<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of Earliest Event Reported): OCTOBER 20, 1997
------------------
PREMIER BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 0-24528 58-1793778
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(Address of principal executive offices, including zip code)
(404) 814-3090
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
ITEM 5. OTHER EVENTS
This Current Report on Form 8-K/A is filed in order to report (i)
financial statements of Premier Bancshares, Inc. (the "Company") for the fiscal
years ended December 31, 1994, 1995 and 1996, restated to reflect the Company's
merger with Central and Southern Holding Company on June 23, 1997, which was
accounted for as a pooling of interests, and (ii) certain pro forma financial
information for December 31, 1994, 1995 and 1996, and June 30, 1996 and June
30, 1997, which reflect the Company's proposed merger with Citizens Gwinnett
Bankshares, Inc. as if such merger was accounted for as a pooling of interest.
Such historical financial and pro forma statements and information were included
as a part of the Company's Form S-4 Registration Statement No. 333-36775 filed
with the Securities and Exchange Commission on September 29, 1997, and effective
on October 16, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits
--------
23. Consent of Mauldin & Jenkins, LLC
99.1 Financial Statements of Premier Bancshares, Inc. for fiscal years
ended December 31, 1994, 1995 and 1996, restated to reflect the merger with
Central and Southern Holding Company on June 23, 1997 which was accounted for as
a pooling of interests.
99.2 Certain Pro forma financial information for the six months ended
June 30, 1996 and June 30, 1997 and the fiscal years ended December 31, 1994,
1995 and 1996, to reflect the merger with Citizens Gwinnett Bankshares, Inc. as
if the merger was effected on such dates and as if the merger was accounted for
as a pooling of interests.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PREMIER BANCSHARES, INC.
Date: November 4, 1997 /s/ Darrell D. Pittard
----------------------
Darrell D. Pittard,
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Current Report on Form 8-K/A of our report,
dated January 31, 1997, except for Note 2 as to which the date in June 23, 1997,
relating to the consolidated financial statements of Premier Bancshares, Inc.
and subsidiaries.
MAULDIN & JENKINS, LLC
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
November 4, 1997
<PAGE>
EXHIBIT 99.1
------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Premier Bancshares, Inc.
and Subsidiaries
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1996. 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 did not audit the financial statements of Central and Southern
Holding Company, a company which was pooled with Premier Bancshares, Inc. in
1997, as explained in Note 2 to the consolidated financial statements, which
statements are included in the restated 1996 financial statements and reflect
total assets of $225.8 million and $207.8 million as of December 31, 1996 and
1995, respectively, and total revenues of $18.5 million, $17.2 million and
$18.4 million for the three years in the period ended December 31, 1996. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to data included for Central and
Southern Holding Company, is based solely on the report of the other auditors.
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, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Premier Bancshares, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Mauldin & Jenkins, L.L.C.
Atlanta, Georgia
January 31, 1997, except for Note 2 as to
which the date is June 23, 1997
F-1
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks............................ $ 19,540,578 $ 18,109,932
Interest-bearing deposits in banks................. 2,697,173 12,347,819
Federal funds sold................................. 42,896,410 19,217,208
Securities available-for-sale...................... 99,731,663 110,311,022
Loans held for sale................................ 24,408,287 25,912,226
Loans.............................................. 313,289,113 246,944,896
Less allowance for loan losses..................... 6,568,371 5,992,224
------------ ------------
Loans, net........................................ 306,720,742 240,952,672
Premises and equipment............................. 12,564,637 8,522,773
Other real estate owned............................ 949,923 907,474
Goodwill and other intangibles..................... 2,827,063 2,467,541
Other assets....................................... 7,607,782 6,624,952
------------ ------------
Total assets..................................... $519,944,258 $445,373,619
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand........................ $ 48,272,239 $ 45,963,923
Interest-bearing demand........................... 98,544,325 76,177,893
Savings........................................... 17,615,424 18,321,314
Time, $100,000 and over........................... 74,303,940 62,762,923
Other time........................................ 193,161,821 155,701,544
------------ ------------
Total deposits................................... 431,897,749 358,927,597
Securities sold under repurchase agreements........ 11,864,486 3,658,634
Federal Home Loan Bank advances.................... 4,625,000 11,125,000
Other borrowings................................... 18,752,230 19,678,642
Other liabilities.................................. 5,611,512 5,876,704
------------ ------------
Total liabilities................................ 472,750,977 399,266,577
------------ ------------
Minority interest in subsidiary.................... 13,618 16,754
------------ ------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1 at December 31, 1996
and $5 at December 31, 1995; 20,000,000 shares
authorized; 8,026,765 and 6,128,546 issued, re-
spectively....................................... 8,026,765 30,642,730
Capital surplus................................... 25,045,780 2,407,315
Retained earnings................................. 15,131,024 12,881,849
Unrealized gains on securities available-for-sale,
net of tax....................................... 109,534 705,832
------------ ------------
48,313,103 46,637,726
Treasury stock, at cost (123,494 and 59,528
shares).......................................... (1,133,440) (547,438)
------------ ------------
Total stockholders' equity....................... 47,179,663 46,090,288
------------ ------------
Total liabilities and stockholders' equity....... $519,944,258 $445,373,619
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans................................... $31,734,674 $25,076,553 $19,868,143
Taxable securities...................... 5,890,316 6,254,570 5,687,540
Nontaxable securities................... 657,417 682,323 922,109
Deposits in banks....................... 426,737 173,807 17,913
Other short-term investments............ 1,542,997 1,387,833 1,226,892
----------- ----------- -----------
Total interest income.................. 40,252,141 33,575,086 27,722,597
----------- ----------- -----------
INTEREST EXPENSE
Deposits................................ 17,481,450 14,371,518 12,349,143
Other borrowings........................ 2,756,476 2,290,912 678,485
----------- ----------- -----------
Total interest expense................. 20,237,926 16,662,430 13,027,628
----------- ----------- -----------
Net interest income.................... 20,014,215 16,912,656 14,694,969
PROVISION FOR LOAN LOSSES................ (417,602) (700,341) 285,000
----------- ----------- -----------
Net interest income after provision for
loan losses........................... 20,431,817 17,612,997 14,409,969
----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts..... 1,718,883 1,578,145 1,652,479
Other service charges and fees.......... 1,375,896 892,834 450,957
Gain on mortgage loans held for sale.... 4,720,267 2,327,916 99,969
Mortgage loan fees...................... 4,180,748 3,638,835 1,183,601
Net realized gains (losses) on sales of
securities............................. 135,295 (205,572) 212,407
Other operating income.................. 987,021 854,831 1,022,766
----------- ----------- -----------
Total other income..................... 13,118,110 9,086,989 4,622,179
----------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits.......... 15,808,369 11,734,103 8,344,291
Occupancy and equipment, net............ 3,290,064 2,406,340 2,144,160
Stationery and supplies................. 592,138 443,785 446,244
Deposit insurance....................... 537,756 452,630 788,308
Goodwill amortization expense........... 207,489 199,225 -
Other operating expenses................ 5,910,113 5,142,333 4,436,040
----------- ----------- -----------
Total other expenses................... 26,345,929 20,378,416 16,159,043
----------- ----------- -----------
Income before income taxes and minority
interest in net income of subsidiary.. 7,203,998 6,321,570 2,873,105
INCOME TAX EXPENSE....................... 1,698,409 1,760,917 964,581
----------- ----------- -----------
Net income before minority interest in
net income of subsidiary.............. 5,505,589 4,560,653 1,908,524
MINORITY INTEREST IN NET INCOME OF SUB-
SIDIARY................................. 11,850 12,709 --
----------- ----------- -----------
NET INCOME............................... $ 5,493,739 $ 4,547,944 $ 1,908,524
=========== =========== ===========
NET INCOME PER SHARE OF COMMON STOCK..... $ .68 $ .57 $ .25
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING...... 8,091,369 7,982,660 7,041,663
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
PREFERRED STOCK COMMON STOCK AVAILABLE- TREASURY STOCK
------------------- --------------------- CAPITAL RETAINED FOR-SALE, -------------------
SHARES PAR VALUE SHARES PAR VALUE SURPLUS EARNINGS NET OF TAX SHARES PAR VALUE
------- ---------- --------- ----------- ----------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER
31, 1993........ 37,969 $1,708,605 5,354,289 $26,771,445 $ 63,340 $ 8,689,965 $ -- -- $ --
Net income...... -- -- -- -- -- 1,908,524 -- -- --
Common stock
dividends
declared....... -- -- -- -- -- (407,678) -- -- --
Preferred stock
dividends
declared....... -- -- -- -- -- (178,913) -- -- --
Stock issued.... -- -- 33,588 167,940 207,072 -- -- -- --
Conversion of
preferred stock
into common
stock.......... (37,969) (1,708,605) 379,690 1,898,450 (189,845) -- -- -- --
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ -- -- -- -- -- 50,483 (1,942,975) -- --
------- ---------- --------- ----------- ----------- ----------- ---------- ------- -----------
BALANCE, DECEMBER
31, 1994........ -- -- 5,767,567 28,837,835 80,567 10,062,381 (1,942,975) -- --
Net income...... -- -- -- -- -- 4,547,944 -- -- --
5% stock
dividend....... -- -- 76,206 381,030 628,699 (1,012,822) -- -- --
Stock issued.... -- -- 284,773 1,423,865 1,698,049 -- -- -- --
Common stock
dividends
declared....... -- -- -- -- -- (715,654) -- -- --
Acquisition of
treasury stock. -- -- -- -- -- -- -- 59,528 (547,438)
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ -- -- -- -- -- -- 2,648,807 -- --
------- ---------- --------- ----------- ----------- ----------- ---------- ------- -----------
