized pursuant to the Georgia Business Corporation
Code.
3.
The Corporation shall have perpetual duration.
4.
The purposes for which the Corporation is organized are to conduct any
businesses and engage in any activities not specifically prohibited to
corporations for profit under the laws of the State of Georgia, and the
Corporation shall have all powers necessary to conduct such businesses and
engage in such activities, including, but not limited to, the powers enumerated
in the Georgia Business Corporation Code or any amendment thereto.
5.
The aggregate number of shares which the Corporation shall have authority to
issue is 1,000,000, all of which shall be common shares of $5.00 par value per
share.
6.
Shares of the Corporation may be issued by the Corporation for such
consideration, not less than the par value thereof, as shall be fixed from time
to time by the Board of Directors.
7.
No shareholder shall have any preemptive right to subscribe for or to
purchase any shares or other securities issued by the Corporation.
8.
Subject to the provisions of Section 14-2-91 of the Georgia Business
Corporation Code, the Board of Directors shall have the power to distribute a
portion of the assets of the Corporation, in cash or in property, to holders of
shares of the Corporation out of the capital surplus of the Corporation.
<PAGE>
9.
The initial Board of Directors of the Corporation shall consist of the
following members, whose names and addresses are:
Henry P. Bradford Charles E. Holmes
3701 Frey Lake Road NW 4960 Burnt Hickory Road
Kennesaw, GA 30144 Kennesaw, GA 30144
James L. Coxwell James L. Newsome
P. O. Box 692 3830 Stylesboro Road NW
Acworth, GA 30101 Kennesaw, GA 30144
Robert E. Flournoy, III J. O. Stephenson
356 Redwood Drive 2060 Pine Hill Circle
Marietta, GA 30101 Kennesaw, GA 30144
James E. Freeman E. W. Teague
483 Kingswood Drive 4640 Due West Road
Marietta, GA 30064 Kennesaw, GA 30144
10.
The Corporation shall have the full power to purchase and otherwise acquire,
and dispose of, its own shares and securities granted by the laws of the State
of Georgia and shall have the right to purchase its shares out of its unreserved
and unrestricted capital surplus available therefor as well as out of its
unreserved and unrestricted earned surplus available therefor.
11.
The address of the initial registered office of the Corporation shall be
located at 2760 Cobb Parkway, Kennesaw, Cobb County, Georgia 30144, Attention:
Mr. Robert E. Flournoy, III, registered agent of the Corporation.
12.
The Corporation shall not commence business until it shall have received not
less than $500 in payment for the issuance of its shares.
13.
The name and address of the Incorporator is Robert E. Flournoy, III, 236
Washington Avenue, Marietta, Georgia 30061.
-2-
<PAGE>
14.
No director of the Corporation shall be personally liable to the Corporation
or its shareholders for monetary damages for a breach of duty of care or other
duty as a director, provided that this elimination of liability shall not
eliminate or limit the liability of a director (i) for an appropriation, in
violation of his duties, of any business opportunity of the Corporation; (ii)
for acts of omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for the types of liability set forth in
Section 14-2-154 of the Georgia Business Corporation Code or (iv) for any
transaction from which the director derived an improper personal benefit.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 30th day of March, 1988.
/s/ Robert E. Flournoy, III
---------------------------
Incorporator
-3-
<PAGE>
EXHIBIT 5.1
July 11, 1996
First Alliance Bancorp, Inc.
63 Barrett Parkway, N.E.
Marietta, Georgia 30066
Ladies and Gentlemen:
This opinion is given in connection with the filing by First Alliance
Bancorp, Inc. ("First Alliance"), a corporation organized and existing under the
laws of the State of Georgia, with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, of a Registration Statement on Form S-4
("Registration Statement") with respect to the shares of the $1.00 par value
common stock of First Alliance ("First Alliance Common Stock") to be issued in
connection with the proposed merger of Premier Bancshares, Inc. ("Premier") with
and into First Alliance (the "Merger").