BALANCE, DECEMBER
31, 1995........ -- -- 6,128,546 30,642,730 2,407,315 12,881,849 705,832 59,528 (547,438)
Net income...... -- -- -- -- -- 5,493,739 -- -- --
Stock options
exercised...... -- -- 2,250 2,250 20,250 -- -- -- --
Common stock
dividends
declared....... -- -- -- -- -- (3,244,564) -- -- --
Recapitalization. -- -- -- (24,514,184) 24,514,184 -- -- -- --
Acquisition of
treasury stock. -- -- -- -- -- -- -- 63,966 (586,002)
1.8055 stock
split.......... -- -- 1,895,969 1,895,969 (1,895,969) -- -- -- --
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ -- -- -- -- -- -- (596,298) -- --
------- ---------- --------- ----------- ----------- ----------- ---------- ------- -----------
BALANCE, DECEMBER
31, 1996........ -- $ -- 8,026,765 $ 8,026,765 $25,045,780 $15,131,024 $ 109,534 123,494 $(1,133,440)
======= ========== ========= =========== =========== =========== ========== ======= ===========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, DECEMBER
31, 1993........ $37,233,355
Net income...... 1,908,524
Common stock
dividends
declared....... (407,678)
Preferred stock
dividends
declared....... (178,913)
Stock issued.... 375,012
Conversion of
preferred stock
into common
stock.......... --
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ (1,892,492)
-------------
BALANCE, DECEMBER
31, 1994........ 37,037,808
Net income...... 4,547,944
5% stock
dividend....... (3,093)
Stock issued.... 3,121,914
Common stock
dividends
declared....... (715,654)
Acquisition of
treasury stock. (547,438)
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ 2,648,807
-------------
BALANCE, DECEMBER
31, 1995........ 46,090,288
Net income...... 5,493,739
Stock options
exercised...... 22,500
Common stock
dividends
declared....... (3,244,564)
Recapitalization. --
Acquisition of
treasury stock. (586,002)
1.8055 stock
split.......... --
Net change in
unrealized
gains (losses)
on securities
available-for-
sale, net of
tax............ (596,298)
-------------
BALANCE, DECEMBER
31, 1996........ $47,179,663
=============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income before minority interest in
net income of subsidiary.............. $ 5,505,589 $ 4,560,653 $ 1,908,524
Adjustments to reconcile net income to
net cash provided by (used in) operat-
ing activities:
Depreciation, amortization and accre-
tion................................. 1,397,576 1,032,569 1,049,266
Provision for loan losses............. (417,602) (700,341) 285,000
Deferred income taxes................. 141,418 213,789 (67,264)
Net (increase) decrease in loans held
for sale............................. 1,503,939 (12,958,178) (679,265)
Net realized (gains) losses on sales
of securities........................ (135,295) 205,572 (212,407)
Gain on sale of branches.............. -- -- (115,324)
Other operating activities............ (2,844,526) 2,902,998 2,440,966
----------- ----------- -----------
Net cash provided by (used in) oper-
ating activities.................... 5,151,099 (4,742,938) 4,609,496
----------- ----------- -----------
INVESTING ACTIVITIES
Purchases of securities available-for-
sale.................................. (39,989,256) (24,034,354) (9,294,404)
Proceeds from sales of securities
available-for-sale.................... 11,534,120 12,592,520 2,702,013
Proceeds from maturities of securities
available-for-sale.................... 38,231,931 9,687,075 12,181,901
Purchases of securities held-to-maturi-
ty.................................... -- (19,494,374) (9,412,235)
Proceeds from sales of securities held-
to-maturity........................... -- 4,560,718 5,076,098
Proceeds from maturities of securities
held-to-maturity...................... -- 16,225,345 15,176,581
Net (increase) decrease in Federal
funds sold............................ (23,679,202) 14,961,485 (9,098,693)
Net (increase) decrease in interest-
bearing deposits in banks............. 9,650,646 (12,331,730) 83,911
Net (increase) decrease in loans....... (65,485,177) (18,721,859) 16,328,991
Proceeds from sales of premises and
equipment............................. 26,673 13,830 31,616
Purchase of premises and equipment..... (5,254,843) (1,413,750) (763,064)
Sale of branches....................... -- -- (40,928,208)
Net cash acquired in business combina-
tions................................. -- 678,430 --
Investment in subsidiary............... -- (5,894,871) --
----------- ----------- -----------
Net cash used in investing activi-
ties................................ (74,965,108) (23,171,535) (17,915,493)
----------- ----------- -----------
</TABLE>
F-5
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in deposits. $ 72,970,152 $ 33,048,590 $ (3,723,940)
Net increase (decrease) in repur-
chase agreements................... 8,205,852 (3,056,366) 6,715,000
Net increase (decrease) in other
borrowings......................... (926,412) 3,275,506 10,029,263
Net decrease in Federal Home Loan
Bank advances...................... (6,500,000) (2,059,990) --
Dividends paid...................... (1,926,449) (718,747) (586,591)
Dividends paid to minority
shareholder........................ (14,986) -- --
Acquisition of treasury stock....... (586,002) (547,438) --
Proceeds from exercise of stock
options............................ 22,500 -- --
Proceeds from common stock issued... -- 3,121,914 375,012
------------ ------------ ------------
Net cash provided by financing
activities........................ 71,244,655 33,063,469 12,808,744
------------ ------------ ------------
Net increase in cash and due from
banks............................... 1,430,646 5,148,996 (497,253)
Cash and due from banks at beginning
of year............................. 18,109,932 12,960,936 13,458,189
------------ ------------ ------------
Cash and due from banks at end of
year................................ $ 19,540,578 $ 18,109,932 $ 12,960,936
============ ============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest........................... $ 20,011,603 $ 16,494,593 $ 13,100,258
Income taxes....................... $ 2,205,556 $ 1,412,504 $ 368,322
BUSINESS COMBINATION
Net cash acquired................... $ 678,430
============ ============
Securities available-for-sale....... $ 1,563,926
Loans held for sale................. 7,829,133
Loan................................ 37,517,520
Premises and equipment.............. 1,401,710
Other assets........................ 1,240,845
Goodwill............................ 2,547,828
Deposits............................ (31,031,023)
Advances from Federal Home Loan
Bank............................... (13,184,990)
Subordinated debentures............. (1,974,394)
Other liabilities................... (694,114)
------------ ------------
Net assets acquired, net of cash
and due from banks of $678,430.... $ 5,216,441
============ ============
NONCASH TRANSACTIONS
Unrealized (gains) losses on
securities available-for-sale...... $ 917,213 $ (3,089,789) $ 2,311,948
Principal balances of loans
transferred to other real estate... $ 528,650 $ 818,103 $ 1,142,865
Transfer of investment securities
from held-to-maturity to available-
for-sale........................... -- 35,073,414 --
Conversion of preferred stock into
common stock....................... -- -- 1,708,605
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Premier Bancshares, Inc., (the "Company" and formerly First Alliance/Premier
Bancshares, Inc.) is a bank and thrift holding company whose business is
conducted by its wholly-owned subsidiaries, First Alliance Bank located in
Marietta, Georgia, Premier Bank located in Acworth, Georgia, Central and
Southern Bank of Georgia located in Milledgeville, Georgia, Central and
Southern Bank of North Georgia, FSB located in Greensboro, Georgia, Premier
Lending Corporation ("Lending") located in Atlanta, Georgia, and Interim
Alliance Corporation d/b/a Alliance Finance located in Smyrna, Georgia, an 80%
owned subsidiary.
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 in connection with evaluating and pursuing potential
business acquisitions.
First Alliance Bank is a commercial bank with operations in Marietta and
Kennesaw, Georgia. First Alliance Bank provides a full range of banking
services to individual and corporate customers in its primary market area of
Cobb County and surrounding counties.
Premier Bank was acquired by the Company during 1995 in a business
combination accounted for as a purchase. Premier Bank provides a full range of
banking services to individual and corporate customers in its primary market
area of Cobb County and surrounding counties.
Central and Southern Bank of Georgia ("Milledgeville") and Central and
Southern Bank of North Georgia, FSB ("North Georgia") were acquired by the
Company on June 23, 1997 in a business combination accounted for as a pooling
of interests. They provide a full range of banking services to individuals and
corporate customers in their primary market areas of central and north Georgia,
respectively.
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 affiliated and non-affiliated financial institutions.
Alliance Finance provides lending and financing services to consumer and
business enterprises. The Finance Company's primary activities consist of
origination of consumer loans including mortgage loans, retail sales financing
and related insurance products.
NAME CHANGE
In January 1997, the Company changed its name from First Alliance/Premier
Bancshares, Inc. to Premier Bancshares, Inc.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany transactions and accounts are
eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the financial
services industry. In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those estimates.
F-7
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection and amounts due from banks
are included in cash and due from banks.
The Company and its subsidiaries maintain amounts due from banks which, at
times, may exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
SECURITIES
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. All
other debt securities are classified as available-for-sale and carried at fair
value with net unrealized gains and losses included in stockholders' equity,
net of tax. Marketable equity securities are carried at fair value with net
unrealized gains and losses included in stockholders' equity. Other equity
securities without a readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
LOANS HELD FOR SALE
Loans held for sale include primarily mortgage loans which are carried at the
lower of aggregate cost or fair value. The determination of fair 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 mortgage loans
on a servicing released basis. The Company's practice is to originate mortgage
loans subject to existing purchase commitments from third party investors.
LOANS
Loans are carried at their principal amounts outstanding less unearned
income, net deferred loan fees and costs and the allowance for loan losses.
Interest income on most loans is credited to income based on the principal
amount outstanding. Interest on other loans is recognized on the sum-of-the-
months method, the results of which are not materially different from generally
accepted accounting principles.
Loan origination fees and certain direct costs incurred in originating 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. The results of operations are not materially different than
the results which would be obtained by accounting for all loan fees and costs
in accordance with generally accepted accounting principles.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the Company's allowance
for loan losses, and may require the Company to record additions to the
allowance based on their judgment about information available to them at the
time of their examinations.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When accrual of interest is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
F-8
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Company adopted the provisions of Statement of Financial Accounting
Standard No. 114, "Accounting by Creditors for Impairment of a Loan" as amended
by Statement of Financial Accounting Standard No. 118, "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures", on January 1,
1995.
A loan is impaired when it is probable the Company will be unable to collect
all principal and interest payments due in accordance with the terms of the
loan agreement. Individually identified impaired loans are measured based on
the present value of payments expected to be received, using the contractual
loan rate as the discount rate. Alternatively, measurement may be based on
observable market prices or, for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds the measure
of fair value, a valuation allowance is established as a component of the
allowance for loan losses. Changes to the valuation allowance are recorded as a
component of the provision for loan losses.
The Company considers the following type loans to be impaired:
(1) all nonaccrual loans, (2) loans that have been restructured in a
troubled debt restructuring provided that the restructured loan agreement
specifies an interest rate that is less than the Company would be willing
to accept at the time of the restructuring for a new loan with comparable
risk or the loan becomes impaired based on the terms specified by the
restructured loan agreement, and (3) any other loan in which management
does not expect to collect all contractual principal and interest payments
in accordance with the terms of the loan agreement.
The Company has not identified large groups of smaller-balance homogeneous
loans which are collectively evaluated for impairment. Any loan that meets the
characteristics as described above are considered to be impaired regardless of
loan type or balance.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent gains
or losses on sale and any subsequent adjustment to the value are recorded as
other expenses.
GOODWILL
The excess of the purchase price over the fair value of net assets acquired
is being amortized using the straight-line method over a period not to exceed
20 years. On an ongoing basis, management reviews the valuation and
amortization of goodwill. As part of this review, management considers the
value and future benefits of the net earnings generated by the net assets
acquired to determine that no impairment has occurred.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current income tax
provisions approximate taxes to be paid or refunded for the applicable year.
Deferred tax assets and liabilities are recognized for the temporary
differences between the bases of assets and liabilities as measured by tax laws
and their bases as reported in the
F-9
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
financial statements. Deferred tax expense or benefit is then recognized for
the change in deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards and tax credits
will be realized. A valuation allowance is recorded for those deferred tax
items for which it is more likely than not that realization will not occur.
The Company and the subsidiaries file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income taxes
(benefits) of the consolidated group.
NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding. Common stock equivalents consist of stock options and warrants.
NOTE 2. RECENT ACQUISITIONS
On June 23, 1997, the Company acquired all of the outstanding common stock of
Central and Southern Holding Company ("C&S") in exchange for 3,653,523 shares
of the Company's outstanding common stock.
The acquisition of C&S has been accounted for as pooling of interests and,
accordingly, all prior financial statements have been restated to include the
accounts and operations of the pooled company. Net interest income and net
income of the separate companies for periods preceding the mergers are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net interest income
Premier................................................ $11,734 $ 9,020 $ 6,843
C&S.................................................... 8,280 7,893 7,852
------- ------- -------
Combined............................................... $20,014 $16,913 $14,695
======= ======= =======
Net income Premier...................................... $ 2,552 $ 2,002 $ 291
C&S.................................................... 2,954 2,559 1,617
------- ------- -------
Combined............................................... $ 5,506 $ 4,561 $ 1,908
======= ======= =======
</TABLE>
F-10
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1996:
U. S. Government and agency
securities................. $ 40,743,161 $ 107,258 $(175,319) $ 40,675,100
State and municipal securi-
ties....................... 9,836,329 493,994 (21) 10,330,302
Mortgage-backed securities.. 46,535,236 261,558 (494,809) 46,301,985
Other securities............ 2,479,345 -- (55,069) 2,424,276
------------- ---------- --------- ------------
$ 99,594,071 $ 862,810 $(725,218) $ 99,731,663
============= ========== ========= ============
December 31, 1995:
U. S. Government and agency
securities................. $ 46,222,209 $ 386,665 $(235,740) $ 46,373,134
State and municipal securi-
ties....................... 9,869,383 590,363 (4,973) 10,454,773
Mortgage-backed securities.. 51,248,580 658,686 (312,149) 51,595,117
Other securities............ 1,916,045 -- (28,047) 1,887,998
------------- ---------- --------- ------------
$ 109,256,217 $1,635,714 $(580,909) $110,311,022
============= ========== ========= ============
</TABLE>
The amortized cost and fair value of securities as of December 31, 1996 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid with or without penalty. Therefore, these
securities and other securities are not included in the maturity categories in
the following summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-
FOR-SALE
-----------------------
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due in one year or less................................ $ 4,504,383 $ 4,541,878
Due from one year to five years........................ 39,644,706 39,760,728
Due from five to ten years............................. 5,799,850 6,039,246
Due after ten years.................................... 630,551 663,550
Mortgage-backed securities............................. 46,535,236 46,301,985
Other securities....................................... 2,479,345 2,424,276
----------- -----------
$99,594,071 $99,731,663
=========== ===========
</TABLE>
Securities with a carrying value of approximately $53,281,000 and $54,025,000
at December 31, 1996 and 1995, respectively, were pledged to secure public
deposits and for other purposes.
Gains and losses on sales of securities consist of the following:
<TABLE>
<CAPTION>
HELD-TO-MATURITY
------------------
1995 1994
-------- --------
<S> <C> <C>
Gross gains................................................. $ 725 $244,162
Gross losses................................................ (31,503) (3,187)
-------- --------
Net realized gains (losses)................................. $(30,778) $240,975
======== ========
</TABLE>
F-11
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. SECURITIES, CONTINUED
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE 1996
-----------------------------
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Gross gains..................................... $148,325 $ 134,926 $ 1,431
Gross losses.................................... (13,030) (309,720) (29,999)
-------- --------- --------
Net realized gains (losses)..................... $135,295 $(174,794) $(28,568)
======== ========= ========
</TABLE>
There were no sales of securities held-to-maturity for the year ended
December 31, 1996.
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 net 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.
During 1994, the Company sold securities classified as held-to-maturity, with
a carrying amount of $5,076,098, recognizing a net gain of $240,975. The sales
occurred in connection with the sale of two branch facilities of Central and
Southern Bank of Georgia. The sale of the branches altered the interest rate
risk of Central and Southern Bank of Georgia's assets and liabilities and the
sales of securities were required to restructure the interest rate risk to an
acceptable level.
In late 1995, the Financial Accounting Standards Board ("FASB") issued an
implementation guide relating to SFAS No. 115. Included in this guide was a
one-time opportunity to reallocate investments between categories without
calling into question the validity of the classifications. Accordingly, in
December 1995, the Company transferred all of its held-to-maturity portfolio to
available-for-sale, resulting in a net unrealized gain of $613,185.
NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Commercial, financial, and agricultural............. $ 50,858,820 $ 47,359,956
Real estate--construction........................... 95,106,247 58,904,467
Real estate--mortgage............................... 137,417,375 109,567,333
Consumer and other.................................. 30,477,795 32,065,986
------------ ------------
313,860,237 247,897,742
Unearned income..................................... (593,489) (781,653)
Net deferred loan (fees) costs...................... 22,365 (171,193)
Allowance for loan losses........................... (6,568,371) (5,992,224)
------------ ------------
Loans, net.......................................... $306,720,742 $240,952,672
============ ============
</TABLE>
F-12
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES, CONTINUED
Changes in the allowance for loan losses for the years ended December 31,
1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR.................. $5,992,224 $5,614,458 $6,262,373
Allowance acquired in acquisitions......... -- 294,309 --
Provision for loan losses.................. (417,602) (700,341) 285,000
Loans charged off.......................... (515,170) (1,625,661) (3,915,223)
Recoveries................................. 1,508,919 2,409,459 2,982,308
---------- ---------- ----------
BALANCE, END OF YEAR........................ $6,568,371 $5,992,224 $5,614,458
========== ========== ==========
</TABLE>
As a result of evaluations of the adequacy of the allowance for loan losses,
a decline in loans charged off and continued significant recoveries of loans
previously charged off, management decided to reduce the provision for loan
losses during 1996 and 1995.
The total recorded investment in impaired loans was $1,424,510 and $1,064,463
at December 31, 1996 and 1995, respectively. None of these had a specific
allowance for loan losses at December 31, 1996 and 1995 determined in
accordance with generally accepted accounting principles. The average recorded
investment in impaired loans for 1996 and 1995 was $1,536,784 and $1,620,500,
respectively. Interest income on impaired loans of $118,085, $10,155, and
$48,760 was recognized for cash payments for the years ended December 31, 1996,
1995, and 1994, respectively.
The Company has granted loans to certain related parties including directors,
executive officers, and their related entities. The interest rates on these
loans were substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan involved.
Changes in related party loans for the year ended December 31, 1996 are as
follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR......................................... $ 3,393,900
Advances.......................................................... 1,188,601
Repayments........................................................ (1,200,081)
-----------
BALANCE, END OF YEAR............................................... $ 3,382,420
===========
</TABLE>
NOTE 5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Land and buildings..................................... $10,505,432 $8,117,446
Furniture and equipment................................ 8,634,339 6,327,332
Construction in progress............................... 293,105 74,686
----------- ----------
19,432,876 14,519,464
Accumulated depreciation............................... (6,868,239) (5,996,691)
----------- ----------
$12,564,637 $8,522,773
=========== ==========
</TABLE>
Depreciation expense was approximately $1,187,000, $857,000, and $990,000 for
the years ended December 31, 1996, 1995, and 1994, respectively.
F-13
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. OTHER BORROWINGS
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
The balance of securities sold under repurchase agreements was $11,864,486
and $3,658,634 at December 31, 1996 and 1995, respectively.