The Merger is intended to be effected pursuant to an Agreement and Plan of
Reorganization dated as of January 30, 1996 and amended as of April 29, 1996
(the "Agreement") between First Alliance and Premier, pursuant to which each
outstanding share of no par value common stock of Premier (other than shares
held by Premier, First Alliance or their subsidiaries or by shareholders who
perfect their dissenters' rights) will be converted into and exchanged for the
right to receive one share of First Alliance Common Stock.
In rendering this opinion, we have examined such corporate records and
documents, including the Agreement, as we have deemed relevant and necessary as
the basis for the opinion set forth herein.
Based upon the foregoing, it is our opinion that the shares of First
Alliance Common Stock, when issued to the holders of Premier Common Stock on the
terms and upon the fulfillment of the conditions set forth in the Agreement,
will be validly issued, fully paid and non-assessable under the Georgia Business
Corporation Code.
<PAGE>
First Alliance Bancorp, Inc.
July 11,1996
Page 5
We hereby consent to the use of this opinion and to the reference made to
our Firm under the caption "Legal Matters" in the Joint Proxy
Statement/Prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE>
EXHIBIT 8.1
PGFM
DRAFT
6/12/96
July 11, 1996
First Alliance Bancorp, Inc.
P.O. Box 670148
63 Barrett Parkway, N.E.
Marietta, GA 30066-0120
Premier Bancshares, Inc.
2180 Atlanta Place
950 East Paces Ferry Road
Atlanta, GA 30326
Ladies and Gentlemen:
You have requested our opinion with respect to certain federal income tax
consequences of the proposed merger of Premier Bancshares, Inc., a corporation
organized and existing under the laws of the State of Georgia ("Premier"), with
and into First Alliance Bancorp, Inc., a corporation organized and existing
under the laws of the State of Georgia ("First Alliance"). For purposes of
rendering this opinion, we have reviewed and relied on the Agreement and Plan of
Reorganization by and between Premier and First Alliance, dated as of January
30, 1996, as amended by that certain Amendment No. 1 to Agreement and Plan of
Reorganization, dated as of April 29, 1996 (the "Reorganization Agreement"), the
Form S-4 Registration Statement filed with the Securities and Exchange
Commission (the "S-4") relating to the First Alliance securities to be issued
pursuant to the Reorganization Agreement, the certificates attached hereto, and
such other documents as we have considered appropriate. Unless otherwise
indicated, terms used in this opinion have the same meaning as in the
Reorganization Agreement.
For purposes of this opinion, we have assumed that the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set forth
in the Reorganization Agreement. We
<PAGE>
have assumed that there is no plan or intention on the part of the shareholders
of Premier to sell, exchange or otherwise dispose of a number of shares of First
Alliance Common Stock received in the Merger that would reduce the Premier
shareholders' ownership of First Alliance Common Stock to a number of shares
having a value, determined as of the Effective Time, of less than fifty percent
(50%) of the value of all of the formerly outstanding shares of Premier Common
Stock as of the Effective Time.
In addition, we have assumed with your permission that the facts and
representations certified to us in writing by Premier and First Alliance which
are set forth in the certificates attached hereto, will apply as of the
Effective Time. Copies of such certificates are attached hereto and
incorporated herein by reference. We have neither investigated nor verified the
accuracy of any of the facts which have been certified to us, upon which this
opinion is based.
This opinion is based also on the Internal Revenue Code, Treasury
Regulations, Internal Revenue Service rulings, judicial decisions, and other
applicable authority, all as in effect on the date of this opinion. The legal
authorities on which this opinion is based may change at any time. Any such
change may be applied retroactively and could modify the opinions expressed
herein. This opinion does not address any tax considerations under foreign,
state, or local laws, or the tax considerations to certain Premier shareholders
in light of their particular circumstances, including persons who are not United
States persons, dealers in securities, tax-exempt entities, shareholders who do
not hold Premier Common Stock as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code, and shareholders who acquired their shares of
Premier Common Stock pursuant to the exercise of Premier options or otherwise as
compensation.