SUBORDINATED DEBENTURES
Subordinated debt of Alliance Finance and Premier Lending consists of fixed
rate debentures which are payable on demand or mature at twelve, 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
redemption without penalty. A summary of the outstanding debentures by interest
rate and maturity are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
7.50% due on demand...................................... $4,236,971 $ --
7.50% due in 1997........................................ 70,000 --
7.50% due February 20, 1999.............................. 70,000 --
8.00% due on demand...................................... 1,327,000 1,194,000
8.00% due in 1998........................................ 35,000 35,000
8.50% due on demand...................................... 90,000 --
10.0% due on demand...................................... 25,000 25,000
---------- ----------
$5,853,971 $1,254,000
========== ==========
</TABLE>
Lines of credit at December 31, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Revolving line of credit of $4,000,000 with a
nonaffiliated institution, bearing interest at prime
less .50% (7.75% at December 31, 1996) due on October
31, 1997. Line is secured secured by all commercial
finance notes receivable, stock of the Company's
subsidiaries and guaranteed by the Company........... $2,320,000 $ --
Revolving line of credit of $4,000,000 with a
nonaffiliated institution, bearing interest at prime
less .50% (7.75% at December 31, 1996), due October
31, 1997. Line is secured by stock of the Company's
subsidiaries and and guaranteed by the Company....... 3,675,000 --
Revolving line of credit of $3,000,000 with a
nonaffiliated institution, bearing interest at prime
less .50% (7.75% at December 31. 1996), due October
31, 1997. Line is secured by accounts receivable of
Alliance Finance, all stock of the Company's
subsidiaries and guaranteed by the Company........... 475,000 --
Line of credit of $2,500,000 with a nonaffiliated
institution, bearing interest at prime less .75%
payable quarterly, due June 1997. Line is secured by
stock of Central and Southern Bank of Georgia, a
subsidiary of the Company............................ 1,600,000 250,000
Treasury, tax, and loan note option account with the
Federal Reserve Bank of Atlanta, due on demand,
bearing interest at 5.148% at December 31, 1996,
collateralized by securities......................... 828,259 --
Line of credit of $505,000 with a nonaffiliated
institution, bearing interest at prime plus 1% (9.25%
at December 31, 1995), matured on August 14, 1996.... -- 505,000
Revolving warehouse line of credit of $30,000,000 with
a nonaffiliated institution, bearing interest at an
annual rate varying from published rates on high-
graded unsecured commercial paper plus 1.75% to plus
3%, matured October 21, 1995......................... -- 13,584,642
Revolving line of credit of $3,000,000 with a
nonaffiliated institution, bearing interest at prime
(8.50% at December 31, 1995) matured February 15,
1996................................................. -- 1,085,000
---------- -----------
$8,898,259 $15,424,642
========== ===========
</TABLE>
F-14
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. OTHER BORROWINGS, CONTINUED
Long-term debt at December 31, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable in the amount of $4,000,000, due in eight... $4,000,000 $ --
annual instalments of $500,000 beginning April 1, 1999
with interest due quarterly at prime less .50% (7.75% at
December 31, 1996), due April 1, 2006. Note payable is
secured by all stock of the Company's subsidiaries and
guaranteed by the Company.
Note payable in the amount of $3,000,000, due in annual.. -- 3,000,000
instalments of $300,000 with interest due quarterly at
prime plus 1% (9.25% at December 31, 1995) to October
28, 2006 collateralized by 320,000 shares of common
stock of Premier Bank.
---------- ----------
$4,000,000 $3,000,000
========== ==========
</TABLE>
In connection with the long-term debt, the Company has agreed, among other
covenants, to during the term of the loan: (1) maintain earnings at a level
equal to or above .60 percent of average assets; (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
dwellings, of the Banks; (3) maintain in aggregate a total risk based capital
ratio of no less than 10.0% and Tier 1 capital to average total assets of no
less than 6.0%; and (4) not permit its capital to be less than $20,000,000.
Aggregate maturities required on long-term debt at December 31, 1996 were as
follows:
<TABLE>
<S> <C>
1999.......................... $ 500,000
2000.......................... 500,000
2001.......................... 500,000
Thereafter.................... 2,500,000
----------
$4,000,000
==========
</TABLE>
NOTE 7. FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank advances consisted of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Advance from the Federal Home Loan Bank with.............. $1,000,000 $ --
interest at 6.79%, due on August 1, 2001. Interest is
payable monthly.
Advance from the Federal Home Loan Bank with.............. 1,000,000 1,000,000
interest at 6.99%, due on September 15, 1997. Interest is
payable monthly.
Advance from the Federal Home Loan Bank with.............. 1,750,000 1,750,000
interest at 8.27%, due on December 8, 1997. Interest is
payable monthly.
Advance from the Federal Home Loan Bank with interest..... 875,000 875,000
at 8.41%, due on December 8, 1999. Interest is payable
monthly.
Advance from the Federal Home Loan Bank with.............. -- 5,000,000
interest at the one month LIBOR rate plus 20 basis points
(6.17% at December 31, 1995), due on May 31, 2005.
Advance from the Federal Home Loan Bank with.............. -- 1,000,000
interest based on the Federal Home Loan Bank's cost of
funds plus .25% (5.85% at December 31, 1995), matured on
January 2, 1996.
</TABLE>
F-15
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. FEDERAL HOME LOAN BANK ADVANCES, CONTINUED
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Variable rate advances from the Federal Home Loan Bank. $ -- $ 1,000,000
with interest based on the Federal Home Loan Bank's
cost of funds plus .25% (6.10% December 31, 1995), ma-
tured on October 12, 1996.
Variable rate advances from the Federal Home Loan Bank. -- 500,000
with interest based on the Federal Home Loan Bank's
cost of funds plus .25% (6.10% at December 31, 1995),
matured on November 3, 1996.
---------- -----------
$4,625,000 $11,125,000
========== ===========
</TABLE>
The advances from the Federal Home Loan Bank are collateralized by a blanket
floating lien on qualifying first mortgages and pledges of certain securities
and the Company's Federal Home Loan Bank stock.
NOTE 8. SALE OF BRANCHES AND CONVERSION
On August 1, 1994, the Central and Southern Bank of Georgia sold two branches
located in Douglas and McRae, Georgia to an unrelated commercial bank. The Bank
received approximately $40,700,000 in exchange for approximately $43,400,000 in
deposits and related accrued interest, premises and equipment with a net book
value of approximately $1,700,000, and other assets of approximately $900,000
which included approximately $535,000 of unamortized deposit premiums. A gain
was recorded of approximately $115,000. The sale was financed through
borrowings under repurchase agreements and available cash and cash equivalents.
On January 16, 1996, final regulatory approval was received to convert the
Central and Southern Bank of North Georgia (formerly Central and Southern Bank
of Greensboro) to a federal savings bank charter. The conversion was completed
during the first quarter of 1996. The primary purpose of the conversion was to
allow the Bank to branch into other markets in the North Georgia area.
NOTE 9. DEFERRED COMPENSATION PLANS
First Alliance Bank has three deferred compensation plans providing for the
deferral of director fees and certain retirement benefits for the directors.
The first 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 under the plan. The accrual recorded for the years ended December 31,
1996, 1995 and 1994 was $103,994, $89,303 and $50,601, respectively. The plan
was terminated effective December 31, 1996 and no additional benefits will be
accrued under this plan.
The Bank's other plans allow the directors to defer up to $500 per month of
their monthly director's 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 plan is similar to the
first except deferred fees are recorded in a liability account monthly plus an
interest amount based on the current market rate accrued annually. During 1996,
1995 and 1994, an amount of $38,260, $31,322 and $21,200, respectively, was
deferred by the directors and recorded as a liability of the Bank.
In conjunction with these plans, several universal life insurance policies
were purchased by the Bank. The Bank is the owner of the policies which insure
the lives of certain directors. These policies may be used by the Bank as
funding vehicles for plan obligations. The directors are general creditors of
the Bank and have no specific claims on these assets.
F-16
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company has two contributory profit sharing plans covering substantially
all employees, subject to certain minimum age and service requirements.
Contributions to the plan charged to expense were $158,252, $117,933, and
$91,975 for the years ended December 31, 1996, 1995 and 1994, respectively.
Premier Bank had a defined contribution 401(k) plan covering all full-time
employees, subject to certain minimum service requirements. This 401(k) plan
was terminated on January 30, 1996 with the individual participants' funds
being disbursed on that date. There were no contributions to the plan for the
year ended December 31, 1996 and the period from acquisition to December 31,
1995.
PENSION PLAN
The Company has a noncontributory, trusteed pension plan. Effective April 15,
1994, the plan was amended to freeze participation in the plan. Participants as
of April 15, 1994 became fully vested and no new benefits will accrue. Pension
expense recorded by the Company for 1996, 1995, and 1994 included the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Interest cost on projected benefit obliga-
tion........................................ $ 38,381 $ 31,518 $ 41,572
Return on plan assets........................ (29,127) (30,313) (17,777)
Net amortization and deferral................ (13,497) (5,463) (59,831)
-------- -------- --------
Pension benefit.............................. $ (4,243) $ (4,258) $(36,036)
======== ======== ========
</TABLE>
The Company's funding policy provides that payments to the plan shall be
consistent with minimum government funding requirements plus additional amounts
which may be approved by the Company.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheets at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of approximately $608,000 in 1996 and
$662,000 in 1995.................................... $ 611,640 $ 666,860
--------- ---------
Projected benefit obligation.......................... $(611,640) $(666,860)
Plan assets at fair value, primarily consisting of
investments in common stock and money market funds... 549,595 537,992
--------- ---------
Plan assets less than projected benefit obligation.... (62,045) (128,868)
Unrecognized net gain................................. (64,712) (2,132)
--------- ---------
Accrued pension cost.................................. $(126,757) $(131,000)
========= =========
</TABLE>
A weighted average discount rate of 6.48% and 6.26% was used in 1996 and
1995, respectively. The expected long-term rate of return on assets was 8% in
1996 and 1995.
F-17
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. EMPLOYEE BENEFIT PLANS, CONTINUED
HEALTH CARE PLAN
In addition to the Company's defined benefit pension plan, the Company has
sponsored a defined benefit health care plan that provides post retirement
medical benefits to retired employees. Effective January 1, 1993, the Company
discontinued the plan but will continue to provide benefits to individuals who
had retired or were eligible for retirement as of December 31, 1993.
The following table presents the health care plan's funded status reconciled
with amounts recognized in the Company's consolidated balance sheets at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated post retirement benefit obligation
("APBO")............................................. $ 372,508 $ 397,190
Unrecognized net gain from experience different than
assumed.............................................. (208,699) (254,298)
--------- ---------
Accrued post retirement benefit cost included in other
liabilities.......................................... $ 163,809 $ 142,892
========= =========
</TABLE>
Net periodic post retirement benefit cost for the years ended December 31,
1996, 1995, and 1994 includes the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Amortization of unrecognized net gain............... $15,468 $14,068 $15,468
Interest cost....................................... 26,346 27,916 29,740
------- ------- -------
Net periodic post retirement benefit cost.......... $41,814 $41,984 $45,208
======= ======= =======
</TABLE>
For measurement purposes, a 9% annual rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) was assumed for 1996. A
13% annual rate of increase was assumed for 1995. The rate was assumed to
decrease gradually to 5% by the year 2004 and remain at that level thereafter.
A one percent increase in the medical trend rate assumed at December 31, 1996
would have resulted in an increase to the APBO at December 31, 1996 of $29,221
and would have increased 1996 post retirement benefit cost by $2,119. The
weighted average discount rate used in determining the accumulated post
retirement benefit obligation was 7.5% and 7.25% at December 31, 1996 and 1995,
respectively.
INCENTIVE STOCK OPTION PLANS
The Company has an Employee Incentive Stock Option Plan. Under the Plan, the
Company can grant to key personnel options to purchase an aggregate of 270,825
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 ten years from date of grant.
The Company also has an employee and a director stock option plan whereby
72,220 and 58,679 shares, respectively, of common stock have been reserved for
stock options. Under the employee plan, the Company can grant to key personnel
options to purchase 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 ten years from date of grant.
F-18
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. EMPLOYEE BENEFIT PLANS, CONTINUED
INCENTIVE STOCK OPTION PLANS (CONTINUED)
Under the director plan, each eligible director who attends at least 75% of
the meetings of the Company's Board and related committee meetings shall
receive an option to purchase 903 shares annually of common stock. The options
expire ten years from the date of grant. All options granted were exercisable
at December 31, 1996. Other pertinent information related to the options is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1996 1995 1994
------------------ ------------------ -----------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Under option, beginning
of year................ 245,080 $5.48 157,179 $5.03 121,040 $4.74
Granted................ 50,555 8.80 96,026 6.22 36,139 6.00
Exercised.............. (4,062) 5.54 -- -- -- --
Terminated............. (903) 5.54 (8,125) 5.54 -- --
------- ------- -------
Under option, end of the
year................... 290,670 6.06 245,080 5.48 157,179 5.03
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED- REMAINING
AVERAGE CONTRACTUAL
RANGE OF EXERCISE LIFE IN
NUMBER PRICES PRICE YEARS
------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Under option, end of year............. 209,088 $4.25-$6.25 $5.16 7.7
81,582 $7.50-$8.86 $8.36 9.6
-------
290,670
=======
</TABLE>
As permitted by Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123), the Company
recognizes compensation cost for stock-based employee compensation awards in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees".
The Company recognized no compensation cost for stock-based employee
compensation awards for the years ended December 31, 1996 and 1995. If the
Company had recognized compensation cost in accordance with SFAS No. 123, net
income and net income per share would have been reduced as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
------------------ ------------------
NET NET
INCOME INCOME
PER PER
NET INCOME SHARE NET INCOME SHARE
---------- ------ ---------- ------
<S> <C> <C> <C> <C>
As reported.............................. $5,493,739 $0.68 $4,547,944 $0.57
Stock-based compensation, net of related
tax effect.............................. (71,567) (0.01) (68,676) (0.01)
---------- ----- ---------- -----
As adjusted.............................. $5,422,172 $0.67 $4,479,268 $0.56
========== ===== ========== =====
</TABLE>
F-19
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. EMPLOYEE BENEFIT PLANS, CONTINUED
INCENTIVE STOCK OPTION PLANS (CONTINUED)
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $2.15 and $1.08, respectively, using the Black Scholes option
pricing model and the following assumptions:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Risk-free interest rate............................... 6.45% 6.45%
Expected life of the options.......................... 7-10 Years 7-10 Years
Expected dividends (as a percent of the fair value of
the stock)........................................... 2.68% 3.85%
Volatility............................................ 9.73% 10.03%
</TABLE>
NOTE 11. SEGMENT REPORTING
The Company's operations include two primary business segments: banking and
mortgage banking activities. The Company, primarily through its subsidiary
banks, offers banking services including a full range of commercial and
corporate banking services. Mortgage banking activities are provided by Lending
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.
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
---------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER HOLDING BANKING MORTGAGE
31, 1996 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
- --------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers................. $ 32,547 $ 41,668,250 $11,669,454 $ -- $ 53,370,251
Revenues from affiliates... 6,121,333 236,953 -- (6,358,286) --
----------- ------------ ----------- ------------ ------------
Total revenue.......... $ 6,153,880 $ 41,905,203 $11,669,454 $ (6,358,286) $ 53,370,251
=========== ============ =========== ============ ============
Income from continuing
operations before income
taxes..................... $ 4,743,202 $ 7,899,583 $ 598,302 $ (6,037,089) $ 7,203,998
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1996......... $54,242,924 $510,861,095 $13,052,684 $(58,212,445) $519,944,258
=========== ============ =========== ============ ============
Depreciation expense....... $ 10,200 $ 984,444 $ 192,356 $ 1,187,000
=========== ============ =========== ============
Premises and equipment
acquisitions.............. $ 1,112,516 $ 3,359,783 $ 782,544 $ 5,254,843
=========== ============ =========== ============
</TABLE>
F-20
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. SEGMENT REPORTING, CONTINUED
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER HOLDING BANKING MORTGAGE
31, 1995 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
---------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers.................. $ 848,513 $ 35,032,017 $ 6,781,545 $ -- $ 42,662,075
Revenues from affiliates.... 3,484,947 197,878 -- (3,682,825) --
----------- ------------ ----------- ------------ ------------
Total revenue........... $ 4,333,460 $ 35,229,895 $ 6,781,545 $ (3,682,825) $ 42,662,075
=========== ============ =========== ============ ============
Income (loss) from
continuing operations
before income taxes........ $ 4,158,008 $ 6,798,013 $ 629,454 $ (5,263,905) $ 6,321,570
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1995.......... $49,613,086 $425,722,895 $21,690,588 $(51,652,950) $445,373,619
=========== ============ =========== ============ ============
<CAPTION>
Depreciation expense........ $ 7,030 $ 759,783 $ 90,187 $ 857,000
<S> <C> <C> <C> <C> <C>
=========== ============ =========== ============
Premises and equipment
acquisitions............... $ -- $ 1,294,783 $ 118,967 $ 1,413,750
=========== ============ =========== ============
<CAPTION>
INDUSTRY SEGMENTS
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER HOLDING BANKING MORTGAGE
31, 1994 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
---------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers.................. $ -- $ 30,429,818 $ 1,914,958 $ -- $ 32,344,776
Revenues from affiliates.... 3,217,469 -- -- (3,217,469) --
----------- ------------ ----------- ------------ ------------
Total revenue........... $ 3,217,469 $ 30,429,818 $ 1,914,958 $ (3,217,469) $ 32,344,776
=========== ============ =========== ============ ============
Income (loss) from
continuing operations
before income taxes........ $ 1,756,209 $ 5,362,666 $(1,040,097) $ (3,205,673) $ 2,873,105
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1994.......... $34,825,421 $346,204,045 $ 7,920,414 $(33,427,804) $355,522,076
=========== ============ =========== ============ ============
Depreciation expense........ $ 68,506 $ 921,494 $ -- $ 990,000
=========== ============ =========== ============
Premises and equipment
acquisitions............... $ 192,121 $ 570,943 $ -- $ 763,064
=========== ============ =========== ============
</TABLE>
F-21
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
<S> <C> <C> <C>
1996 1995 1996
---------- ---------- --------
Current....................................... $2,061,933 $1,547,128 $678,212
Benefit of net operating loss carryforward.... (236,575) -- --
Valuation allowance adjustment................ (691,367) (262,000) 327,388
Deferred...................................... 564,418 475,789 (41,019)
---------- ---------- --------
Income tax expense........................... $1,698,409 $1,760,917 $964,581
========== ========== ========
</TABLE>
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income taxes.