Based upon and subject to the foregoing, we are of the opinion that
provided the Merger qualifies as a statutory merger under the GBCC, the Merger
will constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code, and that the following are certain federal income tax
consequences which will result:
(a) No gain or loss will be recognized for federal income tax purposes
by Premier shareholders upon the exchange of their shares of Premier Common
Stock for shares of First Alliance Common Stock. Each Premier shareholder's
basis in the First Alliance Common Stock received in the exchange will be
equal to such shareholder's basis in the Premier Common Stock surrendered
in the Merger. Each Premier shareholder's holding period of the First
Alliance Common Stock (for purposes of determining whether gain or loss on
a subsequent sale of such stock is long-term or short-term gain or loss)
will include the period that such shareholder held his or her Premier
Common Stock, provided that the Premier Common Stock was a capital asset in
the hands of such shareholder.
<PAGE>
(b) Premier shareholders who receive solely cash pursuant to their
statutory right to dissent will be treated as having received such payment
in redemption of their stock, as provided in Section 302(a) of the Internal
Revenue Code. Generally, any gain or loss recognized by any such Premier
shareholder will be capital gain or loss, provided (i) the Premier Common
Stock constitutes a capital asset in the hands of such shareholder, and
(ii) the requirements of Section 302(b)(1), (2) or (3) of the Internal
Revenue Code are met. Each affected Premier shareholder should consult such
shareholder's own tax advisor for the tax effect of such redemption (i.e.,
exchange treatment or dividend).
(c) No income, gain or loss will be recognized for federal income tax
purposes by First Alliance or Premier as a consequence of the Merger,
except for deferred gain or loss recognized pursuant to Treasury
Regulations issued under Section 1502 of the Internal Revenue Code.
This opinion is being rendered solely to the parties to whom it is
addressed and may be relied upon by them and by the shareholders of Premier.
This opinion may not be relied upon by any other party without the express
written permission of our Firm. We hereby consent to the reference to our Firm
in, and to the filing of this opinion as an exhibit to, the S-4.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE>
EXHIBIT 23.2(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our report,
dated January 19,1996, relating to the consolidated financial statements of
First Alliance Bancorp, Inc. and subsidiaries, and to the reference to our Firm
under the caption "Experts" in the Prospectus.
/s/ MAULDIN & JENKINS
Atlanta, Georgia
July 11, 1996
<PAGE>
EXHIBIT 23.2(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our report,
dated June 12, 1996, relating to the consolidated financial statements of
Premier Bancshares, Inc. and subsidiaries, and to the reference to our Firm
under the caption "Experts" in the Prospectus.
/s/ Mauldin & Jenkins
---------------------
Atlanta, Georgia
July 11, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement constituting part of this
Registration Statement on Form S-4 of First Alliance Bancorp, Inc. of our report
dated May 19, 1995 relating to the financial statements of Premier Bancshares,
Inc. as of March 31, 1995 and for the year then ended, which appear in such
Proxy Statement. We also consent to the reference to us under the heading
"Experts" in such Proxy Statement.
/s/ PRICE WATERHOUSE LLP
Atlanta, Georgia
July 11, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
In connection with the proposed merger of Premier Bancshares, Inc., Atlanta,
Georgia and First Alliance Bancorp, Inc., Marietta, Georgia, the undersigned,
acting as an independent financial analyst to the common shareholders of First
Alliance Bancorp, Inc., hereby consents to the reference to our firm in the
proxy statement and to the inclusion of our fairness opinion as an exhibit to
the proxy statement.
July 11, 1996
-------------
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
AUSTIN, TEXAS
By: /s/ Gerard Feil
________________