A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996
------------------- ------------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- -------- -------
Income taxes at statu-
tory rate.............. $2,449,360 34% $2,149,333 34% $976,856 34%
Nondeductible merger
expenses.............. 142,021 2 36,462 -- 6,257 --
Valuation allowance ad-
justment.............. (691,367) (9) (262,000) (4) 327,388 11
Tax-exempt interest in-
come.................. (195,837) (3) (213,330) (3) (311,323) (11)
Alternative minimum tax
credit................ -- -- -- -- (37,135) (1)
Other items, net....... (5,768) -- 50,452 1 2,538 --
---------- ------- ---------- ------- -------- -------
Income tax expense...... $1,698,409 24% $1,760,917 28% $964,581 33%
========== ======= ========== ======= ======== =======
</TABLE>
F-22
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. INCOME TAXES, CONTINUED
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- -----------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves................................... $ 9,811 $ 136,259
Deferred compensation................................ 150,896 97,215
Other real estate.................................... 43,748 44,377
Write-down of mutual funds........................... 18,885 18,885
Pension.............................................. 44,540 44,540
Postretirement benefits other than pensions.......... 48,583 48,583
Net operating loss carryforward...................... 585,067 821,642
Alternative minimum tax carryforwards................ 588,939 777,635
Georgia tax credits.................................. 72,423 72,423
Other................................................ 45,030 143
Valuation allowance.................................. (415,294) (1,106,661)
---------- -----------
1,192,628 955,041
---------- -----------
Deferred tax liabilities:
Depreciation and amortization........................ 641,212 623,778
Deferred loan fees, net of cost...................... 141,507 59,119
Securities available-for-sale........................ 28,058 358,509
Cash method accounting on certain receivables........ 144,250 131,030
Change in accounting method.......................... -- 33,892
Other................................................ 60,268 28,780
---------- -----------
1,015,295 1,235,108
---------- -----------
Net deferred tax assets (liabilities)................. $ 177,333 $ (280,067)
========== ===========
</TABLE>
At December 31, 1996, the Company has available net operating loss
carryforwards of approximately $1,379,000 for Federal income tax purposes. If
unused, the carryforwards will expire beginning in 2009. Utilization of the net
operating loss carryforwards is subject to the separate return limitations and
change of ownership rules of the Internal Revenue Code of 1996.
The Company's Federal alternative minimum tax credits can be carried forward
indefinitely.
F-23
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES
The Company enters into firm commitments to sell mortgage loans which it has
originated at agreed upon prices. The sales price for the loans is set based on
market rates at the time 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 the 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 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.
In the normal course of business, the Company has entered into off-balance-
sheet financial instruments which are not reflected in the financial
statements. These financial instruments include commitments to extend credit
and standby letters of credit. Such financial instruments are included in the
financial statements when funds are disbursed or the instruments become
payable. These instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for unfunded mortgage loan commitments,
residential construction and commercial loan commitments, commitments to extend
credit and standby letters of credit is represented by the contractual amount
of those instruments. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
------------- -----------
<S> <C> <C>
Unfunded mortgage loan commitments............... $ 20,000,000 $31,968,000
Residential construction and commercial loan com-
mitments........................................ 27,277,198 18,526,425
Commitments to extend credit..................... 71,518,000 33,682,000
Standby letters of credit........................ 860,000 1,260,000
------------- -----------
$ 119,655,198 $85,436,425
============= ===========
</TABLE>
At December 31, 1996, the Company had agreements with unaffiliated
institutions allowing it to sell participations in loans at the Company's
option. The unused participation amount was $36,082,936 at December 31, 1996.
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, inventory, equipment and personal property.
F-24
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held varies
as specified above and is required in instances which the Company deems
necessary.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management of the Company, any liability
resulting from such proceedings would not have a material effect on the
Company's consolidated financial statements.
LEASE OBLIGATIONS:
The Company leases ten office facilities and certain equipment under
noncancelable lease agreements.
The future minimum lease commitments at December 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
Years
Ending
December
31,
<S> <C>
1997 $ 588,336
1998 580,444
1999 411,395
2000 253,157
2001 115,991
----------
$1,949,323
==========
</TABLE>
Rental expense for the years ended December 31, 1996, 1995 and 1994 was
$755,981, $116,583, and $58,777, respectively.
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 Company also leases various other equipment under short-term leases.
NOTE 14. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer loans
to customers in the 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.
Seventy-four percent of the Company's loan portfolio is concentrated in loans
secured by real estate of which 30% consists of construction loans. A
substantial portion of these loans are secured by real estate in the Company's
primary market areas. In addition, a substantial portion of the other real
estate owned is located in those same markets. Accordingly, the ultimate
collectibility of the loan portfolio and the recovery of the carrying amount of
other real estate owned are susceptible to changes in market conditions in the
Company's primary market area. The other significant concentrations of credit
by type of loan are set forth in Note 3.
The banking subsidiaries, as a matter of policy, do not generally extend
credit to any single borrower or group of related borrowers in excess of
regulatory limits.
F-25
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15. REGULATORY MATTERS
The banking subsidiaries are subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At December
31, 1996, approximately $3,345,000 of retained earnings were available for
dividend declaration without supervisory approval.
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory--and possibly
additional discretionary--actions by regulators that, if undertaken, could have
a direct material effect on the financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and Banks must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's and
Banks' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Banks to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Premier Bank must also have core capital equal to 3% of
adjusted total assets and tangible capital equal to 1.5% of adjusted total
assets. These additional requirements are in accordance with the Office of
Thrift Supervision, their primary regulator. Management believes, as of
December 31, 1996, the Company and Banks meet all capital adequacy requirements
to which they are subject.
As of December 31, 1996 and 1995, notification from the FDIC categorized
First Alliance Bank, Milledgeville and North Georgia as well capitalized and
Premier Bank as adequately capitalized, respectively, under the regulatory
framework for prompt corrective action. To be categorized as adequately
capitalized, the Banks must maintain minimum total risk-based, Tier I risk-
based, and Tier I leverage ratios as set forth in the following table. There
are no conditions or events since that notification that management believes
have changed the Banks' category.
F-26
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15. REGULATORY MATTERS, CONTINUED
The Company's and Banks' actual capital amounts and ratios are presented in
the following table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
------------- ------------- -------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk Weighted Assets):
Consolidated....................... $48,449 12.96% $29,538 8% $37,380 10%
First Alliance Bank................ $18,716 14.02% $10,680 8% $13,350 10%
Premier Bank....................... $ 6,221 8.57% $ 5,807 8% $ 7,259 10%
Milledgeville...................... $19,064 20.00% $ 7,805 8% $ 9,757 10%
North Georgia...................... $ 5,810 12.00% $ 3,946 8% $ 4,933 10%
Tier I Capital
(to Risk Weighted Assets):
Consolidated....................... $44,127 11.88% $14,854 4% $22,281 6%
First Alliance Bank................ $17,044 12.74% $ 5,351 4% $ 8,027 6%
Premier Bank....................... $ 5,819 8.02% $ 2,902 4% $ 4,353 6%
Milledgeville...................... $17,822 18.00% $ 3,903 4% $ 5,854 6%
North Georgia...................... $ 5,187 11.00% $ 1,973 4% $ 2,960 6%
Tier I Capital
(to Average Assets):
Consolidated....................... $44,127 8.59% $20,537 4% $25,671 5%
First Alliance Bank................ $17,044 8.89% $ 7,669 4% $ 9,586 5%
Milledgeville...................... $17,822 12.00% $ 6,004 4% $ 7,505 5%
Core Capital
Premier Bank....................... $ 5,819 5.85% $ 2,984 3%
North Georgia...................... $ 5,187 7.00% $ 2,140 3%
Tangible Capital
Premier Bank....................... $ 5,819 5.85% $ 1,492 1.5%
North Georgia...................... $ 5,187 7.00% $ 1,070 1.5%
</TABLE>
F-27
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. The use of different methodologies
may have a material effect on the estimated fair value amounts. Also, the fair
value estimates presented herein are based on pertinent information available
to management as of December 31, 1996 and 1995. Such amounts have not been
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
SECURITIES AVAILABLE-FOR-SALE:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value approximate
fair values.
LOANS:
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying collateral values.
The carrying amount of loans held for sale approximates fair value.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for fixed-
rate certificates of deposit are estimated using discounted cash flow methods,
using interest rates currently being offered on certificates.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, FEDERAL HOME LOAN BANK ADVANCES
AND
OTHER BORROWINGS:
The fair values of Federal Home Loan Bank advances and other borrowings are
estimated using discounted cash flow methods based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of variable-rate other borrowings and securities sold under
repurchase agreements approximate the carrying value.
F-28
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair values.
OFF-BALANCE-SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments are
based on fees charged to enter into similar agreements. However, commitments to
extend credit do not represent a significant value to the Company until such
commitments are funded or closed. The Company has determined that these
instruments do not have a distinguishable fair value and no fair value has been
assigned.
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
------------ ------------ ------------ ------------
Financial assets:
Cash, due from banks,
interest-bearing
deposits in banks and
Federal funds sold.... $ 65,134,161 $ 65,134,161 $ 49,674,959 $ 49,674,959
Securities available-
for-sale.............. 99,731,663 99,731,663 110,311,022 110,311,022
Loans.................. 331,129,029 332,754,541 266,864,898 268,228,597
Accrued interest re-
ceivable.............. 3,314,778 3,314,778 3,161,672 3,161,672
Financial liabilities:
Deposits............... $431,897,749 $433,027,181 $358,927,597 $358,941,367
Securities sold under
repurchase agreements. 11,864,486 11,864,486 3,658,634 3,658,634
Federal Home Loan Bank
advances.............. 4,625,000 4,722,254 11,125,000 11,292,000
Other borrowings....... 18,752,230 18,754,380 19,678,642 20,845,808
Accrued interest pay-
able.................. 1,987,171 1,987,171 1,760,847 1,760,847
</TABLE>
NOTE 17. BUSINESS COMBINATIONS
On August 31, 1996, First Alliance Bancorp, Inc. effected a business
combination with Premier Bancshares, Inc. by exchanging 746,530 shares of its
common stock for all the outstanding common and preferred stock of Premier
Bancshares, Inc. Premier Bancshares, Inc. is a thrift holding company whose
business is conducted by its wholly-owned subsidiaries, Premier Bank and
Premier Lending, as discussed in Note 1. Subsequent to the business
combination, the combined holding company changed its name to Premier
Bancshares, Inc. The combination was accounted for as a pooling of interest
and, accordingly, all prior financial statements have been restated to include
Premier Bancshares, Inc. The results of operations of the separate companies
for the periods prior to the combination are summarized as follows:
<TABLE>
<CAPTION>
REVENUES NET INCOME
----------- ----------
<S> <C> <C>
Eight months ended August 31, 1996
First Alliance Bancorp, Inc............................ $10,800,000 $1,501,000
Premier Bancshares, Inc................................ 11,707,000 115,000
----------- ----------
$22,507,000 $1,616,000
=========== ==========
Year ended December 31, 1995
First Alliance Bancorp, Inc............................ $14,244,000 $1,850,000
Premier Bancshares, Inc................................ 11,209,000 139,000
----------- ----------
$25,453,000 $1,989,000
=========== ==========
</TABLE>
F-29
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17. BUSINESS COMBINATIONS, CONTINUED
On May 1, 1995, Premier Bancshares, Inc. 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 funded through the sale of
preferred stock and a loan obtained from a third party financial institution in
the amount of $3 million. 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 was accounted for as a purchase and
the results of operations of Allatoona Federal Savings Banks since the date of
acquisition are included in the consolidated financial statements.
The consolidated statement of income for the year ended December 31, 1995
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 December 31, 1995. 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 noninterest income............................................. 215,090
Less noninterest 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 31, 1995, First Alliance Bancorp, Inc. acquired Interim Alliance
Corporation (d/b/a 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 was accounted for as a purchase.
NOTE 18. COMMON STOCK SPLIT
On February 24, 1997, the Company declared a 1.8055 stock split for shares of
record as of March 6, 1997. All share and per share data reflect the split. The
effect of the split is presented retroactively within stockholders' equity at
December 31, 1996 by transferring from capital surplus to common stock the
additional shares times the par value.
F-30
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets of Premier
Bancshares, Inc. at December 31, 1996 and 1995 and the statements of income and
cash flows for the years ended December 31, 1996, 1995 and 1994:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash.................................................. $ 1,205,030 $ 351,586
Interest-bearing deposits with bank subsidiary........ 21,251 39,252
Investment in subsidiaries............................ 50,912,568 47,746,351
Building, net......................................... 1,102,316 --
Other assets.......................................... 1,001,759 1,475,897
----------- -----------
Total assets......................................... $54,242,924 $49,613,086
=========== ===========
Liabilities
Other borrowings...................................... $ 5,600,000 $ 3,250,000
Other liabilities..................................... 1,463,261 272,798
----------- -----------
7,063,261 3,522,798
----------- -----------
Stockholders' equity................................... 47,179,663 46,090,288
----------- -----------
Total liabilities and stockholders' equity........... $54,242,924 $49,613,086
=========== ===========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
Interest on deposits...................... $ 23,553 $ 50,713 $ --
Interest and fees on loans................ -- 424,137 652,652
Dividends from subsidiaries............... 3,798,263 1,640,648 409,694
Other income.............................. 93,238 401,372 1,274,102
---------- ---------- ----------
3,915,054 2,516,870 2,336,448
---------- ---------- ----------
EXPENSES
Salaries and employee benefits............ 55,742 910,896 1,939,227
Interest.................................. 359,001 332,604 333,511
Other expenses............................ 995,935 738,619 1,103,480
---------- ---------- ----------
Total expenses........................... 1,410,678 1,982,119 3,376,218
---------- ---------- ----------
Income (loss) before income tax benefits
and equity in undistributed income of
subsidiaries and minority interest
in net income of subsidiary
subsidiaries............................ 2,504,376 534,751 (1,039,770)
INCOME TAX BENEFITS........................ (762,387) (402,645) (152,315)
---------- ---------- ----------
Income (loss) before equity in undistrib-
uted income of subsidiaries and minority
interest in net income of subsidiary.... 3,266,763 937,396 (887,455)
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDI-
ARIES..................................... 2,238,826 3,623,257 2,795,979
---------- ---------- ----------
Income before minority interest in net
income of subsidiary.................... 5,505,589 4,560,653 1,908,524
MINORITY INTEREST IN NET INCOME OF SUBSIDI-
ARY....................................... 11,850 12,709 --
---------- ---------- ----------
Net income............................... $5,493,739 $4,547,944 $1,908,524
========== ========== ==========
</TABLE>
F-31
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19. PARENT COMPANY FINANCIAL INFORMATION, CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income before minority interest in net
income of subsidiary..................... $5,505,589 $4,560,653 $1,908,524
Adjustments to reconcile net income to net
cash provided by
(used in) operating activities:
Depreciation............................. 10,200 7,030 68,506
Amortization............................. 23,148 22,557 20,585
Undistributed income of subsidiaries..... (2,238,826) (3,623,257) (2,795,979)
Net increase in loans held for sale...... -- (456,640) (679,265)
Other operating activities............... 471,445 317,782 (136,195)
---------- ---------- ----------
Net cash provided by (used in) operating
activities............................. 3,771,556 828,125 (1,613,824)
---------- ---------- ----------
INVESTING ACTIVITIES
Net (increase) decrease in interest-bear-
ing deposits............................. 18,001 232,632 130,658
Net increase in loans..................... -- (1,646,888) (810,759)
Purchase of premises and equipment........ (1,112,516) -- (192,121)
Investment in subsidiaries................ (1,683,646) (7,739,452) --
Proceeds from sale of premises and equip-
ment..................................... -- 19,893 --
---------- ---------- ----------
Net cash used in investing activities... (2,778,161) (9,133,815) (872,222)
---------- ---------- ----------
FINANCING ACTIVITIES
Net increase in borrowings................ 2,350,000 5,688,566 879,263
Dividends paid............................ (1,926,449) (718,747) (586,591)
Proceeds from exercise of stock options... 22,500 -- --
Proceeds from common stock issued......... -- 3,121,913 375,012
Proceeds from redemption of subsidiary
common stock............................. -- -- 2,000,000
Purchase of treasury stock................ (586,002) (547,438) --
---------- ---------- ----------
Net cash provided by (used in) financing
activities............................. (139,951) 7,544,294 2,667,684
---------- ---------- ----------
Net increase (decrease) in cash........... 853,444 761,396 181,638
Cash at beginning of year................. 351,586 1,112,982 931,344
---------- ---------- ----------
Cash at end of year....................... $1,205,030 $ 351,586 $1,112,982
========== ========== ==========
</TABLE>
F-32
<PAGE>
EXHIBIT 99.2
------------
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
GENERAL
The following unaudited pro forma condensed combined financial statements are
presented assuming the Merger will be accounted for as a pooling of interests
and reflect the combination of the historical consolidated financial statements
of Premier and Citizens. The pro forma condensed combined balance sheet has
been prepared as if the acquisition had been consummated at the beginning of
the period covered. The pro forma condensed combined statements of income have
been prepared as if the acquisition had been consummated on January 1, 1994.
The following financial statements do not reflect any anticipated cost savings
which may be realized by Premier after consummation of the Merger.
The pro forma information does not purport to represent what Premier's and
Citizens' combined results of operations actually would have been if the Merger
had occurred on January 1, 1994.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
ASSETS --------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Cash and due from banks............ $ 21,806 $ 7,110 $ $ 28,916
Interest-bearing deposits in banks. 8,870 100 8,970
Federal funds sold................. 20,138 490 20,628
Securities available-for-sale...... 99,706 39,759 139,465
Loans held for resale.............. 40,333 40,333
Loans.............................. 378,342 109,082 -- 487,424
Less allowance for loan losses..... 6,973 1,300 8,273
--------- -------- ---- --------
Loans, net....................... 371,369 107,782 0 479,151
--------- -------- ---- --------
Premises and equipment............. 12,986 5,770 18,756
Goodwill and other intangibles..... 2,699 2,699
Other assets....................... 9,517 1,935 -- 11,452
--------- -------- ---- --------
Total Assets..................... $ 587,424 $162,946 $ 0 $750,370
========= ======== ==== ========
Deposits
Non-interest bearing............. $ 58,586 $ 29,242 $ 87,828
Interest bearing................. 413,770 121,125 534,895
--------- -------- --------
Total deposits................. 472,356 150,367 622,723
Securities sold under repurchase
agreements........................ 25,005 25,005
Other borrowings................... 34,083 162 34,245
Other liabilities.................. 5,625 1,102 (350)(1) 7,077
--------- -------- ---- --------
Total liabilities................ 537,069 151,631 (350) 689,050
--------- -------- ---- --------
Common stock....................... 7,917 2,424 357 (2) 9,984
Capital surplus.................... 23,886 3,708 (357)(2) 27,951
Retained earnings.................. 18,349 5,083 350 (1) 23,082
Unrealized gains on securities
available-for-sale, 203 100 -- 303
net of tax........................ --------- -------- ---- --------
50,355 11,315 350 61,320
--------- -------- ---- --------
Total liabilities and stockholders' $ 587,424 $162,946 $ 0 $750,370
equity............................ ========= ======== ==== ========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
36
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
---------- -------- -------------- -----------
<S> <C> <C> <C> <C>
Interest income.......... $ 23,045 $ 6,605 $ $ 29,650
Interest expense......... 11,379 2,677 0 14,056
---------- -------- ----- -----------
Net interest income..... 11,666 3,928 0 15,594
Provision for loan (130) 314 184
losses.................. ---------- -------- ----- -----------
Net interest income after
provision for loan 11,796 3,614 0 15,410
losses.................. ---------- -------- ----- -----------
Other income:
Service charges on de-
posit accounts........ 898 366 1,264
Gain on sale of subsid-
iary.................. 757 757
Mortgage loan income... 5,376 5,376
Security transactions,
net................... (41) (3) (44)
Other.................. 1,530 119 0 1,649
---------- -------- ----- -----------
8,520 482 0 9,002
---------- -------- ----- -----------
Other expenses:
Salaries and employee
benefits.............. 9,024 1,465 10,489
Occupancy and equipment
expense............... 1,876 421 2,297
Other operating ex- 3,749 830 0 4,579
penses................ ---------- -------- ----- -----------
14,649 2,716 0 17,365
---------- -------- ----- -----------
Income before income
taxes................... 5,667 1,380 0 7,047
Income tax expense....... 1,571 424 0 1,995
---------- -------- ----- -----------
Income before minority
interest in net income 4,096 956 0 5,052
of subsidiary........... ---------- -------- ----- -----------
Minority interest in net 8 0 8
income of subsidiary.... ---------- -------- ----- -----------
Net income............... $ 4,088 $ 956 $ 0 $ 5,044
========== ======== ===== ===========
Net Income per share of $ 0.51 $ 3.95 $ 0.50
common stock............ ========== ======== ===========
Average shares 8,062,259 242,350 10,129,109
outstanding............. ========== ======== ===========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
37
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (DOLLARS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
--------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Interest income................. $ 19,904 $ 4,988 $ $ 24,892
Interest expense................ 9,766 2,280 -- 12,046
--------- ------- ----- ----------
Net interest income........... 10,138 2,708 -- 12,846
Provision for loan losses....... (229) 190 -- (39)
--------- ------- ----- ----------
Net income after provision for 10,367 2,518 -- 12,885
loan losses.................... --------- ------- ----- ----------
Other income:
Service charges on deposit ac-
counts....................... 840 287 1,127
Mortgage loan income.......... 3,926 3,926
Security transactions, net.... 135 12 1 47
Other......................... 983 71 -- 1,054
--------- ------- ----- ----------
5,884 370 -- 6,254
--------- ------- ----- ----------
Other expenses:
Salaries and employee bene-
fits......................... 7,537 1,256 8,793
Occupancy and equipment ex-
pense........................ 1,489 317 1,806
Other operating expenses...... 3,251 617 -- 3,868
--------- ------- ----- ----------
12,277 2,190 -- 14,467
--------- ------- ----- ----------
Income before income taxes...... 3,974 698 -- 4,672
Income tax expense.............. 1,009 164 -- 1,173
--------- ------- ----- ----------
Income before minority interest 2,965 534 -- 3,499
in net income of subsidiary.... --------- ------- ----- ----------
Minority interest in net income 6 -- -- 6
of subsidiary.................. --------- ------- ----- ----------
Net income...................... $ 2,959 $ 534 $ -- $ 3,493
========= ======= ===== ==========
Net Income per share of common $ 0.37 $ 2.20 $ 0.35
stock.......................... ========= ======= ==========
Average shares outstanding...... 7,970,193 242,350 10,102,699
========= ======= ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
38
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
--------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Interest income................. $ 40,252 $11,019 $ $ 51,271
Interest expense................ 20,238 5,105 -- 25,343
--------- ------- ---- ----------
Net interest income............. 20,014 5,914 -- 25,928
Provision for loan losses....... (418) 303 -- (115)
--------- ------- ---- ----------
Net income after provision for 20,432 5,611 -- 26,043
loan losses.................... --------- ------- ---- ----------
Other income:
Service charges on deposit ac-
counts....................... 1,719 615 2,334
Mortgage loan income.......... 8,901 8,901
Security transactions, net.... 135 12 1 47
Other......................... 2,363 211 -- 2,574
--------- ------- ---- ----------
13,118 838 -- 13,956
--------- ------- ---- ----------
Other expenses:
Salaries and employee bene-
fits......................... 15,808 2,501 18,309
Occupancy and equipment ex-
pense........................ 3,290 612 3,902
Other operating expenses...... 7,248 1,329 -- 8,577
--------- ------- ---- ----------
26,346 4,442 -- 30,788
--------- ------- ---- ----------
Income before income taxes...... 7,204 2,007 -- 9,211
Income tax expense.............. 1,698 496 -- 2,194
--------- ------- ---- ----------
Income before minority interest 5,506 1,511 -- 7,017
in net income of subsidiary.... --------- ------- ---- ----------
Minority interest in net income 12 -- 12
of subsidiary.................. --------- ------- ---- ----------
Net income...................... $ 5,494 $ 1,511 $ -- $ 7,005
========= ======= ==== ==========
Net Income per share of common $ 0.68 $ 6.24 $ 0.69
stock.......................... ========= ======= ==========
Average shares outstanding...... 8,091,369 242,350 10,141,721
========= ======= ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
39
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
---------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Interest income............... 33,575 $ 7,431 $ $ 41,006
Interest expense.............. 16,662 3,211 -- 19,873
---------- -------- ----- ----------
Net interest income.......... 16,913 4,220 -- 21,133
Provision for loan losses .... (700) 118 -- (582)
---------- -------- ----- ----------
Net interest income after pro- 17,613 4,102 -- 21,715
vision for loan losses ...... ---------- -------- ----- ----------
Other income:
Service charges on deposit
accounts.................... 1,578 473 2,051
Mortgage loan income......... 5,967 5,967
Security transactions, net... (206) (30) (236)
Other ....................... 1,748 119 -- 1,867
---------- -------- ----- ----------
9,087 562 -- 9,649
---------- -------- ----- ----------
Other expenses:
Salaries and employee bene-
fits........................ 11,734 1,956 13,690
Occupancy and equipment ex-
pense....................... 2,406 380 2,786
Other operating expenses .... 6,238 896 -- 7,134
---------- -------- ----- ----------
20,378 3,232 -- 23,610
---------- -------- ----- ----------
Income before income taxes.... 6,322 1,432 -- 7,754
Income tax expense ........... 1,761 427 -- 2,188
---------- -------- ----- ----------
Income before minority inter-
est in net income of subsidi- 4,561 1,005 -- 5,566
ary.......................... ---------- -------- ----- ----------
Minority interest in net in- 13 -- 13
come of subsidiary .......... ---------- -------- ----- ----------
Net income.................... $ 4,548 $ 1,005 $ -- $ 5,553
========== ======== ===== ==========
Net Income per share of common $ 0.57 $ 4.12 $ 0.56
stock........................ ========== ======== ==========
Average shares outstanding.... 7,982,660 244,236 9,953,075
========== ======== ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
40
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PREMIER CITIZENS DEBIT (CREDIT) COMBINED
---------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Interest income.................. $ 27,723 $ 5,794 $ $ 33,517
Interest expense................. 13,028 2,059 15,087
---------- ------- ----- ----------
Net interest income............. 14,695 3,735 -- 18,430
Provision for loan losses ....... 285 80 -- 365
---------- ------- ----- ----------
Net interest income after provi- 14,410 3,655 -- 18,065
sion for loan losses ........... ---------- ------- ----- ----------
Other income:
Service charges on deposit ac-
counts......................... 1,652 444 2,096
Mortgage loan income............ 1,284 1,284
Security transactions, net...... 212 212
Other .......................... 1,474 104 -- 1,578
---------- ------- ----- ----------
4,622 548 -- 5,170
---------- ------- ----- ----------
Other expenses:
Salaries and employee benefits.. 8,344 1,489 9,833
Occupancy and equipment expense. 2,144 309 2,453
Other operating expenses ....... 5,671 806 -- 6,477
---------- ------- ----- ----------
16,159 2,604 -- 18,763
---------- ------- ----- ----------
Income before income taxes....... 2,873 1,599 -- 4,472
Income tax expense .............. 965 594 -- 1,559
---------- ------- ----- ----------
Income before minority interest 1,908 1,005 -- 2,913
in net income of subsidiary..... ---------- ------- ----- ----------
Minority interest in net income -- 0
of subsidiary .................. ---------- ------- ----- ----------
Net income....................... $ 1,908 $ 1,005 $ -- $ 2,913
========== ======= ===== ==========
Net Income per share of common $ 0.25 $ 4.02 $ 0.31
stock........................... ========== ======= ==========
Average shares outstanding....... 7,041,663 250,000 9,041,691
========== ======= ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
41
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The unaudited pro forma condensed combined balance sheet as of June 30,
1997 and condensed combined statements of income for the six months ended
June 30, 1997 and 1996 and for the years ended December 31, 1996, 1995 and
1994 have been prepared based upon the historical consolidated balance
sheets and statements of income, which give effect to the Merger accounted
for as a pooling-of-interests, based on the Exchange Ratio. The pro forma
financial statements include all adjustments necessary to reflect the
acquisition on a pooling-of-interests basis. The pro forma condensed
combined financial statements should be read in conjunction with the
accompanying historical consolidated financial statements of Premier and
Citizens and notes thereto included elsewhere in this Joint Proxy
Statement/Prospectus.
(2) Provided below is the pro forma adjustment necessary to reflect the
business combination of Premier and Citizens accounted for as a pooling-of-
interests. Each outstanding share of Citizens Common Stock will be
exchanged for 8.0 shares of Premier Common Stock.
<TABLE>
<S> <C>
Issuance of Premier shares (2,066,850 at $1.00 par value)..... $2,066,850
Retirement of Citizens shares (242,350 at $10.00 par value)... (2,423,500)
Net effect on common stock.................................... ( 356,650)
==========
</TABLE>
The issuance of shares shown above is based on the current number of shares
outstanding. Subsequent to June 30, 1997, 1,850 options have been exercised
by an employee.
(3) The pro forma condensed combined statements of income do not include the
estimated direct costs associated with the acquisition. The estimated
merger expenses of Premier and Citizens are $400,000 and $250,000,
respectively. As of June 30, 1997, approximately $350,000 of the estimated
expenses remained to be paid.
(4) Net income per common and common equivalent share was computed by dividing
net income by the weighted average number of shares of common stock and
common stock equivalents outstanding during each period, restated for the
Premier stock split and to reflect the merger of Premier and Central and
Southern in June 1997. Common stock equivalents include stock options.
42
